Momentum investors and speculators compete daily in a frenzied race for immediate performance but participating in this chaotic style of trading will seldom produce regular profits. Managing a winning portfolio requires planning, patience and good judgment. Learning when to buy and sell requires a solid understanding of technical analysis and market trends. It is also important to use consistent, well-known trading techniques. Before you open any position, it is important to evaluate your personal risk/reward attitude and develop a trading plan based on that outlook. Once you have established a comfortable style of investing, you must decide how to divide your portfolio among all the different types of financial instruments. Most investors find that a combination of investments will provide the best balance of risk and reward while accomplishing their specific objectives.

If stock ownership is one of your primary investment tools, you must learn to evaluate how each individual position contributes to your long-term plan. Does the stock compliment your portfolio? Is this a company you want to own right now or in the future? Are you willing to pay the current price for the issue? Experienced investors will assemble a collection of favorable candidates and identify the best entry opportunity for each issue through chart reading and technical analysis.

The ideal time to buy is when a stock is moving out of a defined base into a dynamic stage II pattern. The breakout above the top of the resistance area (and the long-term moving average) should occur on impressive volume. In stage II, the 30-week MA generally starts turning up shortly after the breakout. The initial rally is usually followed by at least one pullback. That decline brings the price back close to the breakout point, offering another excellent opportunity to enter the position. The less it retreats, the more strength inherent in the move. The potency of the pattern becomes evident as each successive peak eclipses the previous one and the lows on corrections are also progressively higher. As long as all of these gyrations continue to occur above the moving average, the trend remains intact and long positions should be maintained until the target exits are achieved. After the trend is well established and favorable profits are guaranteed, the primary objective is to manage the position for maximum return while avoiding potential losses.