Have you heard about CAN SLIM method? If yes, you probably had read the book ‘How to Make Money in Stocks’ (one of the books in my recommended list). If not, here are some general investment rules that I learned from Investor’s Business Daily (IBD)

• Consider buying stocks with each of the last three years’ earning up 25%, return on equity of 17% and recently earnings and sales accelerating
• Recently quarterly earnings and sales should be up 25% or more
• Avoid buying cheap stocks
• Learn how to use charts to see buying points
• Cut every loss when it’s 8% below your cost (I believe different people have different risk level; some may set this figure higher, some lower). Make no exceptions so you can always avoid huge losses. Never average down in price
• Follow selling rules on when to sell and take profit on the way up
• Buy when market indexes are in an uptrend. Reduce investments and raise cash when general market indexes show five or more days of volume distribution
• Pick companies with management ownership of stock
• Select stocks with increasing institutional sponsorship in recent quarters
• Current quarterly after-tax profit margins should be improving, near their peak and among the best in the stock’s industry
• Don’t buy because of dividends or P-E ratios
• Pick companies with a superior new product or service
• Don’t try to bottom guess or buy on the way down. Never argue with the market. Forget your pride and ego
• Find out if the market currently favors big-cap or small-cap stocks
• Do a post-analysis of all your buys and sells. (I suggest you keep a trading report for all your trades). Post on charts where you bought and sold each stock. Evaluate and develop rules to correct your major past mistakes

If you have traded in US market before, you might came across different type of orders, type of fills and type of validity. What is stop loss, stop limit or GTC means?

Type of Orders
Market Order
This is an order to buy or sell a stock immediately at the best available current market price. This is considered as ‘unrestricted order’. Never use this order unless you want your order to get fill immediately, always exercise your right to bargain for the best price.

Limit Order
An order you placed with a brokerage to buy or sell a stock at a price equal to the specified price or better. Limit order guarantee a price (or better price than specified) but do not guarantee an execution.

Stop Order
This is a contingency order to buy or sell a stock when its price reaches a particular level. When the price reaches that level specified in the stop order, the stop order becomes a market order and is executed at the best possible price. Also referred to as a ‘Stop-Loss Order’

Stop Limit Order
A stop limit order combines the features of stop order with those of a limit order (you have to specify stop price and limit price). A stop-limit order will be executed at a specified price (or better) after a given stop price has been reached. Once the stop price is reached, the stop-limit order becomes a limit order to buy (or sell) at the limit price or better.

Example: Assume company XYZ share is trading at $60 and you want to buy the stock once it begins to show uptrend signal. You put in a stop-limit order to buy with stop price at $65 and the limit price at $66. If the price of company XYZ moves above $65 stop price, the order is activated and turns into a limit order. As long as the order can be filled below $66 (the limit price), then it will be filled. If stock gaps above $66, the order will not be filled.

Type of fills
ANY
Any fill type allows your order to be filled in different quantities
Example:
You placed an order of buy 3,000 XYZ shares at $1.28 LIMIT. Your order may be filled in the following to complete your order:
1000 at $1.28
500 at $1.28
400 at $1.28
200 at $1.28
900 at $1.28
With ANY fill, orders may be partially executed if there is not enough liquidity or if the market moves away from your limit price.

AON (All or None)
AON fill type allows your order to be filled in entirely or nothing at all. It indicates that you do not wish to complete a portion of your trade if all the shares are not available. ANY file type takes priority over AON file type.

Kind of validity
DAY
Day order is only valid for the trading day the order is placed. It will automatically lapse when not executed by the end of the trading day.

GTC (Good-Until-Canceled)
GTC order is active until you decide to cancel it or the trade is executed. The order is valid as long as it has not yet been executed and will be automatically sent to the exchange the next trading when the market opens.