Don't buy the daily upswings

If you ever find yourself in a hostage situation where a captor holds a gun to your head asking if the market will move up or down tomorrow - your best bet is to say the opposite of how the market moved today.

This means if the market was up today - tell him it will be down tomorrow, and vice-versa.

Although the market will move upward over the long-term, in the short-term it moves up and down in waves. The shorter the term, the more "random" the price movement and the more difficult it is to predict.

This concept explains why you should never buy stocks that are on the upswing. No matter how attractive the opportunity looks, chances are a stock that is up today will be down tomorrow. Furthermore, the greater the upswing today, the larger the downturn tomorrow.

99% of stocks are not fairly valued; they're either under or overvalued. This means that while you should only purchase undervalued stocks, it's best not to purchase undervalued stocks on an upswing.

The chances that your undervalued stock will soon become fairly valued is slim to none. On the other hand, the chances that your undervalued, dipped stock will be up tomorrow is much greater.

Invest wisely and profit.

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