When it comes to trading and investing, much of the conversation revolves around what to buy and when to buy. But as the legendary trader Stan Weinstein reminds us, understanding what NOT to buy can be equally—if not more—important.
If you want to steer clear of bad trades and save your hard-earned money, here are some key rules from Stan Weinstein that every trader should remember:
Don’t Buy Too Late in an Advance
No matter how bullish a stock appears, avoid jumping in when the price is already far above the ideal entry point. Timing matters.
Avoid Stocks with Poor Relative Strength
A weak stock with poor relative strength is often a recipe for losses. Stick to strong performers.
Avoid Stocks in Negative Groups
Market sectors move in cycles, and buying a stock from a weak sector (like the automobile sector during a downfall) can work against you. Always prioritize strong sectors.
Don’t Buy Stocks Below the 30-Week Moving Average
If a stock is trading below its 30-week moving average (or 150-day moving average), it’s not worth considering.
Steer Clear of Heavy Overhead Resistance
Stocks facing significant resistance levels above their current price can struggle to move higher. Choose stocks with a clear upward path instead.
Don’t Buy Stocks with a Declining 30-Week MA
Even if a stock moves above its 30-week moving average, it’s not an automatic buy. Make sure the moving average itself is trending upward.
By following these timeless principles, you can significantly improve your trade decisions and avoid costly mistakes. Remember, discipline and strategy are your best allies in the market.
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