Step -3: When to buy/sell; at which price levels.
This is the most interesting part but not necessarily the most important. In fact, even if less attractive, I would place step-1 and 2 above step -3.
There are many ways, methods or strategies to select the best buy/sell price and time. Sometime ago, I wanted to find what was the best method of all.
it proved to me that I was raising the wrong question.
then what was the right question...?
What is the best way of using these methods to gain profit?
The answer was simple:
Have faith in your share and your method.
Sound crazy? I will give two examples.
e.g. -1: Method -1: Invest 40% at current price level. If the price falls 10%, invest 20%. If falls another 10%, invest another 20% so on. If the price goes up 10% sell 20% etc. etc.
You can check this with historical data and see the profits for yourself.
e.g.-2: Method -2: Invest 40% now. If the price is on the rise, invest 20% more. wait for price to settle down, if rises more, invest 20% etc etc.
If price is falling, sell 20%. Wait for price to settle down. If it falls, sell 20% etc.
As you can see the two method are of contrary to each other, but both can generate profits.
I my case, I use some technical analysis to decide the entry exit points.
Anyway, the rule is 'stick to your method' and 'buy/sell at different price levels'.
I hope these will make you think about how you trade/invest.
Thanks for being with me so far.