TRADE INACTIVE 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 not remain leaders. Changing conditions in the country cause certain groups to lead for a time, then become laggards, while new groups become public favorites and leaders. It is the same thing with individual stocks of the different groups. As a rule, a stock that becomes a favorite and a leader will continue active anywhere from five to ten years. After this period of time, it will pass into the hands of investors and its activity will cease. Fluctuations will become narrow because investors do not jump in and out every day. They hold for a long time, and finally when they do start to sell out for some good reason, or get scared, then the old time leaders become active on the down side until liquidation has been completed. 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. Divide your capital up so that you can make seven to ten trades with it. Suppose you have $5,000.00. Trade in 100-share lots and limit risks to 3 to 5 points. You would be able to stand five or six consecutive losses and still have capital to work with. By letting your profits run one big profit will often wipe out four or five small losses. But, if you take big losses and small profits, you have no chance of gaining in the end. If you can only trade in 50 shares, take 10 shares each of five different stocks. Place stop loss orders on these trades from 3 to 5 points away, according to the indications on the stocks you are trading in. Two of these stocks may go against you and catch your stop while the other three may not. This will leave you part of your holdings and if they move in your favor, will make back your losses on the others and show profits. 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. make money online ~ forex trading training |