How to make money from stock investment – Part 1

Caution:Stock price movement is totally unpredictable by anybody. Please use it at your risk.

15/50 Rule: From various investment suggestions, I used 15/50 rule, which is sell if price goes down 15% or sell if price goes up 50%. As an individual investor, we have to minimize our loss at same time take off some profit.

For example,
If we buy Apple (AAPL) stock for $100, create two limit orders as soon as we bought the stocks,

1. Sell all if price is $85
2. Sell all if price is $150

This is very straightforward; this works most of the time, but when the market is volatile, we may want to use advance feature called stop-limit order.

Stop limit order is same as limit orders but more precious control than limit orders. Stop-limit order executed as per order, first stop on one price and then execute limit on one price.

We can use the above same example, because Apple stock price now very volatile nowadays, hence 15/50 rule may not work well. Better solution is stop-limit order for this scenario.

Same as above example, we can create 2 stop limit orders,
1. Stop at $85 and sell at $80. (This gives more margin of $5 drop)
2. Stop at $150 and sell at $160 (This gives more margin of $10 gain)

So, how to determine the stop sell prices, my advice would be read the chart. By using simple mathematics, we can assume peaks and valleys by using charts and simple moving average.