| Being wrong is OK, but let's not carry it to | | | | what every professional knows: Keep your |
| extremes. That applies to everything, but | | | | losses small and let your profits run. How |
| let's limit our discussion here to the stock | | | | many times have you heard that one? BUT how |
| market. | | | | many times have you ignored that rule? |
| | | | |
| I have been trading for several decades and | | | | At the end of the year when you analyze your |
| was an exchange memebr and floor trader for | | | | trades you find that you made $3.00 for each |
| 17 years. You learn fast there or you go | | | | $1.00 you lost you will show a nice big |
| broke in a hurry. As you can see I managed to | | | | profit. |
| hold my own for a few years until I found the | | | | |
| secret and started to become a successful | | | | I don't care what business you are in you |
| trader. Every professional trader I know | | | | don't put your whole wad on a single outcome |
| knows the one great secret and that is to | | | | and stick with it until it either works or go |
| keep your losses small. | | | | broke. That is what brokers and mutual fund |
| | | | managers want you to do. They want you to |
| We all learned that when we took a position - | | | | buy, but never sell. |
| either long or short - that we better be able | | | | |
| to jump out if the trade was not going our | | | | It is a tragedy for the small investor today |
| way. Many of my friends were scalpers. That | | | | that mutual fund families are putting in |
| means they were trading for just a few ticks | | | | selling restrictions to discourage investors |
| and every night went home flat. Flat is no | | | | from dumping funds that are headed down. Many |
| positions at all. | | | | require long holding periods and if you sell |
| | | | prior to that time they charge an extra fee |
| Others, myself included, took a longer look | | | | of 2%. They give lame excuses that I know are |
| and planned to hold a position for a period | | | | not true for doing this. Never buy any fund |
| of time. That could be several days or weeks. | | | | or trade with any brokerage company that has |
| If you were right the longer you held on the | | | | that kind of rule. |
| more money you would make. | | | | |
| | | | It is cheaper to pay the 2% or whatever fee |
| The general public seems think that exchange | | | | there is and get out than hang around and |
| members know everything and always made | | | | lose 20% to 40% of your equity. Look back at |
| money. Tain't so. Many traders were wrong | | | | 2000 to 2003. This can happen again despite |
| more than 50% of the time. Huh? Yes, fifty | | | | what your broker tells you. |
| percent. My account had losses 40% of the | | | | |
| time and 20% were scratch trades (neither | | | | Be wrong and run home with most of your |
| winners nor losers). | | | | money. You still have enough to invest in a |
| | | | better opportunity. If you are disciplined to |
| You ask, "If you are out of the money 60% of | | | | get out of any bad situation early you will |
| your trades how can you make money?" This is | | | | end up a rich person. |