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What is the three-day rule for stocks?

The three-day rule for stocks is one example. According to the rule, investors should wait three days before buying shares whose price has dropped significantly. Investors can often be rattled by news impacting the financial markets and, typically, reacting too quickly to news can cause more damage than waiting.

What happens if I buy a new stock in 30 days?

You won't have bought any new shares within the rule's window. You'll have a tax-deductible loss and still maintain a position in a stock you believe may appreciate in value. For instance, if you bought 200 shares initially, sell only 100. As soon as the 30 days is up, buy 100 more shares to replenish your position.

How long should you hold a stock if it breaks out?

"The basic rule is that if a stock breaks out of a base (i.e. a narrow range) where it's been trading for a while and gains 20% in three weeks or less, you should hold for at least eight weeks," says Ian Rayner, founder of Rayner Gobran. The week in which a breakout occurs is when the clock starts ticking on the eight-week hold rule.

Should I repurchase XYZ stock after 30 days?

When the 30-day period has passed, sell the fund or ETF and then repurchase your XYZ stock if you so desire. If you plan to sell an entire position at a loss in order to offset gains, but still want to own the stock, buy additional shares and just wait out the rule period of 30 days. Then sell your position (perhaps at even a greater loss).

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