Sound Rules Shield Your Capital.(A)(INVESTOR'S CORNER)

Byline: JONAH KERI

Tracking the market's direction means following the changes of the major indexes in both price and volume. Research shows that multiple days of distribution, or declines on heavier volume, can torpedo a burgeoning rally.

Sometimes the signals can be subtler, especially in a wild year like 2002. How, then, can you always protect your nest egg? Cutting losses and using sell stops to secure profits will force you out of a bad market -- even when you aren't sure if it's a bad market.

If you buy only high-quality leaders breaking out of sound bases, only to see them break down, you'll know something's likely wrong with the market. You don't want to stubbornly hold on to a plunging stock, thinking your investment is perfect and impervious to a nasty market attack.

Your first shield of strength in battle? Always sell if your stock falls 7% to 8% from your buy point. If you bought at the correct price, but the stock drops and triggers that sell, you have your first sign of market trouble.

If your stock fares better and goes up after you buy, keep surveying it closely, making sure it's making new highs on brisk trade, not low volume. It should find support at its 50-day moving average, not dive below it.

If your stock violates these or other key thresholds, consider taking profits. You can put in stop-sell orders if you can't watch your stocks regularly or you're worried emotions may get the best of you at the moment of ...