Trading and Analysis rules
1. "Planning your trades in advance allows you to conduct research when there are no distractions or blinking quote screens.
2. "Once the stock successfully breaks out, the stock price should hold its 20-day moving average and in most cases should not close below it."
3. "A failed breakout can quickly lead to a base failure."
4. "If the pivot point is tight, there is no material advantage in getting in early; you will accomplish little except to take on unnecessary risk. Let the stock break above the pivot and prove itself."
5. "With very little supply of stock in the market from sellers, even a small amount of buying can move the price up very rapidly."
6. "When a stock breaks through the line of least resistance, the chances are the greatest that it will move higher in a short period of time."
7. "A pivot point is a "call to action" price level. It is often referred to as the optimal buy point."
8. "The pivot point is where the stock establishes a price level that will act as the trigger to enter that trade."
9. "A price spike may occur on the left side of a base just before a price correction or consolidation begins."
10."Look for significant, above-average increases in volume on upward moves coming off the lows and up the right side of the base."
11."A spike in price on overwhelming volume often indicates institutional buying."
12."Price shakeouts will strengthen the setup at the completion of a base."
13."Informed investors who understand price action are on the lookout for evidence of price shakeouts before they buy."
14."Always include in your thinking that whatever you're seeing in the marketplace is also visible to everyone else."
15."If a stock is under accumulation, a price consolidation represents a period when strong investors absorb weak traders. Once the "weak hands" have been eliminated, the lack of supply allows the stock to move higher because even a small amount of demand will overwhelm inventory."
16."The better stock selections generally will correct the least amount percentagewise from the absolute peak to trough during their correction phase."
17."The trend is your friend. If you try to trade against it, the trend becomes your worst enemy."
18."Human behavior hasn't changed and isn't likely to change much in the future."
19."You want to be where the action is and take advantage of momentum."
20."The key is not knowing for sure what a stock is going to do next but knowing what it should do. Then it's a matter of determining whether the proverbial train is on schedule."
21."Stock prices move in virtually the same fashion today that they followed in the past."
22."The same elementary forces of hope and greed, exuberance and panic, that formed the price behavior of Microsoft and America Online in the 1990s showed up in price movement of market leaders decades before that period."
23."Chart patterns are not the cause; they're the effect. Human behavior hasn't changed and isn't likely to change much in the future."
24."Savvy traders use price and volume analysis as a mechanism to time their trades, manage risk and increase the probabilities for profit."
25. "I would never bet on my fundamental ideas alone without confirmation from the actual price action of the underlying stock."
26."Charts enable us to see what's going on in a particular stock as buyers and seller come together in an auction marketplace. They distill the clash for emotional and logical decisions into a clear visual display."
27."It's people - emotional, imperfect, even illogical - who make buy and sell decision. Ego, fear, greed, hope, ignorance, incompetence, overreaction and other human errors in reasoning create all sorts of discrepancies and in turn opportunity."
28."Efficient Market Hypothesis is a flawed theory."
29."During a market decline the news is always filled with market gurus predicting the end of the world. Shut off the TV, close out the media and start looking for the next wave of market leadership, which is certain to emerge eventually."
30."I buy strength, not weakness."
31."Very often the leaders of the next bull market will emerge from the most unlikely areas but quickly reveal themselves through the application of price analysis techniques."
32."Investing in leading stocks is indeed very risky if it is timed incorrectly."
33."Your watchlist of stock candidates should bring you into the market early in the bullish phase and later you will be forced out of the market stock by stock in oncoming bearish or corrective phases."
34."You must have a plan to sell and nail down profits when you have them."
35."When a market is bottoming, the best stocks make their lows ahead of the absolute low in the market averages. As the broader market averages make lower lows during the last leg down, the leaders diverge and maker higher lows."
36."The stocks that emerge first in the early stage of the a new bull market with the greatest power are generally the best candidates for superperformance."
37."Let the strength of the market tell you where to put your money, not your personal opinion, which rarely is a good substitute for the wisdom of the market. Opinions mean nothing compared with the verdict of the market."
38."A growing number of stocks displaying positive, divergent price behavior during a general market decline can tip you off to where the next group of market leaders may emerge or what stocks are likely to blast off first when the market starts to rally."
39."Look for resilient stocks that hold up the best, rebound the fastest, and gain the most percentage wise off the general market bottom."
