After an investor learns probability-based buy and sell rules, the hard part begins.
You must follow the rules.
This requires self-discipline and an ability to act when emotions whisper the opposite message.
If you're learning the IBD approach, here are six steps to keep you on the right path.
• Start small: The right way to invest is often counterintuitive. Selling a stock after a 20%-to-25% gain — because most stocks begin to consolidate after such a gain — will feel like you're leaving the party too early. Likewise, buying stocks when they are near or at 52-week highs also will feel wrong.
Feelings intensify with the amount of money you risk, and those feelings can cut both ways.
Too big a position combined with the euphoria of success will keep you in a position when you should be taking profits. Too big a position combined with a modest pullback could scare you out of a stock for no good reason.
The good news is that eventually probability-based rules — if you stick with them — will begin to feel natural. Don't expect to be there at the beginning.
If this means keeping most of your money in cash until your skills improve, do it.
• Simplify when confused: A rookie investor can feel overwhelmed by IBD's many intricate rules. When in doubt, go back to the core message. The goal is to buy the best stocks at the best time. Keep that in mind and you will generally react correctly as you build understanding.
Learning to invest is a layered discipline — like mastering a musical instrument. How long would it take you to learn to play the violin reasonably well? Don't expect investing skills to come any quicker.
• Focus on the process: If you sell a stock because it drops 8% below your and then the stock rebounds, you will be tempted to think the sell rule is wrong. But probabilities are about what happens most, not all, of the time.
Don't fuss over one case. Stay focused on the process because that will determine long-term results.
• Know yourself: Are you naturally an aggressive investor or a cautious investor? This will determine what kind of mistakes you are prone to make. The ideal isn't to be one or the other, but to adjust your stance to market conditions.
• Listen to your imaginary pal: When in doubt, let an imaginary master look over your shoulder. Do you think William O'Neil would do what you're about to do? If not, why are you doing it
You won't know in every case what Bill would say. But if you've read and re-read "," you will know right from wrong most of the time.
• Study ordinary success: You probably aren't willing to put as much time into investing as a pro does. Yet, if you consistently put as much time into investing as the amateur violinist puts into music, you will improve over time.
Amy Smith's new book "How to Make Money in Stocks: Success Stories" is rich with stories about IBD readers who have done well.
Check out Chapter Four's "Belt Promotion: One Stock Victory at a Time." Investors talk about gains of 14% in five months, 20% in four months, 25% in one month, 122% in 11 months and 12% in two months.
The smaller gains in one stock might sound pedestrian. But over time, they can bulk up a portfolio.