THE ALCHEMIST by AL THOMAS
THE GREAT STOCK MARKET SECRET
When the stock market is going up and all your stocks and mutual funds are making money you feel like a genius. It is too bad that some folks
dont remember what happened in 2000. Of course, right now we are in one of those genius phases.
Your broker and financial planner are
encouraging you to buy, buy, buy. And I cant fault that at this time. You remember back in 2000 how many times they told you to buy, buy, buy
while the market was going down, down, down. Are we in another of those periods now that are leading up to a humongous crash? Hey, I dont
predict, but I do listen to the voice of the market.
The great Wall Street mantra is buy a
good stock and put it away. Did you keep WorldCom and Global Crossing? Even if these were exceptions because of fraud a smart investor would not have
lost any money. In fact he could have made a nice profit.But Al, they went under! Yes, I know, but the smart money still made out because they sold
near the top.
As a former exchange member and floor
trader I was not right every time I bought something and I especially did not like giving back nice profits that had accumulated. You dont have to be psychic to know when to sell and dont
think you are going to be able to pick the top. A really smart trader waits for a stock or fund to start up and then jumps on it with both feet. When
it starts down he jumps off looking for another equity that is going up. The wise trader knows he cant buy the bottom and sell the top. What he
wants is a big bite out of the middle.
When you make a sandwich most of the meat is in the center and a professional trader does the same with his trading. He wants to take a bite
out of the middle of the move. You can do this too by looking for stocks, mutual funds or Exchange Traded Funds that have a nice upward pattern. As I
said before buying is not the secret. Then what is?
You must learn to sell - for two reasons.First to protect your equity after your initial purchase and second to keep from giving back profits you have made as the equity advances. The
great Wall Street secret is an exit strategy: knowing when to sell. Unless you learn to sell will not be successful in the market. Brokerage
companies do not want you to sell and rarely issue sell signals. You must decide how much you are willing to risk before you buy.
The simplest way is with a percentage stop loss order of 5%, 7%, 10%, 12%, whatever you can live with. Instruct your broker to place a
trialing stop or you can change it yourself every week. Do not lower a stop.
Selling is the great secret you will never hear from your broker.