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If You're Thinking About Dumping Stocks Now, Stop!

So, what is a buy or sell discipline? For some people, their buy discipline is simply blind dollar-cost averaging every month, whereas the sell discipline consists of rebalancing every year and reallocating to bonds according to a specific schedule as retirement approaches.

For others, buy and sell discipline is determined by the cross of moving averages. For others, buy and sell discipline is based upon buying when stocks are cheap according to Rober Shiller's PE10 and selling when stocks are expensive according to the same metric. Some people employ more complex rules and combinations of rules.

The point is this: Whatever your buy and sell discipline is, you must stick to it. Sure, you are allowed change your system over time -- if and only if you have studied the matter carefully and you think you have found a better one. However you may not change a buy or sell discipline on the fly - ever. A change in buy/sell discipline can only lead to an actual trade execution after a "cool-off" period has been allowed to elapse

If you do not have a buy or sell discipline, then you need urgently stop everything you are doing in terms of trading and investing. It is imperative that you do the proper research and adopt a buy and sell discipline that you commit to and adhere to religiously.

I happen to think that it is more likely than not that the major stock indices such as the S&P 500 (^GSPC), Dow Jones Industrials (^DJI) and Nasdaq (^IXIC) will continue to rise in the next few months. I also think that it is fairly likely that a short-term correction could occur in the interim. I have explained the reasons for both my longer-term and shorter-term outlooks in previous articles.

However, these insights are of no use to an investor or trader if they do not have an investing and/or trading system in place that can rationally and systematically utilize these sorts of insights regarding timing.
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