Some will object to this, say that you have to pay taxes on your gains, or that you're trying to trade. First, taxes are a compliment to your investing prowess. Second, this is not trading. This is selling a stock that is overpriced, one that has gone up and up and up and is beyond the radar screen for a rational investor. Trading is when you try to jump in and out of stocks on a daily basis, trying to catch a few ticks up for a small profit.

The next exercise: When the market is falling apart and there seems to be no hope in sight, buy a stock that is undervalued. In other words, when every one else is selling, you buy, even if only a small amount of a stock, a stock you follow and know has good earnings, one with a price that makes no sense given its solid fundamentals.

This exercise is great for picking up undervalued stocks when other investors are panicking and forgetting some basic rules about investing. They can't wait to get out. You, on the other hand, will be most anxious to get in because prices are so attractive.

Sounds so simple, doesn't it? Buy low, sell high. The problem is that when everyone else is buying, most investors act on their emotional instinct of following the crowd. They buy stocks. When stocks are selling way down, again, we tend to follow the crowd. It's the way our emotions work. That's why these exercises are hard to do. They require you to ignore your emotions and use your head, not your heart.

If you can develop the discipline of selling when everyone else is buying, then buying when everyone else is selling, you will make very good money in the stock market.

By the way, these exercises work very well for Warren Buffett.