40."The stocks that hold up the best and rally into new high ground off the market low during the first 4 to 8 weeks of a new bull market are the true market leaders. You can't afford to ignore these golden opportunities."
41."A strong market trend is not something you want to go against. However, if you concentrate on the general market solely for timing your individual stock purchases, you're likely to miss many of the really great selections as they emerge."
42."If the major market indexes ignore an extremely overbought condition after a bear market decline and your list of leaders expands, this should be viewed as a sign of strength."
43."It can be very confusing if you listen to what people are saying instead of paying attention to what stocks are telling you."
44."Few investors buy stocks near new highs, and fewer buy them at the correct time."
45."Making it even more difficult is the fact that leading stocks always appear to be too high or too expensive to most investors."
46."Market leaders tend to foretell turns to the downside as well."
47."I made 99% of my profits in the stock market by trading in leading names."
48."By paying close attention to the market's leading names, you can be in the best stocks before they are obvious to the public."
49."No one, not even management, can accurately forecast what a company will earn or what its rate of growth will be a year or two down the road."
50."You can judge the true earnings perception only from the response of the share price."
51."Stock price movement from significant earnings surprises not only are felt right away but can have a longer-term effect beyond the immediate price adjustments. Many studies have shown the effect can persist for months after an announcement."
52."No matter how good an earnings report appears to be on the surface, you want to pay close attention to the stock's price reaction to determine how good the report really was or was perceived to be."
53."A company can increase profits by cutting jobs, closing plants, or shedding its losing operations. However, these measures have a limited life span."
54."Institutions like to see the following: 1) Earnings surprises 2) Accelerating EPS and revenues 3) Expanding margins 4) EPS breakout 5) Strong annual EPS change 6) Signs that acceleration will continue"
55."A surprisingly good earnings report could be the beginning of a string of successful quarters. Strong quarterly results should translate into strong annual results."
56."Some of the greatest stock market successes deliver large quarterly sales increases consistently for several years."
57."More than 90% of the biggest stock market winners showed some form of earnings acceleration before or during their huge price moves."
58."The earnings cycle phenomenon is not a one-time event or something unusual. It happens time and time again, market cycle after market cycle. The only thing that changes are the names."
59."Hot one-product stocks that go from unknown to all the rage overnight can be great investments if you get in and get out at the right time."
60."Really successful companies generally report earnings increases of 30 to 40% or more during their super performance phase."
61."Big earnings will eventually attract the big players and create the conditions for big price performance."
62."Efficient market theory holds that the market reacts instantaneously and fully prices in new information completely. Experienced trader know that this is false for several reasons."
63."Every price movement is rooted in one of these two elements: anticipation of news, an event, an important business change, or reaction to an unexpected event and a surprise, whether positive or negative."
64."Who moves stock prices? Institutional investors such as mutual funds, hedge funds, pension funds and insurance companies."
65."Many winning stocks may be companies that you never heard of before. Their best days lie ahead, not in the past."
66."The stock market cares little about the past, including the status of a company. What it cares about is the future, namely growth."
67."The fact is, no matter how big or prestigious a company is, when fundamentals deteriorate, you never know how far the stock will fall."
68."When a stock suffers a major break in price, there's a reason, and very often it's the beginning of lower prices to come."
69."I have found that more often than not, the best stocks in the leading groups advance before it's obvious that the group or sector is hot."
70."When you see a growing number of names in a particular industry making new 52-week highs (especially coming off a market low), this could be an indication that a group advance is under way."
71."It's definitely worth investigating the industry groups in which the most stocks were resisting the decline and then subsequently broke into new highs while the market was coming off its lows or during the market's initial few rallies."
72."The industry groups with a healthy number of stocks hitting new highs early in a bull market will often be the leaders. Your portfolio should consist of the bet companies in the top four or five sectors."
73."The leadership groups or categories can start to stage their bull market rallies before the broad benchmark's bottom."
74."The formation of a bear market bottom typically begins with signs of accumulation in certain market sectors or segments."
75."There's always a reason why one stock trades at a high multiple and another trades at a low multiple. More times than not, the expensive market leader is actually cheap and the laggard is really the more expensive choice."
76."Laggards usually appear to be relatively cheaper than market leaders, and that attracts unskilled investors."
