Top lessons from “How to Make Money in Stocks: A Winning System in Good Times or Bad:
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“Be completely objective and recognize what the marketplace is telling you, rather than trying to prove that what you said or did yesterday or six weeks ago was right. The fastest way to take a bath in the stock market is to try to prove that you are right & the market is wrong.”
“The whole secret to winning big in the stock market is not to be right all the time, but to lose the least amount possible when you’re wrong.”
“Charts plus earnings will help you tell the best stocks and general markets from the weaker, riskier stocks and markets that you must avoid altogether.”
“I made a rule that I’d buy each stock exactly at the pivot buy point and have the discipline not to pyramid or add to my position at more than 5% past that point. Then I’d sell each stock when it was up 20%, while it was still advancing.”
“A great trader once noted there are only two emotions in the market: hope and fear. “The only problem,” he added, “is we hope when we should fear, and we fear when we should hope.”
“Success in a free country is simple. Get a job, get an education, and learn to save and invest wisely. Anyone can do it. You can do it.”
“The moral of the story is: never argue with the market. Your health and peace of mind are always more important than any stock.”
Market tops:
“On one of the days in the uptrend, volume for the market as a whole will increase from the day before, but the index itself will show stalling action.”
“I call this “heavy volume without further price progress up.”
Distribution:
“As professional investors liquidate stock. The spread from the average’s daily high to its daily low may in some cases be a little wider than on previous days.”
“If one of the indexes is down for the day on volume larger than the prior day’s volume, it should decline more than 0.2% for this to be counted as a distribution day.”
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What is surprising is not the magnitude of our forecast errors,but our absence of awareness of it. This is all the more worrisome when we engage in deadly conflicts: wars are fundamentally unpredictable. Owing to this misunderstanding of the causal chains between policy & action
“It is impossible for our brain to see anything in raw form without some interpretation. We may not even always be conscious of it.”
10 Top Lessons From the Book “Reminiscences of a Stock Operator”
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“A man must believe in himself and his judgment if he expects to make a living at this game.”
“After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!”
Ed Seykota’s 10 Top Trading Principles that made him a fortune and a legend:
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Seykota was long through bull markets.
“If I am bullish, I neither buy on a reaction, nor wait for strength; I am already in. I turn bullish at the instant my buy stop is hit, and stay bullish until my sell stop is hit. Being bullish and not being long is illogical.”
Ed traded a system that fit his own personality.
“Systems don’t need to be changed. The trick is for a trader to develop a system with which he is compatible”
William J. O’Neil’s 10 trading principles that made him a fortune and a legend:
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He sells a stock he is holding after it has gone down 7% from his purchase price.
“I make it a rule to never lose more than 7% on any stock I buy. If a stock drops 7% below my purchase price, I will automatically sell it at the market – no second-guessing, no hesitation”
One of the major keys to his profitable trading was only having small losses when he was wrong.
“The whole secret to winning in the stock market is to lose the least amount possible when you’re not right.”
In trading less is more, less activity generally leads to more profits and smaller positions sizes leads to better odds of keeping profits over the long term. Less activity in trends allows an easier way to make money. Less position size leads to smaller losses when wrong.
It is better to specialize in trading, pick a market, pick a method and master it. It is better to be a master of one set up, pattern, stock, market, or system, than to dabble in many.