Common Sense buying and selling

James B. Stewart explains his Common Sense guide to buying and selling in his column in the June 2006 SmartMoney.

My traditional focus on buying is one of the reasons that I introduced the Common Sense guide to buying and selling, which has been the underpinning of this column since its inception. At periodic intervals, this system forces me to be disciplined and take some profits when stocks are high. As I've explained in previous columns, my goal is simply to buy low and sell high. When the market drops, I add to my holdings at intervals of 10% declines in the Nasdaq composite index, my preferred barometer. During rallies, I sell some of my stocks at intervals of 25% advances. These numbers aren't arbitrary. They're the midpoints of average bear market declines (20%) and bull market rallies (50%).