Being Wrong Buying Stock is Okay

Being wrong is OK, but let's not carry it to extremes. That applies to everything, but let's limit our discussion here to the stock market.

I have been trading for several decades and was an exchange memebr and floor trader for 17 years. You learn fast there or you go broke in a hurry. As you can see I managed to hold my own for a few years until I found the secret and started to become a successful trader. Every professional trader I know knows the one great secret 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 to jump out if the trade was not going our way. Many of my friends were scalpers. That means they were trading for just a few ticks and every night went home flat. Flat is no positions at all.

Others, myself included, took a longer look and planned to hold a position for a period of time. That could be several days or weeks. If you were right the longer you held on the more money you would make.

The general public seems think that exchange 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 account had losses 40% of the time and 20% were scratch trades (neither winners nor losers).

You ask, "If you are out of the money 60% of your trades how can you make money?" This is what every professional knows: Keep your losses small and let your profits run. How many times have you heard that one? BUT how many times have you ignored that rule?

At the end of the year when you analyze 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 in you 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 small investor today that mutual fund families are putting in selling restrictions to discourage investors from dumping funds that are headed down. Many require long holding periods and if you sell prior to that time they charge an extra fee of 2%. They give lame excuses that I know are not true for doing this. Never buy any fund or trade with any brokerage company that has that kind of rule.

It is cheaper to pay the 2% or whatever fee there is and get out than hang around and lose 20% to 40% of your equity. Look back at 2000 to 2003. This can happen again despite what your broker tells you.

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

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

---

Swing Trading Strategies

Using Swing Trading Strategies and Technical Analysis when Trading Stocks... Read More

Trading Stocks ?Never Forget About A Past Trade

We all know that emotions control every decision that an... Read More

Stock Trading - Daddy, Why Arent We Rich?

One Saturday morning, while he was sitting at his computer... Read More

The Stock Market - Part 1: Believe It Or Not, Its Always Been Your Best Friend And Always Will Be

Regardless of the fact that the world's stock markets have... Read More

Market Psychology

Today we are inundated with tons of information about the... Read More

Peer Groups

Whenever I see mutual fund comparisons in the trade publications... Read More

401K-itis

Are you one of those many people who dread reading... Read More

On Line Stock Trading: Small Cap & Micro Stocks Go Up and Down - How Can You Profit?

Success in small cap & micro cap stock trading like... Read More

Investing in Trash Company Stocks

Refuse is a serious issue in any society, about as... Read More

Investment Lawyers and Trash Stocks

The trash business in its efforts to cook their books... Read More

Dividends

When is a dividend not a dividend?The latest thing "conservative"... Read More

Why Change Funds?

On November 17 I bought 7 different mutual funds and... Read More

Market Globalization

Just 30 years ago the stock market was a shadow... Read More

Two for the Money

Look back over the years and try to remember how... Read More

Zero Sum Game

Most people think the stock market is a zero sum... Read More

Evaluation II

As I said in Part I everyone in the insane... Read More

Mutual Fund Honor Roll ? Buy High, Sell Low by Chasing Performance

Buy high and sell low -- It's not a typo.Millions... Read More

Alfred E. Newman

What! Me worry?Many of you remember the cover of MAD... Read More

The Surgeon General

The Surgeon General of the United States says that smoking... Read More

When?

When will the stock market stop going down and start... Read More

Laws and Efficiencies and Theories of Diminishing Returns

The basis of diminishing return discussions surround such simple notions;... Read More

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

I have been trading for several decades and was an... Read More

Option Spread Trading

Spread trading is a technique that can be used to... Read More

Downdraft

For the year 2000 we have seen hundreds of mutual... Read More

The Stock Market is a Roller Coaster: Prepare for the Ups and Downs

IT'S REMINISCENT OF THE OLD children's tale about an old... Read More

Again With the Bubbles?

A few years back ? it seems like an eternity... Read More

The Secret Art of Backtesting

If you have not back tested your trading system, you... Read More

How to Short Stocks? How to Make Money when Your Stocks Go Down by Shorting

The stock market can present you with a lot of... Read More

Struggling Stocks, Booming Commodities

04/28/2005NASDAQ dropped -12.5% year to date in 2005. S&P500 index... Read More

The Stock Market Doesnt Care if You are a Beginner?. Get Prepared to Succeed at Trading

Stock trading remains a very competitive field and the stock... Read More

Analyzing Growth Stocks: An Important Focus For Any Investor

Analyzing growth stocks is an important focus for any investor.... Read More

What is Involved in Peak Performance Trading?

There is so much involved in developing peak performance, that... Read More

Is Active Trading The Answer?

One of the main reasons many of us get into... Read More