Deciding whether to buy, sell or hold a stock comes down to comparing the conviction level from your analysis to thresholds set in advance. The point of a rule-based framework is to remove emotion, the main cause of bad decisions in the markets.
Why decide by rules rather than by instinct?
Behavioral biases (anchoring, loss aversion, herd behavior) push us to buy at the top and sell at the bottom. Setting rules in advance neutralizes these reflexes at the moment emotion is strongest.
How to translate an analysis into a signal?
Aggregate your analysis dimensions into a single conviction score. Then define thresholds:
When should you sell?
Sell when the initial thesis no longer holds: deterioration in financial quality, a reversal in momentum, or a valuation that has become excessive. Selling should not depend on the purchase price, which has no informative value.
When is holding the best decision?
When signals are mixed or contradict each other, taking no action is a decision. Forcing a trade on a weak signal destroys performance through fees and risk.
How to manage position size?
Adjust the size to conviction: the stronger and more confirmed it is, the larger the position can be, within the limits of your diversification. High conviction never justifies concentrating all your capital.
InvestIQ produces this signal automatically: a 0-100 score and a BUY/SELL/HOLD verdict, with the conditions that would invalidate the thesis.
This is not investment advice.