"once again thanks for the wonderful service. you often mention that you "only buy shares and/or other instruments when they are cheap". could you please elaborate a little on what how you decide when a stock and a fund is "cheap".
i know the question might sound naive, but at least for me your answer would be very useful. thanks in advance."

David Fuller's view Thanks for the feedback.

I believe I can summarise Eoin's and my view on this subject most clearly by saying that we do not like to pay up for instruments. Ideally, we like to buy following setbacks to potential support levels and / or when they look oversold. Conversely, we would prefer to sell when markets are accelerating higher and look overbought.

For instance, and starting with extremes, the best time to buy is shortly after a market crash, when sentiment is apocalyptic. Conversely, the most important time to sell is when trends are accelerating upwards in parabolic fashion and crowd sentiment is euphoric.

Applying the same principle to a medium to longer-term trend, we would prefer to buy following mean reversion corrections towards a rising 200-day moving average. Conversely, we mention on occasion that if one is inclined to take some profits, an ideal time to do it is following upside overextensions relative to that same MA.

There are exceptions, depending on how the markets of interest to you are performing. For instance, in a ranging base formation we may prefer to wait for pattern completion in the form of an upward breakout before participating.

With leveraged trades, we may add to positions following a breakout from a trading range consolidation, within an overall upward trend. However in this instance it is a good idea first to raise trailing stops on earlier purchases, for money control purposes. We would aim to use these trading tactics in reverse when short in downward trends.

Do I do this all the time? No, because circumstances may change, or more likely, I may not have been sufficiently alert to notice an optimum entry or exit point. However, it is usually a good idea to invest or trade with a plan. That may not prevent us from making impulsive decisions on occasion but it will help us to understand that they can be more risky.