Being Wrong Buying Stock is Okay

Being wrong is OK, but let's not carry it to extremes.every professional knows: Keep your losses small and
That applies to everything, but let's limit ourlet your profits run. How many times have you heard
discussion here to the stock market.that one? BUT how many times have you ignored
I have been trading for several decades and was anthat rule?
exchange memebr and floor trader for 17 years. YouAt the end of the year when you analyze your
learn fast there or you go broke in a hurry. As youtrades you find that you made $3.00 for each $1.00
can see I managed to hold my own for a few yearsyou lost you will show a nice big profit.
until I found the secret and started to become aI don't care what business you are in you don't put
successful trader. Every professional trader I knowyour whole wad on a single outcome and stick with it
knows the one great secret and that is to keep youruntil it either works or go broke. That is what
losses small.brokers and mutual fund managers want you to do.
We all learned that when we took a position - eitherThey want you to buy, but never sell.
long or short - that we better be able to jump out ifIt is a tragedy for the small investor today that
the trade was not going our way. Many of mymutual fund families are putting in selling restrictions
friends were scalpers. That means they were tradingto discourage investors from dumping funds that are
for just a few ticks and every night went home flat.headed down. Many require long holding periods and if
Flat is no positions at all.you sell prior to that time they charge an extra fee
Others, myself included, took a longer look andof 2%. They give lame excuses that I know are not
planned to hold a position for a period of time. Thattrue for doing this. Never buy any fund or trade with
could be several days or weeks. If you were rightany brokerage company that has that kind of rule.
the longer you held on the more money you wouldIt is cheaper to pay the 2% or whatever fee there
make.is and get out than hang around and lose 20% to
The general public seems think that exchange40% of your equity. Look back at 2000 to 2003.
members know everything and always made money.This can happen again despite what your broker tells
Tain't so. Many traders were wrong more than 50%you.
of the time. Huh? Yes, fifty percent. My account hadBe wrong and run home with most of your money.
losses 40% of the time and 20% were scratchYou still have enough to invest in a better
trades (neither winners nor losers).opportunity. If you are disciplined to get out of any
You ask, "If you are out of the money 60% of yourbad situation early you will end up a rich person.
trades how can you make money?" This is what