Invest, Be Wrong, and Make Money in the Stock Market


I have been trading for several decadesand was an exchange member and floor trader for 17years. You learn fast there or you go broke in ahurry. As you can see I managed to hold my ownfor a few years until I found the secret andstarted to become a successful trader. Everyprofessional trader I know knows the one greatsecret and that is to keep your losses small.

We all learned that when we took a position - either long or short - that we better be able tojump out if the trade was not going our way. Many of my friends were scalpers. That meansthey were trading for just a few ticks and everynight went home flat. Flat is no positions atall.

The general public seems think thatexchange members know everything and always made money. Tain't so. Many traders were wrong more than 50% of the time. Huh? Yes, fifty percent. My accounthad losses 40% of the time and 20% were scratchtrades (neither winners nor losers).

You ask, "If you are out of the money60% of your trades how can you make money?" Thisis what every professional knows: Keep your lossessmall and let your profits run. How many timeshave you heard that one? BUT how many times haveyou ignored that rule?

At the end of the year when youanalyze your trades you find that you made $3.00 for each $1.00 you lost you will show a nice big profit.

I don't care what business you are inyou don't put your whole wad on a single outcome and stick with it until it either works or go broke. That is what brokers and mutual fund managers want you to do. They want you to buy, but never sell.

It is a tragedy for the smallinvestor today that mutual fund families are putting in selling restrictions to discourage investors fromdumping funds that are headed down. Many requirelong holding periods and if you sell prior tothat time they charge an extra fee of 2%. Theygive lame excuses that I know are not true fordoing this. Never buy any fund or trade with anybrokerage company that has that kind of rule.

It is cheaper to pay the 2% or whateverfee there is and get out than hang around and lose20% to 40% of your equity. Look back at 2000 to2003. This can happen again despite what yourbroker tells you.

Be wrong and run home with most ofyour money. You still have enough to invest in a better opportunity. If you are disciplined to get outof any bad situation early you will end up arich person.


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