Rule #1. Never buy a stock that is priced under $5.00. Most mutual funds have rules in their charters that do not allow them to purchase stocks under $5.00. It is very tempting to want to buy these shares and there is the occasional exception in this year 2009. (F,THC,UIS,ESLR).
Rule#2. If you trade a stock twice , and have gains both times, do not go back to the well and buy it a third time. This rule was put into place after some nosedive trade experiences with Krispy Kreme Donuts, (KKD), and Sirius Satellite Radio, (SIRI). They took me for a ride down a slippery slope on the third trade after some nice gains.
Rule#3. Only buy stocks that have earnings above $0.10 per share annually. This will keep you out of a lot of bad places.
Rule#4. Try to buy companies that are not loaded down with debt, or even better yet have zero debt.
These are a few to start out with that will keep you out of 80% of the trouble you can find.
Sincerest Regards,
Freewilly
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