‘How to trade in Stocks’ (II)
This week, we’ll continue with ‘How to trade in Stocks’ by Jesse Livermore
Follow the Leaders
1. When you clearly see a move coming in a particular group, act upon it. But do not let yourself act in the same way in some other group, until you plainly see signs that the second group is in a position to follow suit.
Money in the Hand
1. Have a look at your real money once in a while. Count the money over. Money in a broker’s account or in a bank account is not the same as if you feel it in your own fingers. This will reduce chances of losing your gains.
The Million dollar Blunder
1. The market will tell the speculator when he is wrong, because he is losing money. When he first realizes he is wrong is the time to clear out, take his losses, try to keep smiling, study the record to determine the cause of his error, and await the next big opportunity.
How to Trade in Stocks
1. Patience and knowledge go hand in hand. You must investigate before you buy and then you are sure your position is a sound one.
2. Never let yourself become discouraged by the fact that your securities are moving slowly. Good securities in time appreciate sufficiently to make it well worthwhile to have had patience.
3. A speculator without cash is like a store-owner with no inventory. Cash is your lifeline, your best friend — -Don’t lose money!
4. It is dangerous to establish your full stock position at only one price. Divide your purchase into several portions. Each additional purchase must be at a higher price.
5. Stick with the winners — -as long as the stock is acting right — — do not be in a hurry to take a profit. Let profits ride!
6. To buy and hold blindly on the basis that it is a great company, or a strong industry, or the economy’s generally healthy, is the equivalent of stock-market suicide. The basic conditions that originally caused you to buy a stock can change.
7. It is earnings and profit potential that moves stock. It is profits, real and imagined, that drive the price of stocks.
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