What “buy strength,
sell weakness”
actually means.
Buy strength — we buy a company only after it has proved it is doing well, in its earnings and in its share price. Sell weakness — we sell it once that proof disappears, whatever we still think of the business. Everything else on this page follows from those two sentences.
The life of one position
-
Stage one
We are not in yet
The price has bottomed and turned up, but the evidence is not complete. We own nothing here — the first stretch of every rise happens without us. Every time, and by design: nobody who tells you they bought the low knew it at the time.
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Stage two
Both tests say yes
The business is improving and the market is paying for it — higher highs over higher lows. While that stays true we do nothing at all. Leaving a working position alone is most of the job.
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Stage three
Weakness, then out
The trend rolls over: a lower high, then the prior low gone. That is the rule firing, not a call on the top. We sell below the high — and are out before the part of the chart that costs real money.
A portfolio held together by conviction alone has no way of finding out that it was wrong. The exit rule is not a weakness — it is the mechanism that has protected capital through four full market cycles.