The rules around the key point

A key point tells you when. It says nothing about which share, or how much of your money, or what to do three weeks later when you are up and tempted to add. Those are rules of their own, and they are where most of the damage gets done.

Buy the leader, not the cheap one

When a group of shares starts moving, they do not move equally. One or two go first and go furthest, and the rest follow at a distance or not at all. The laggard is always the more comfortable buy, because it looks cheap next to the one that has already run. It is cheap for a reason, and it is usually the one that gives everything back first.

Adding in a pyramid

pyramiding

Adding to a position that is already working, in amounts that get smaller each time. The opposite of averaging down, which is putting more money into something that has fallen since you bought it.

The rule that makes pyramiding work is the one that is easiest to break: you add only to something that has already proved you right. Money going into a share because it has fallen is a different decision wearing the same clothes, and it is how a small mistake becomes the only thing in your account.

Both exits are decided before you enter

Where you get out if you are wrong is a stop loss, and it is chosen before you buy — normally just under the key point, because a close back below it has cancelled the reason for the trade. Where you get out if you are right is harder, and the usual answer is that you do not pick a price at all: you stay while the trend is intact and leave when it is not.

That is the argument for sitting still. The large moves come from holding through a long run, not from trading every wobble inside it — and every extra trade costs you brokerage and taxes on the way in and the way out. Sitting still is also far harder than it reads, because doing nothing feels like neglect while the price moves around.