After more than thirty years in the financial markets I have made my shares of mistakes but have also learned many things on how investors or traders can stack the odds in your favor.

The financial media is full of analysts’ lists of what will be the best stocks or ETFs for the year. Some have inquired why I don’t publish a list each year.

At the start of a bull market you will often find a number of stocks that have completed basing patterns that span a year or longer, which when completed makes them strong candidates to move higher over the next year or more.

Click to Enlarge

In 2009, Neflix Inc. (NFLX ) was such a stock as it had been trading between the 2004 high at $39.77 and the 2004 low of $9.25. The monthly chart shows a broad trading range, lines a and b, with key resistance at $40.90, which was the April 2008 high.

The relative performance broke through its resistance, line c, at the end of December 2008 as NFLX closed above its 20-month EMA. The following month, the OBV moved above its WMA (line 1) and NFLX completed its bottom formation at the end of March 2009 as it closed at $42.92.

The on-balance volume (OBV) did not break through its resistance until the end of January 2010 as NFLX gained over 84% in 2009. By the time it peaked in July 2011, NFLX had reached a high of $304.79.

When a market has been rising for almost four years it is much more difficult to find stocks with long-term bases. Even though I do concentrate on monthly and weekly charts, they generally spot trends that last four-six months, but not always a whole year.

Click to Enlarge

Given the volatility of the stock market in the past two years, market picking a list of stocks to hold for the entire year is a waste of time as very few stocks stay in sustained up trends for an entire year.

This chart of the Spyder Trust (SPY ) shows the various swings that occurred in 2012. From the beginning of the year, the SPY rose 11.5% to the April 2 high before dropping 11.2% into the June lows as the SPY came all the way back to just a 0.3% gain for the year.

By September 14, SPY was back up over 16% for the year as it had gained 15.8% from the June lows. In just two months, the SPY had lost 9.8% with SPY finishing the year with an 11.7% gain.

From a risk management standpoint, giving up over a 10% gain is a bad habit to develop if you want to make money over the long haul. I feel that these lists can often encourage investors to make some of the classic investing or trading mistakes, which drastically reduces their chances of success. In this article I will propose five rules that if followed in 2013 will increase your chances for a profitable year.

Click to Enlarge

Caterpillar Inc. (CAT ) was one of the 10 Best Stocks for 2012 that was featured on CNNMoney. Most of the lists come from fundamental analysts who make their recommendations based on their estimate of the company’s earnings or other fundamental factors that they expect will drive the stock price higher for the whole year.

The analyst who recommended this stock commented that (CAT ) “has a 2% dividend yield, but that’s really just a side benefit. The company’s five-year average P/E ratio is 16. Were it only to rise from its current 10.1 multiple to 13 (assuming it hits its projected 2012 earnings), that would mean $117 a share—a 31% total return.”

(CAT ) closed 2011 at $90.60 and while this analyst did give a price target, quite a few do not. In the majority of cases they will also not give a suggested entry level or stop. This is one of my key complaints about these yearly top stock lists.

Click to Enlarge

The weekly chart of Caterpillar Inc. (CAT ) shows the 2011 close, (point 1) at $90.60. On the first day of 2012, (CAT ) opened at $92.77 and a stop under the December low of $86.29 (such as $85.92) would be the tightest that seemed reasonable. This would have been a risk of 7.3%.

In 2013, be sure you calculate the risk of every new trade before entering an order. Too many ignore the risk of just a few of trades each year, which can seriously impact the performance of your whole portfolio. For 2013, concentrate on risk.

(CAT ) rallied for eight weeks and made a high of $116.95, which was very close to the analyst’s $117 target. At this point, the position had a 26% gain. As it turned out, that was the high for the year, as by July (CAT ) had dropped to a low of $78.25. If you bought at the year’s opening price, you then had a loss of 15.6%. (CAT ) closed the year at $86.81, which was a loss of 6.4% for the year.

Of course, I feel that fundamentals are often a lagging indicator and a stock can drop 20% and still be a growth company. Technical analysis can help you time your entry, as well as a price level where you should buy or sell.

Regular readers know that I spend quite a bit of time determining an entry level and while I sometimes miss buying a big winner by a few cents, occasionally I also buy a market low. There are quite a few stocks that I do not write about because the risk/reward profile is not favorable.

I use a number of technical tools to determine when and where to buy. For example, I use starc bands to tell me when not to buy and when to wait. As for entry levels I use a combination of pivot point analysis. Fibonacci as well as simple tools like the 20-period EMA. As most of you are aware, in an uptrending market, pullbacks to the 20-day EMA often provide a good entry point.