To phrase this a little differently: what makes or breaks an investor is being able to separate the actual long-term value of "owning a piece of this company" from the stock's relative motion. Being up 30% or down 50% isn't what matters. Being overvalued or undervalued by the current market is what matters.

Don't toss money away on a gamble that something might become worth more in the future (rule 1), but do spend money on good-to-great companies that should be worth more than their current price and should remain stable over the long term (rules 2-4).