Some strategies for using this screen:
- Invest the same amount in each of the top five stocks. For example, this test portfolio has $20,000 in each of the five stocks.
- Use a stop loss on each stock. You still have to protect yourself if the stock or market goes against you. Put the stop loss order no more than 7% below your entry point.
- As the stock prices moves up, move the stop with it.
- Check the earnings calculator. You don't want to buy going into an earnings report. Buy after, if the stock is still a buy. I did not due this for this test.
- Don't enter the market unless if the trend is against you. Be patient and invest at the right time.
While several factors are considered, the IBD screen looks for quality companies with earnings and revenue growth and are relatively strong in price compared to the overall market (RS).