77."At the top of a cyclical swing, the following things happen: 1) Earnings are moving up 2) Dividends are being raised 3) The P/E ratio is low 4) News is generally good."
78."At the bottom of a cyclical swing, the following things happen: 1) Earnings are falling 2) Dividends may be cut or omitted 3) The P/E ratio is high 4) News is generally bad."
79."Stocks don't necessarily stay in one category forever. $AAPL was a turnaround situation that morphed into a growth stock and since then has reached institutional favorite status."
80."On March 18, 2009, just seven days after the NASDAQ traded at its bear market low and only 10 days after the Dow Jones traded at its bear market low, $NFLX hit an all-time high."
81."Institutions that know enough about a company and its future prospects provide the buying power. They are not concerned about how far the stock has already advanced, but about where it's going and what the prospects are for future growth."
82."Market leaders are easy to spot, but most investors have psychological difficulty deciding to buy them."
83."Publicly traded companies tend to fall into one of six categories: 1) Market Leaders 2) Top Competitors 3) Institutional Favorites 4) Turnaround Situations 5) Cyclical Stocks 6) Past Leaders and Laggards"
84."Having the long-term trend on your side is like sailing with the wind at your back. If there's no wind, you're dead in the water, and if the wind is against you, you have little chance of moving forward."
85."Many times before a fundamental problem is evident, there will be a hint in the form of a material change in price behavior. That change should always be respected even if you don't see any reason for the sudden change in sentiment."
86."Don't listen to the company or the media; listen to the stock."
87."Learn to do your own analysis and base your purchases on sound criteria, not because someone else says a broken stock is good value."
88."Stocks very often top out while earnings still look good."
89."To compound your capital, you must be where the action is. You can't afford to have your money tied up in a stock waiting for what you think is a great fundamental story to get noticed by the rest of the world."
90."Keep in mind that if the institutional investment community doesn't see what you see, your stock could sit dormant for an extended period of time. Why sit and wait when you can put your money elsewhere?"
91."Even if you're correct in your fundamental analysis, investor perception is what creates buy orders and you are going to need big buy orders in your stock to move it up significantly."
92."I never place much faith in my fundamental ideas about a particular company without confirmation from the market, namely, the price of the stock."
93."History clearly shows that virtually every super performance stock was in a definite uptrend before experiencing its big advance. In fact, 99% of them traded above their 200-day moving average before their huge advance and 96% traded above their 50-day moving average."
94."Buying stocks in long-term downtrends will significantly lower your odds of owning a big winner. If you want to increase the odds, you should focus on stocks that are in a confirmed uptrend."
95."To succeed, an astute stock trader must make decision often on the basis of incomplete information."
96."Leave the overintellectualizing and complex theories to the professors and academicians and the valuation tactics to the Wall Street analysts."
97."The bigger point is that the P/E ratio doesn't have much predictive value for finding elite super performance stocks."
98."Trying to buy oversold conditions and sell overbought conditions as a trading strategy is risky business. Disregard for a strong directional trend will ultimately lead to buying into a precipitous decline."
99."The market is a discounting mechanism that trades on the future, not the past. Just as you can't drive a car by looking only in the rear-view mirror, you shouldn?t run a stock portfolio on backward referencing valuation metrics."
100."If tomorrow the price of a stock you own fell 25 percent from your purchase price, would you feel better knowing that the P/E had fallen below its industry average though? Of course not."
101."Concluding that stock is overvalued because it sells for 65 times earnings is like saying that a van Gogh painting selling at auction for $49 million is overvalued because the paint and canvas cost only 40 bucks. The painting sells on the basis of its perceived valued."
102."Value doesn't move stock prices; people do by playing buy orders."
103."Stock prices move on the basis of what people think. Ultimately, it's perception that motivates investors and creates price movement."
104."If analyzing balance sheets were the Holy Grail for stock investing, accountants would be the world's greatest traders."
105."Regardless of one's opinion, the market always has the last word."
106."How high or low the price is relative to where it was previously is not the determining factor in whether a stock will go higher still."
107."The really exciting, fast-growing companies with big potential are not going to be found in the bargain bin. You don't find top-notch merchandise at the dollar store."
108."Historical analyses of outperforming stocks suggests that by themselves P/E ratios rank among one of the most useless statistics on Wall Street."
109."Most investors look for bargains instead of looking for leaders, and more often than not they get what they pay for."
