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1. Type of stock: Understand the type of stock based on company's business. This should be used to determine what to expect from it.

• Commodity stock: Stock of a company whose products are largely subject to market forces, say steel, aluminum, automobiles, chemicals etc.
  * Don't hold for long term. Best returns are obtained if they are bought when the results are worst and EPS is maybe negative or P/E is very high (because EPS is very low). Sell them when the company has reported very impressive financial results. EPS is high and P/E is low. Don't fall in love at that time. Sell them to put money in the leader stocks of the industry that is doing very bad and laying off people; but is a basic industry by nature. For buying and selling don't look at ticker or company news; just look in to Annual reports. When numbers are great, take a divorce.
• Growth Stock: Revenues are growing at least 15 %. Margins are improving. Have strong consumer loyalty and great brands. The market for its products seem to last atleast one decade.
  * Invest in them for long term. Don't be over occupied by their P/Es. They are good buys until P/Es are way above their PERCENTAGE ANNUAL GROWTH rate. Don't look at ticker everyday nor search yahoo for news related to the company.
• TurnAround Stock: They are real treasures for minting money; but also like a treasure, they are very hard to find or locate.
  * To save money, doubt them first. Avoid the stock if you get too excited by its story (Believe me more money is lost in potential turnarounds than in other categories of stocks. 90% of them never turn around.) Certain early symptoms: New CEO plus new product announcements, selling-restructering of business units that the company diversified into few years back which brought the whole company down.
• Fancy stocks: They are among most actives on stock markets. Owning them brings you more pride or even envy in your friends' eyes. When they start fluctuating a lot each day, be cautious.
  * When to sell? Ask 10 of your friends randomly for their opinion about that stock and when 8 to 10 of them advise you not to sell, just sell it. If 4 to 7 are worried about its high valuations and are even courageous to think about going short on it, just hold on; the stock is on its way to make new highs.