IBD’s 20 Trading Rules

The post going around is not a random list of trading tips. It is a condensed version of Investor’s Business Daily’s old “20 Rules,” a William J. O’Neil-style checklist built around buying leading stocks, cutting losses fast, and treating every trade like a repeatable process instead of a gut call. (shop.investors.com) A lot of the rules come from the CAN SLIM method that O’Neil popularized in his book and newspaper. That method looks for companies with fast earnings and sales growth, then waits for their stock prices to break out of chart bases rather than trying to buy “cheap” after a collapse. (investors.com) That is why one of the most repeated lines is to buy stocks near new highs, not after big drops. Investor’s Business Daily still frames many of its stock lists around high Composite Ratings, strong Relative Strength, and names trading near buy zones rather than deep below old peaks. (investors.com, investors.com) The Composite Rating is Investor’s Business Daily’s in-house score that rolls several factors into one number from 1 to 99. The 20 Rules sheet says to focus on stocks with a Composite Rating of 90 or higher and a Relative Price Strength Rating of 85 or higher, which is their way of filtering for companies that are already outperforming most of the market. (shop.investors.com) The list also tells traders to stay in the strongest neighborhoods of the market instead of wandering everywhere. The original sheet says to buy mostly from the top six broad industry sectors on Investor’s Business Daily’s New High List or from the top 20 industry subgroups, which is a momentum rule about following leadership, not hunting bargains. (shop.investors.com) Another rule that survives because it is simple is the 7% to 8% loss cut. Investor’s Business Daily still teaches that if a new position falls 7% to 8% below the purchase price, the investor should sell, because one small loss is easier to recover from than a 20% or 30% drawdown. (investors.com, finance.yahoo.com) That stop-loss rule is the part that turns the checklist from stock picking into risk management. A stock can have a perfect rating and still fail, so the system assumes mistakes are normal and tries to keep any single mistake from doing major damage. (investors.com) The “analyze every trade after the fact” advice is there for the same reason. The original sheet tells investors to write down every buy and sell, then study both mistakes and successes, which is closer to keeping game film than making one heroic market call. (shop.investors.com) That is also why these rules keep resurfacing on social media during volatile markets. A checklist gives people fixed triggers like “90-plus rating,” “new high,” and “sell at minus 7%” at the exact moment fear of missing out pushes them to improvise. (shop.investors.com, investors.com) The catch is that this is a momentum system, not a universal investing law. It is designed for people willing to buy strength, monitor charts, and exit quickly, which is very different from value investing, index fund investing, or holding a business through years of volatility. (smartasset.com, investors.com) So when people repost the 20 Rules, they are really reposting a worldview: let the market prove a stock is strong, buy only when price and fundamentals line up, and obey the sell rule even when your opinion says “wait one more day.” That is why the list still spreads nearly two decades after the PDF first circulated. (shop.investors.com, pragcap.com)