| 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 our | | | | let 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 an | | | | that rule? |
| exchange memebr and floor trader for 17 years. You | | | | At the end of the year when you analyze your |
| learn fast there or you go broke in a hurry. As you | | | | trades you find that you made $3.00 for each $1.00 |
| can see I managed to hold my own for a few years | | | | you lost you will show a nice big profit. |
| until I found the secret and started to become a | | | | I don't care what business you are in you don't put |
| successful trader. Every professional trader I know | | | | your whole wad on a single outcome and stick with it |
| knows the one great secret and that is to keep your | | | | until 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 - either | | | | They want you to buy, but never sell. |
| long or short - that we better be able to jump out if | | | | It is a tragedy for the small investor today that |
| the trade was not going our way. Many of my | | | | mutual fund families are putting in selling restrictions |
| friends were scalpers. That means they were trading | | | | to 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 and | | | | of 2%. They give lame excuses that I know are not |
| planned to hold a position for a period of time. That | | | | true for doing this. Never buy any fund or trade with |
| could be several days or weeks. If you were right | | | | any brokerage company that has that kind of rule. |
| the longer you held on the more money you would | | | | It 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 exchange | | | | 40% 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 had | | | | Be wrong and run home with most of your money. |
| losses 40% of the time and 20% were scratch | | | | You 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 your | | | | bad situation early you will end up a rich person. |
| trades how can you make money?" This is what | | | | |