RULES FOR SUCCESSFUL TRADING (PART2)
NEVER LET A PROFIT RUN INTO A LOSS
More traders are ruined by violating this rule than any other, except overtrading. When you buy or sell a stock and it shows you a profit of 3 to 4 points, what is the sense or reason for ever risking any more of your capital on it? Place a stop loss order where you will get out even or better; then you have all to win and nothing to lose. If the trade continues to move in your favor, you can follow it up with a stop loss order. People often buy or sell a stock and it shows them a good profit, but they are “hoggish,” expect more, hold on and hope and let it run into a loss, which is very poor business, and the man who follows it will not succeed in the end. Always protect your principal in every way possible. More traders are ruined by violating this rule than any other, except overtrading. When you buy or sell a stock and it shows you a profit of 3 to 4 points, what is the sense or reason for ever risking any more of your capital on it? Place a stop loss order where you will get out even or better; then you have all to win and nothing to lose. If the trade continues to move in your favor, you can follow it up with a stop loss order. People often buy or sell a stock and it shows them a good profit, but they are “hoggish,” expect more, hold on and hope and let it run into a loss, which is very poor business, and the man who follows it will not succeed in the end. Always protect your principal in every way possible. investor or a trader to learn is to take a loss and take it quickly. When you see that you are wrong there is no use putting up more margin and holding on and hoping. If you take a small loss quickly and get out of the market, your judgment will be much better and you can see an opportunity to get in again and make profits.
WHEN IN DOUBT GET OUT
When you buy or sell a stock and it does not act right immediately or start to move in your favor within a reasonable length of time, get out of it. Your judgment gets worse the longer you hold on and hope for the market to go your way, and at extremes you always do the wrong thing. It is much better to take a quick loss of 2, 3, or 5 points than to
hold on an hope and eventually take anywhere from a 10 to a 50-point loss. Stocks are not going to stop going up or down once they start just for your benefit. Always remember what Jim Keene said: “If stocks won’t go your way, you must go their way.” Always go with the tide; never buck it. If you were on a railroad track and saw a train coming at 6o miles an hour, would you stand there and hope that the train would stop before it hit you, or would you hope that maybe you could knock it off the track? Of course you wouldn’t. You would get out of the way and do it quick. You should do the same thing in the stock market -- Get out; let them go by, or get aboard and ride with them.
TRADE IN ACTIVE STOCKS
Always confine your trading to standard, active stocks listed on the New York Stock Exchange. Outside stocks have spurts, but the active leaders yield more profits in the long run. Stocks traded in on the New York Stock Exchange always have a good market and you can get in and out when you want to. Ninety per cent of the unlisted and curb stocks disappear sooner or later. Leave the pups, cats and dogs, and mining stocks alone. The same group of stocks over a long period of time do Of course, the big money is always made in trading in stocks that fluctuate over a wide range. For this reason, you must always be on the lookout for a new leader that will give opportunities for making big profits. Be up-to-date, keep up with the new stocks as they are listed, watch their development, and you will be able to pick the new live leaders and discard the old, inactive stocks. Big money is made, not from dividends but from fluctuations, if you know how to trade quickly. That is why it pays to trade in active stocks that make a wide range. If you have to take a loss in stocks of this kind, you can make it back very quickly, because opportunities occur often.
EQUAL DISTRIBUTION OF RISK
There is an old saying, “Never put all of your eggs in one basket.” And in the stock market it is a very good rule to follow. If you are in position to do so, select as many as four or five stocks, one from each of the different groups. Buy or sell in equal amounts. If you get into the market right and with a reason, records show that it very seldom occurs that you would get the stops caught on all of your stocks. You may not always make as much profit as you would to trade in one or two of the active, fast moving stocks, but you will be safer. That is my aim: To teach you safety; help you protect yourself and cut short your losses in every possible way and let your profits run.
More traders are ruined by violating this rule than any other, except overtrading. When you buy or sell a stock and it shows you a profit of 3 to 4 points, what is the sense or reason for ever risking any more of your capital on it? Place a stop loss order where you will get out even or better; then you have all to win and nothing to lose. If the trade continues to move in your favor, you can follow it up with a stop loss order. People often buy or sell a stock and it shows them a good profit, but they are “hoggish,” expect more, hold on and hope and let it run into a loss, which is very poor business, and the man who follows it will not succeed in the end. Always protect your principal in every way possible. More traders are ruined by violating this rule than any other, except overtrading. When you buy or sell a stock and it shows you a profit of 3 to 4 points, what is the sense or reason for ever risking any more of your capital on it? Place a stop loss order where you will get out even or better; then you have all to win and nothing to lose. If the trade continues to move in your favor, you can follow it up with a stop loss order. People often buy or sell a stock and it shows them a good profit, but they are “hoggish,” expect more, hold on and hope and let it run into a loss, which is very poor business, and the man who follows it will not succeed in the end. Always protect your principal in every way possible. investor or a trader to learn is to take a loss and take it quickly. When you see that you are wrong there is no use putting up more margin and holding on and hoping. If you take a small loss quickly and get out of the market, your judgment will be much better and you can see an opportunity to get in again and make profits.
WHEN IN DOUBT GET OUT
When you buy or sell a stock and it does not act right immediately or start to move in your favor within a reasonable length of time, get out of it. Your judgment gets worse the longer you hold on and hope for the market to go your way, and at extremes you always do the wrong thing. It is much better to take a quick loss of 2, 3, or 5 points than to
hold on an hope and eventually take anywhere from a 10 to a 50-point loss. Stocks are not going to stop going up or down once they start just for your benefit. Always remember what Jim Keene said: “If stocks won’t go your way, you must go their way.” Always go with the tide; never buck it. If you were on a railroad track and saw a train coming at 6o miles an hour, would you stand there and hope that the train would stop before it hit you, or would you hope that maybe you could knock it off the track? Of course you wouldn’t. You would get out of the way and do it quick. You should do the same thing in the stock market -- Get out; let them go by, or get aboard and ride with them.
TRADE IN ACTIVE STOCKS
Always confine your trading to standard, active stocks listed on the New York Stock Exchange. Outside stocks have spurts, but the active leaders yield more profits in the long run. Stocks traded in on the New York Stock Exchange always have a good market and you can get in and out when you want to. Ninety per cent of the unlisted and curb stocks disappear sooner or later. Leave the pups, cats and dogs, and mining stocks alone. The same group of stocks over a long period of time do Of course, the big money is always made in trading in stocks that fluctuate over a wide range. For this reason, you must always be on the lookout for a new leader that will give opportunities for making big profits. Be up-to-date, keep up with the new stocks as they are listed, watch their development, and you will be able to pick the new live leaders and discard the old, inactive stocks. Big money is made, not from dividends but from fluctuations, if you know how to trade quickly. That is why it pays to trade in active stocks that make a wide range. If you have to take a loss in stocks of this kind, you can make it back very quickly, because opportunities occur often.
EQUAL DISTRIBUTION OF RISK
There is an old saying, “Never put all of your eggs in one basket.” And in the stock market it is a very good rule to follow. If you are in position to do so, select as many as four or five stocks, one from each of the different groups. Buy or sell in equal amounts. If you get into the market right and with a reason, records show that it very seldom occurs that you would get the stops caught on all of your stocks. You may not always make as much profit as you would to trade in one or two of the active, fast moving stocks, but you will be safer. That is my aim: To teach you safety; help you protect yourself and cut short your losses in every possible way and let your profits run.
