Rules for Stock Selection

HappyHarry said: "This is from the book "Rules of the Trade" by David S. Nassar. Let's see what we think of these rules for stock selection: 1) Trade Liquid Stocks 2) Avoid Chaotic Stocks 3) Match Volume to Time 4) Specialize 5) Trade Stocks with Good Correlation 6) Trade Strong Sectors 7) Do the research 8) Forget about Chat Rooms LOL, in particular to number 8. I assume he means message boards for that one too. This list is pretty good. Anyone have any impressions?"

chahinemm said: "i don't agree with trade strong sectors... because u should not be necessarily in terms of sectors but companies... all sectors have bargains in there the only thing is to find them on the right time... IMO at least. chahine"

HappyHarry said: "Investors Business Daily and William O'Neill have always stressed the sector as well. Do you know why? 50% of a stock's move can usually be traced to the sector! Have you ever heard the phrase: "a rising tide raises all ships"? Well that's what happens when the sector is on fire also. Generally, in a hot sector there will be several dog stocks that move well just because the leaders do well."

travllr said: "Good list, thanks for posting. Tidbit comments (ref: list no's previously posted): 2) Avoid Chaotic Stocks - those with trading systems (or long term trading systems that rely on oscillations without any long term Up of Down - for instance, PCA software) would probably not want this. 4) Specialize - not quite sure what this means. 5) Trade Stocks with Good Correlation - with what? 7) Do the research - except for disciplined TA traders who take their cues largely from observation in the moment. 8) Forget about Chat Rooms - well, of course not! (just do the DD first) -trav"

nemke said: "[QUOTE=HappyHarry]Investors Business Daily and William O'Neill have always stressed the sector as well. Do you know why? 50% of a stock's move can usually be traced to the sector! Have you ever heard the phrase: "a rising tide raises all ships"? Well that's what happens when the sector is on fire also. Generally, in a hot sector there will be several dog stocks that move well just because the leaders do well.[/QUOTE] I agree, I would not invest in a company due to the sector it belongs to because these indicators are uncontrollable. Usually it is hard to forcast the indutry trends and people should focus more on the actual performance of the company and not the industry itself! Would you agree Harry?"

HappyHarry said: "I agree. I think its an indicator of short term stock movement, but in reality, the company performance is always what matters most."