110."The standard P/E ratio reflects historical results and does not take into account the most important element for stock price appreciation: the future."
111."In the stock market, what appears to be cheap could actually be expensive and what looks expensive or too high may turn out to be the next super performance stock."
112."A trader who really knows the strengths and weaknesses of his or her own strategy can do significantly better than someone who knows only a little about a superior strategy."
113."A stock trading strategy is like a marriage; if you're not faithful, you probably won't have a good outcome."
114."You don't need a PhD in math or physics to be successful in the stock market, just the right knowledge, a good work ethic and discipline."
115."If you want consistent superperformance, you will need to roll up your sleeves and do some old-fashioned manual analysis. That's the interesting part of trading, and that's what makes it fun and rewarding."
116."Most companies have their high-growth phase when they?re relatively small and nimble. As they grow older, larger and more mature, their growth begins to slow as does the rate at which their stock prices appreciate."
117."Most investors shy away from names they have never heard of. This is exactly the opposite of what you should do if your goal is to find big stock market winners."
118."During the bear market correction of the early 1990s, I focused on stocks that were holding up well and then moved into new high ground first off the market's low. Most of the names were relatively unknown at the time."
119."More than 90% of superperformance stocks began their phenomenal price surges as the general market came out of a correction or bear market. Very few stocks had superperformance phases during a bear market."
120."The Five Key Elements of SEPA are: 1) Trend 2) Fundamentals 3) Catalyst 4) Entry Points 5) Exit Points."
121."In the stock market, timing is crucial because time is money."
122."It wasn?t long before I realized that many of stocks were low priced for good reason and in most cases were on their way to lower lows. I did, however, see many stocks hit the 52-week high list and then skyrocket even higher in price."
123."The past cannot be changed, only learned from."
124."I went six consecutive years without making a penny while pursuing stock trading. Along the way I had days I when I almost threw in the towel and gave up. However, I knew the power of persistence."
125."Applying conventional wisdom produces conventional returns, not superperformance."
126."Individual investors can react to surprises that create new price trends almost instantly. There is no committee approval process and no diversification mandate."
127."If you think for a minute that the big institutional approach is safer or less risky, I suggest you take a look at your favorite mutual funds and study their performance during past major bear markets."
128."The vast majority of funds must stay at least partially invest even during dreadful market conditions. Moving to the safety of cash is frowned on."
129."Contrary to what many believe, a professional money manager has no advantage over an individual investor. The biggest handicap facing virtually every big fund manager is size to have a meaningful impact on their portfolio."
130."If you're going to invest like a fund manager, why not just give your money to a fund manager? Why not just invest in stock market index funds, which beat most fund managers?"
131."Most investors treat trading as a hobby because they have a full-time job doing something else. If you treat trading like a business, it will pay you like a business."
132."Trading stocks and running a business are virtually identical."
133."The proliferation of cheap brokerage commissions, internet trading and web-based stock market data may have provided everyone with the same technology, but it did not grant investors an equal ability to use those resources."
134."Practice does not make perfect. Practice only makes habitual."
135."It's more important to make money than it is to be right."
136."No one cares about your money and your future as much as you do. Do the work, own your failures and you will own your success."
137."Have confidence in your ability. Learn to do your own research and think for yourself. Your own resources are far superior to outside research, tips and so-called expert opinions because they're yours and therefore you can keep tabs on them."
138."You need to first understand that your greatest challenge is not the stock market, it's you."
139."On the basis of 30 years of personal experience and historical analysis of every market cycle going back to the early 1900s, I can assure you that nothing has changed very much. In fact, history repeats itself over and over."
140."If you think stock trading is gambling, I suppose you could say the same thing about brain surgery. To a trained surgeon with the necessary expertise, though, it is a job with risks that are offset by knowledge, training and ultimately skill. Stock trading is no different."
141."You will most likely have to learn to do certain things that go against your natural instincts or perhaps relearn some ingrained investment beliefs."
142."The vast majority of investors operate from faulty assumptions that are based on personal opinion or theory, not unbiased facts. Among those who acquire the necessary knowledge, many fail to develop the emotional discipline to execute a winning plan."
143."For me, the greatest success came when I finally decided to forget about the money and concentrate on being the trader I could be. Then the money followed."
