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  Wednesday October 22nd, 2014    

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The Alchemist (04/11/2010)
By Al Thomas

NEVER LOSE MONEY IN THE STOCK MARKET

I’m sure you haven’t lost money in the market, but you might

want to pass this article along to a friend.

Way back in 1984 anyone could buy AT&T at $5.00 per share and put it away. It always went up for 15 years to $60. It paid a nice dividend every year too.

From the 1999 high of $60 it dropped below $20, then rallied

to $40 and now is trading around $25. The woulda, coulda, shoulda

guys said I coulda bought it at $5 and coulda sold it at $60 and shoulda never bought it back at $40. Hindsight is always 20/20.

Everyone is looking for that stock that skyrockets. Remember PMC Sierra? Started at $4 and in about a year went to $250 and in

one more year was back at $30 and is now trading at $9. YUK! Maybe you were smart enough to buy it at 5 and sell it at 225. There are a lot of folks that still have it in their portfolio hoping it will “come back”.

The most expensive trading word in the market is one called

hope. It never pays off.

And almost every broker will tell his clients to hang on because it will “come back”. This is another portfolio breaker. Remember Enron?

Are there any stocks now getting ready to take off like PMC

Sierra? Sure, but you will have find them. As a professional trader of many years I can’t. And neither can your broker. Brokers are taught to get you to buy – anything. They are not taught how to protect your profits if you should be lucky enough o ride one of those skyrockets. You have to learn that.

Many, many years ago I took a stock market trading class with

an old trader from Detroit. It was e expensive, but he taught the single most important trading method: HOW TO SELL.

The secret of the stock market is not buying; it is selling. Every

professional trader I know always has one thought in mind when he takes a new position: How much will I allow myself to lose if I am wrong.

The pro thinks about losses not profits. Limit losses; profits take care of themselves.

Every individual position must stand on its own. Just because there is a profit in another stock do not let the good one hold off selling the bad one. Every position in a portfolio should have some kind of exit strategy.

The best is a trailing stop loss of some kind that the brokerage company will place every day. A simple GTC (Good Til Cancelled) order you follow up each week or month will work very well.

Over the last decade the Buy N Hold S&P Index funds lost (yes, lost) 25% of the investors money. A simple timing strategy made money. Learn how to sell. Unless there is an exit strategy investors never make money in the stock market.

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 2010 Williamsburg Investment Co. All rights reserved.

 

 

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