Building your position

Building profitable positions in my stock picks -- or in any investments, for that matter -- takes disciplined buying. By that, I mean buying stocks as they naturally settle below their price-trend support levels on normal pullbacks, rather than chasing stocks exploding upward.

Disciplined buying also means stepping into your positions with one-third bites. Some investors toss the dice in a single barrage of buying, in hopes of having perfect timing (ain't gonna happen, folks).

For example: My subscribers decide what percent of their portfolio they want to allocate to each of five buy lists. Our allocation recommendations are a general guideline; only investors can decide how they want to split investments based on personal goals and situations. On top of these allocations, it is important to have portions of any portfolio in cash, Treasurys and other bonds.

For our holdings, if you can stomach a great deal of risk and market volatility, more weight should be put into the "corporate turnarounds/transformations" and "speculative plays" portions of your portfolio. If your time to retirement is running short, the reverse is true, and you may want to invest more heavily in the "cash generators" and "game-over dominators" portfolio picks. Emerging "game-over dominators" are good middle-ground picks with a moderate degree of risk.

One-third bites

I advise you to start a position with about one-third of your desired investment. In up-trending markets, I advise you to place a good-until-canceled "buy stop," or buy order, 5% to 10% ahead of your initial entry price. This ensures you complete your position at a reasonable basis, in case of a runaway breakout to the positive -- a common occurrence in bull markets for aggressive-growth stocks.

I recommend that you add an additional one-third of your capital to your initial positions if you get a 5% to 10% pullback from your initial entry price. Then wait and watch closely. If the position starts to move toward profitability, add your final one-third. If instead it starts sliding to 15% or more below your entry price, it may be time to sell it to contain your losses. In such cases, clients are advised on the best course of action via alerts by e-mail and on our Web site often.

There is one caveat here: If, after investing your first portion, you get a more sizable pullback (15% or more) where there is no significant change in our investment thesis, I advise you to complete your remaining two-thirds position on that move.

I advise you to start positions at or under our "buy under" prices -- the top of our attractive price range. I say "at or under" so that you don't ignore a stock if it hits the "buy under" price exactly.

The idea is to get into each stock gradually but to watch out for big moves downward. Institutional investors are getting into these stocks at the 20-day, 30-day and 50-day moving averages. If a stock drops too far below the 50-day moving average, it's a sign that the company may have some major problem that you're not be aware of, and it may be time to pull out.

That's how I advise ChangeWave traders to trade. It may help you as well.