144."Once acquired, the skill of proficient stock trading can never be taken from you. No one can fire you from your craft the way a boss can from a job; it's just you and the market. All you have learned and the experience you have gained can bear fruit for man years to come."
145."The difference between interest and commitment is the will not to give up. When you truly commit to something, you have no alternative but success."
146."My philosophy and approach to trading is to be a conservative aggressive opportunist. It simply means to be aggressive in my pursuit of potential reward and at the same time to be extremely risk-conscious."
147."The stock market was the one place I could see that had unlimited potential without prejudice."
148."I dropped out of school in the eighth grade at age 15, which means that I am almost completely self-educated. I have never seen the inside of a high school as a student, let alone attended a university."
149."Dedication and a desire to succeed are definitely requirements to achieve superperformance in stocks. What is not required is conventional wisdom or a college education."
150."Success requires opportunity. And the stock market provides incredible opportunity on a daily basis."
151."To win big in the stock market, two things are required: a desire to succeed and a winning strategy."
152."I've always felt that smart people learn from their mistakes but really smart people learn from other people's mistakes."
153."I dropped out of school at age 15 with virtually no money and no education. If I could make big money in the stock market, think about how well you can do. There is no reason you shouldn't be able to achieve far more than I have."
154."When people tell me that trading today is too difficult, that the market is too complex and the pros have the edge, it makes me chuckle. It's a much more level playing field today between the amateurs and the professionals."
155."In my career, I have had many periods in which I put my entire account in just four names. This of course corresponds with some of my most profitable periods."
156."As a results, a stock that is a big winner will make a real contribution to your portfolio."
157."Depending on the size of your portfolio and your risk tolerance, you should typically have between 4 and 6 stocks, and for larger portfolios maybe as many as 10 or 12 stocks."
158."You will never achieve superperformance if you overly diversify and rely on diversification for protection."
159."Diversification does not protect you."
160."If you're trading poorly and your batting average is dropping off below the 50% level, the last thing you want to do is increase the room you give your stocks on the downside."
161."You may feel dumb breaking even on a trade that was once at a profit; however, you'll feel a lot worse if you turn a good-size gain into a loser."
162."I always move my stop up to at least breakeven."
163."By pyramiding up when you're trading well and tapering off when you're trading poorly, you trade your largest when trading your best and trade your smallest when trading your worst. This is how you make big money as well as protect yourself from disaster."
164."If you're not profitable at 25 or 50 percent invested, why move up to 75 or 100 percent or use margin?"
165."You should start off with 'pilot buys' by initiating smaller positions than normal; if they work out, larger positions should be added to the portfolio soon thereafter."
166."Stock trading is not an on / off business."
167."To trade with ease, you must learn to wait patiently until the wind is at your back. Why not wait for a breezy day to set sail?"
168."Remember that only losers average losers."
169."There is no shame in losing money on a stock trade, but to hold on to a loss and let it get bigger and bigger or, even worse, to buy more is amateurish and self destructive."
170."Keep yourself in tune with your portfolio, and when you start experiencing abnormal behavior, watch out."
171."The money will come as a result of sticking to your discipline and maintain a positive risk/reward ratio."
172."Not defining and committing to a predetermined level of risk costs traders and investors more money than any other mistake."
173."By the time you purchase a stock, the price at which you will sell at a loss should already be determined."
174."The problem with relying on a high percentage of profitable trades is that no adjustment can be made; you can't control the number of wins and losses."
175."Never let a loss grow larger than your average gain."
176."During my 30 years of trading stocks, I have been correct on winning trades only about 50 percent of the time. I'm wrong as often as I'm right however the dollar amount of the profitable trades have been much larger than the losses on average."
177."You have no control over how much a stock goes up, but you can, however, control the amount you lose on each trade. You should base that amount of loss on the average mortality of your gains."
178."Losses are a function of expected gain."
179."Selling into strength is a learned practice of professional traders. You can unload your position easily when buyers are plentiful."
180."It's the long-term results that count. Some of my best trades were in stocks that previously stopped me out several times and then reset."
181."If a stock knocks you out of your position, don't automatically discard it as a future buy candidate. Your timing may have been off. It could take two or even three tries to catch a big winner."
182."Before the open each trading day, mentally rehearse how you will handle each position based on whatever could potentially unfold during that day. Then, when the market opens for trading, there will be no surprises; you already know how you will respond."
