• Sell any stock that falls at least 8% below your purchase price. This is essential to avoid heavy losses.
   
• Check IBD SmartSelect® Corporate Ratings to detect any significant changes in your stocks, such as a sharp decline in Relative Price Strength, Earnings Per Share or Accumulation/Distribution ratings.
   
• Diversifying into too many stocks can hurt your overall performance. Stick to just a few stocks, but never buy more than six or seven or you'll find it hard to keep track of them. You'll make more on one or two good stocks than a broad stable of more mediocre ones.
   
• Be prepared to spend time each day reviewing the general market. Read The Big Picture and the General Market & Sectors page to learn over time when you should be in or out of the market.
   
• Charts provide important clues about a stock's strength. Look for signs of weakness, such as an exhaustion gap up, a climax run or falling prices on high volume.

Related Resources:

Click here to get the 7 Steps For Selecting Winning Stocks, according to the CAN SLIMTM Investment Research Tool.

Go to the Investor's Corner Archives to read IBD's "editor picks" of classic Investor's Corner columns.

Search our archive of Ask Bill O'Neil Q & A's organized by topic.