Trading/Investing Books Summary (3) - Truth of the stock tape

How to trade

  1.) Have a well-defined plan before you start trading, then follow that plan.

 2.) Place the stop loss so that you can lose a few times before you make a profit that wipe out the losses.

 3.) Three biggest mistakes

-       Averaging a loss

-       Failing to place a stop loss order

-       Overtrading

 4.) Cut short your losses, let your profits run, pyramid or increase your buying or selling when the market is moving in your favour, not when it is going against you.

5.) Do as the insider do: If they cannot get what they want, they take what they can get; if the market will not take what they have to offer, they offer what it will take; if the market will not go their way, they go its way.

6.) Trading method : Your first risk should be your greatest

-       Buy a stock and put a stop loss

-       When market moves in your favour, buy again and move the stop loss up

-       When you buy again, you should keep decreasing your trade size and never increase them

7.) A profit is never a profit so long as it is on paper

8.) All of the information that affects the future price of the stock is contained in its fluctuations and you need nothing more than its record of prices.

9.) If the supply of stock exceeds the demand, or at least that buyers are able to get what they want without bidding prices up, then it is better to sell out, watch and wait.

10.) The seven zone of activirty

i.) The Normal Zone

- represents something near actual intrinsic value

ii.) The First Zone above Normal

-       A period of quiet advancing prices which attracts very little attention

iii.) The Second Zone above Normal

-       A period of greater activity when pools begin marking up stocks.

iv.) The Third Zone above Normal

-       A period of distribution

v.) The First Zone below Normal

-       Marked by a quiet decline from high prices

vi.) The Second Zone below Normal

          -  Liquidation increases, breaks become bigger and rallies smaller

vii.) The Third Zone below Normal

-       A period of panicky conditions, extreme pessimism

-       It is time to cover short and buy

-       May be necessary to watch and wait for several months until liquidation is completed and accumulation is taking place