183."Your goal is not risk avoidance but risk management: to mitigate risk and have a significant degree of control over the possibility and amount of loss."
184."As a stock market investor, you must learn to sell for your own protection because you have no control over the forces that move stock prices."
185."Good trading is boring; bad trading is exciting and makes the hair on the back of your neck stand up. You can be a bored rich trader or a thrill-seeking gambler. It's entirely your choice."
186."To win in an environment where everyone has the same objective, you must do the things that most investors are consciously unwilling or subconsciously unable to do."
187."A good retail merchant doesn't hang on to dead merchandise, hoping a style comes back in a vogue a year later. If he's smart, he marks it down, gets it off the shelf as quickly as possible, and then looks to restock the shelves with something that everyone wants to buy."
188."Individual stocks are not like mutual funds, they don't have a manager and they don't manage themselves; you are the manager."
189."Losses are a part of trading and investing; if you are not prepared to deal with them, then prepare to eventually lose a lot of money."
190."To have lasting success in the stock market, you must decide once and for all that it's more important to make money than to be right. Your ego must take a backseat."
191."Investors usually become emotionally attached to their stock holdings. When their proud pick takes a dive, they can't believe it. They search the internet for favorable opinions to back up their faith in the company. They ignore the only opinion that counts: the market verdict."
192."Although cutting your losses won't guarantee that you will win in the stock market, it will help ensure your survival."
193."The stock market is no place for someone who is easily discouraged by mistakes."
194."The alternative to managing risk is not managing risk, and that never turns out well."
195."No one will ever be so good that he or she will never take a loss. Being wrong is unavoidable, but staying wrong is a choice."
196."The real mistake comes when you refuse to make an adjustment after things change."
197."In the stock market, you have the luxury of being able to stay on the sidelines, free of charge, observing and waiting for the most opportune moment to wager. You get to see the market's 'cards' before you bet, free of charge."
198."The goal is to make money, not to prove you're right and the stock market is wrong."
199."Successful investors can shift gears and accept change. They don't fall in love with a stock and ignore when circumstances take a turn for the worse."
200."In the stock market, you're playing probabilities, not certainties; that means you cannot be correct all the time. If you make more on your winners than you lose on your loses over time, that's all you need to accomplish to be successful."
201."If you're going to become a stock trader, you will be trading for years, maybe even decades. If you regard each trade as just one out of a million over time, it becomes much easier to take a small loss and move on to the next trade."
202."The best trades are the ones who recognize mistakes, dispassionately cut their losses and move on, preserving capital for the next opportunity."
203."Losing trades are inevitable. By limiting your losses, you will put yourself way ahead of the majority of investors because most investors lack discipline."
204."Folding mediocre cards at the poker table is the same as selling off stocks soon after they fall below your purchase price to protect your account."
205."The Achilles' heel of most gamblers and speculators is the desire to play every hand, a common human weakness that allows impatience to override good judgement."
206."Undisciplined players looking for action always show up at the poker tables. The stock market is no different except that most stock market investors are even less disciplined than most poker players."
207."How low can it go? To zero!"
208."Good companies can be terrible stock investments if they are bought at the wrong time."
209."No stock can be held forever."
210."There is no such thing as a safe stock."
211."You can be correct on only 50% of your stock selections and still enjoy huge success, but only if you keep your losses in check."
212."Every major correction begins as a minor reaction. You can't tell when a 10% decline is the beginning of a 50% decline until after the fact, when it's too late."
213."Because investors hate to admit mistakes, they rationalize. They fluctuate from 'traders' when they're right to becoming 'investors' when they are wrong."
214."To master the craft of speculation, you must face your destructive capacity."
215."If you can't learn to accept small losses, sooner or later you will take big losses."
216."Avoiding large losses is the single most important factor for winning big as a speculator. You can't control how much a stock rises, but whether you take a small or large loss is entirely your choice.
217."There is only one way to protect your portfolio from a large loss, and that is to sell when you have a small loss before it snowballs into a huge one."
218.When a stock you have bought falls below your purchase price, it is telling you have made an error - at a minimum in timing."
219."The best way to stay clear of the market's wrath is to accept its judgement."
220."The market can and will break anyone who ignores the risks and dangers."
221."To achieve big results, your gains must eclipse your losses on a risk/reward basis - period!"
