NEVER LET A PROFIT RUN INTO A LOSS More traders are ruined by violating this rule than any other, except overtrading. When you buy or sell a stock and it shows you a profit of 3 to 4 points, what is the sense or reason for ever risking any more of your capital on it? Place a stop loss order where you will get out even or better; then you have all to win and nothing to lose. If the trade continues to move in your favor, you can follow it up with a stop loss order. People often buy or sell a stock and it shows them a good profit, but they are "hoggish," expect more, hold on and hope and let it run into a loss, which is very poor business, and the man who follows it will not succeed in the end. Always protect your principal in every way possible. DON'T BUCK THE TREND The way to make money is to determine the trend and then follow it. When you are in a Bear market and the long trend is down, it is always much safer to wait for rallies and sell short than to buy. If you are in a big Bear market where stocks are going to break from 50 to 200 points, you can miss the bottom several times on the way down and lose all of your capital. The same applies to a Bull market. You should never sell short on an advancing market. It is better to wait for reactions and buy than to try to pick tops for selling. Big profits are made by going with the trend and not against it. One of the most vital and important things for either an investor or a trader to learn is to take a loss and take it quickly. When you see that you are wrong there is no use putting up more margin and holding on and hoping. If you take a small loss quickly and get out of the market, your judgment will be much better and you can see an opportunity to get in again and make profits. 6 T H: WHEN IN DOUBT GET OUT When you buy or sell a stock and it does not act right immediately or start to move in your favor within a reasonable length of time, get out of it. Your judgment gets worse the longer you hold on and hope for the market to go your way, and at extremes you always do the wrong thing. It is much better to take a quick loss of 2, 3, or 5 points than to hold on and hope and eventually take anywhere from a 10 to a 50-point loss. Stocks are not going to stop going up or down once they start just for your benefit. Always remember what Jim Keene said: "If stocks won't go your way, you must go their way." Always go with the tide; never buck it. If you were on a railroad track and saw a train coming at 6o miles an hour, would you stand there and hope that the train would stop before it hit you, or would you hope that maybe you could knock it off the track? Of course you wouldn't. You would get out of the way and do it quick. You should do the same thing in the stock market — Get out; let them go by, or get aboard and ride with them. make money online ~ forex trading training |