There are 3 steps to do before buying a stock. First, look at its products, services. Do you use or like them? How are they compare with their competitors? What is the company's market share, growth strategy, international presence? Second, look at the financial fundamentals (price earning ratio, cash flow, revenues, expenses, etc.) If you like the company or the ETF's composition, it is placed into the buying/consider list. Third, find the right entry point by doing a technical analysis. The entry point is the "right" price that you will or should buy. Your price is likely not the same as other investors. The number of shares depends on your current exposure and the importance of this industry in your portfolio. You can buy more over time instead of all at once.
What is diversification?
Basically you want to have some stake in different industries, different countries and markets. For example: if you don't already have a pharmaceutical stock, it's time to consider one. Diversification can become too much if you take too many small positions in many specific companies, which can be a challenge to manage and monitor over time, which leads to bad decisions. It's better to have multiple stocks but not too many. The number depends on your capital, managing experience and time.
When to sell?
Sell when it's high. It's much easier to say than to actually do it. The simple reason is greed. When it's high, you think it might go higher. And when it's low, you worry it might be lower. Human psychology is not very logical and often leads us to mistakes. So it's a good idea to always have a reminder and a target price level. You set to sell at this pre-determined target level. One way to do this is set a Good-Till-Cancel sell order. Or you can sell a covered call with the strike price being the target price and if it's called out, you're happy. On the other hand, if you look to generate income from dividend then you might want to consider to sell if the capital gain is several years of dividend. For example: you get 5% yield and the capital gain is 20%. That's 4 years of dividend. You can consider selling then if you think the stock might go down within 12 months.
When to average down?
When a stock you bought goes below your entry price, don't average down on a down trend. Think about the price tomorrow and the days after. If it's a downtrend, it'd be cheaper tomorrow. If you average down now, it looks like you're cutting your loss and reducing the cost basis. But in fact, you are exposing more of your money and your loss is getting bigger because the trend is down. The stock might go back up to your original price, but it might take weeks or months. You should only buy more when the stock indeed finds a support level and a firm trend reversal. Don't time for the bottom, time for the near-bottom. It's less risk and will save your from the extra pains. Ask yourself these questions:
What is the chance it will continue to go down tomorrow? If so, be patient. Remember you don't have to react to every news. Just let it go down further. Buying more today will generate a bigger loss tomorrow.
What is the chance it will go sideway? In this case, patience is your friend. Selling covered calls can also be another strategy to generate some income while it's moving sideway. Don't put your strike in-the-money, at-the-money or low out-the-money since it can be called and you have to realize the loss while your objective is to recapture your original investment.
What is the chance it will go up right away? This scenario happens less frequent than you thought. When it does happen, it is often an over-reaction to company-specific negative news. More often, the market is correcting itself after too many up days or beginning of a bear. If the whole market or industry goes into a downtrend, the way up is not in days. It might take several months for a reversal to happen.
Do you think the worst just past for this stock at this stage? If you think a firm trend reversal just shows up on the stock chart, you can consider buying more to average down. Do this carefully.
How do you to time the market?
Simple: Don't. If you don't believe, try to do this a few times and learn your own lessons. It's much memorable than hearing from a stranger. Remember not putting too much money when you're learning or you will not have another chance. You can feel but don't really know the bottom or top. Instead, you should aim for the near-bottom and near-top. Sell when you feel it's the near top and be happy with it. Buy near the bottom and be happy with it.