222."Set an absolute maximum line in the sand of no more than 10% on the downside. Your average loss should be much less, rather 6 or 7%.
223."The larger the loss is, the more difficult it is to recover from it."
224."By keeping your losses small, you preserve your hard earned capital for future investments."
225."When you lose money on a stock trade, you will need a greater percentage gain to get back to even because losses work against you geometrically."
226."It takes a lot of unspectacular practice to get spectacular results."
227."Each day, a stock must justify your confidence in holding it for a greater profit."
228."Amateur investors treat their gains like the market's money instead of their money, and in due time the market takes it back."
229."Beware of well-known companies that everyone regards as 'official growth stocks'.
230."There is no guarantee of catching a stock as it begins a large-scale advance. Therefore, you must always be prepared with an exit plan to cut your losses if a primary base turns against you."
231."Your opinion about a company is worthless unless it is verified by the price action of the stock."
232."Before I buy an IPO, it must have a minimum trading history: a base. Some IPO's can take up to a year or more to form a proper base."
233."It doesn't really matter what you think about a stock. What matters is what big institutions think, because they are the ones that can move a stock price dramatically."
234."A good company is not always a good stock."
235."The key to making big money in stocks is to align supporting fundamentals with constructive price action during a healthy overall market environment."
236."Even if your fundamental analysis of the company is spot on, to make big money, your analysis of investor perception also needs to be accurate and time correctly."
237."Velocity begets more velocity."
238."Some of my biggest winners were stocks that stopped me out and then reset. Of course, not all failed setups will reset."
239."A shakeout could turn out to be constructive for the stock going forward."
240."The fact that you get stopped out of a stock doesn't necessarily mean the underlying fundamentals are bad or the trade has soured; you may just be the victim of a shakeout."
241."The most dangerous time to trade is when a stock is trying to bottom. Trying to pick a low can be very frustrating and costly. You can increase the odds of success by waiting for the stock to turn, which will lessen the chance of failure."
242."If the stock is healthy and under accumulation, the pullbacks will be brief and will be met with support that pushes the stock to new highs within days, bouncing back like a tennis ball."
243."Price reactions and pullbacks allow you to determine whether your stock is a tennis ball or an egg."
244."Planning your trades in advance allows you to conduct research when there are no distractions or blinking quote screens."
245."Try to give your stocks until the end of the day unless the reversal is so severe that it triggers your protective stop."
246."Once the stock successfully breaks out, the stock price should hold its 20-day moving average and in most cases should not close below it."
247."A failed breakout can quickly lead to a base failure."
248."Try to give your stocks until the end of the day unless the reversal is so severe that it triggers your protective stop."
249."As long as the price holds above my stop loss, I try to give the stock some room."
250."I rarely buy a stock that has corrected 60% or more. Most constructive setups correct between 10 and 35%."
251."A stock hitting a new high has no overhead supply to contend with."
252."It's obvious that you have to buy at a price lower than the price at which you sell to make a profit. However, this doesn't mean that you have to buy at or near the lowest price at which the stock has traded historically."
253."If you are too early, you run the risk of the stock resuming its downtrend. If you're too late, you run the risk of buying a late-stage base that is obvious to everyone and prone to failure."
254."You're not trying to be the first one on board; rather, you're looking for where momentum is picking up and the risk of failure is relatively low."
255."Because you know how something is supposed to perform, when it doesn't perform that way, it makes the exit decision much easier."
256. Some say... your strategy only works in a good market. Uhh..Ok. if it worked in a good AND bad market, it would work 100% of the time! I would love to have that strategy. Let me know when you find it. If you do it right, you make enough to sit tight during the down time.
257. A smart trader knows what to trade. A wise trader knows when to trade it.
258. I've had at least 7 years when I was up anywhere between 155% and 413%. Think about how much sit out time that buys; how long I could do nothing risk free and still have a great long term performance. Do the math!
259: My goal is to be in the market the LEAST amount of time possible. When you are invested you are at risk of drawdown. My goal is to make the biggest return in the shortest period and spend the rest of the time safe in cash.
260. You will never get huge returns with any real consistency holding a diversified portfolio of stocks through thick and thin. Big performance with little drawdown requires:
1. Timing
2. Turnover
3. Aggressive position sizing when trades are working, light or cash when they're not.
