Principles written in the blood and tears of lost money:

• Preserve Capital. Large losses will lead to horrible things in your life. Your capital is your ticket to play the market; your power... don't lose it!
• World markets are held in healthy tension, leading to steady-state and giving the 'house' the advantage. Tension favors tried and true sysems such as brokerage houses and not individuals. Stay in cash and wait for a major disruption in national or international political or financial systems, then invest when fear has peaked and a new trend starts. Disruptions lead to chaos, fear and the redistribution of wealth from instituions to individuals. Choppiness in the market leads to bleeding of cash resources.
• Trade by a plan. Look at support & resistance as well as RSI, Stochastic & MACD at stockcharts.com.
• Buy and setll lots of stocks, lots of times; not a few stocks a few times.
• Trust numerical methods, not people's opinions.
• "Lose your opinion, not your money."
• Don't allow yourself to lose more than 8% on a trade.
• Much harder to lose $500 ea. across 8 bad trades rather than $4000 in one trade.
• The market is designed to fool most of the people most of the time. Tread lightly. Diversify.
• Take small profits. "Bulls make money & bears make money, but pigs get slaughtered".
• Set clear stop losses (electronic or mental) and honor them. Drink your poison quickly when a trade goes against you.
• Diversify. Make 8-10 small bets, not 1 big one. Diversifying into parts pays off from the perspective of randomness.
• Invest for pleasure, not survival.
• Know the fundamental reasons you are buying a security, so if it goes against you, you will be able to think clearly about what to do.
• If your only hope is hoe for a losing trade, it may be time to get out.
• Keep a good reserve of cash.
• Understand candlestick chart patterns and visual patterns .
• Dollar cost average over a few week period. You can't call a bottom and can confirm your decision over time.
• This game is ALL about emotional competency. Don't trade beyond your emotional competency
• Follow the trend. Stocks that go high will often go higher and vice-versa.
• As far as trends go, look for higher highs and lower lows on long stocks, opposite for short.
• Don't buy stocks on the way down... don't try to catch a falling knife. Wait until you see an up trend.
• Money can be made twice as fast on stocks in the downward direction. Learn how to trade Shorts and Puts.
• Don't listen to tips from friends, a stock 'pro' or the media. They are often wrong. Make your own trades and keep silent.
• Beware of impatience. Wait. Wait like a sniper for a great shot. Wait. Wait. Wait.
• Are you crafting a strategy that will put you in a Lear Jet in ten years?
• Limit Options to 2% of your portfolio.
• Stay out of funds. Invest where your money is liquid and stop losses can be honored immediately.
• If you are feeling fear in making a trade, it is often the right one. Beware when you feel like it is a 'sure thing'.
• Jesse Livermore: The big money in a bull market is made via sitting on your bottom.
• JL: The moral of the story: Sometimes you just need to be patient. And, at all times, you need to have conviction -- because, as I have said before, one of the goals of Mr. Market is to throw you off the scent of your good ideas, by making you bullish at the top, bearish at the bottom, and unsure in between.
• JL: Send out an initial 'probe' investment. Wait for it to 'take' before investing more.
• JL: The speculator must know the overall trend of the market- the line of least resistance- before making a trade. Be sure you know whether this line is upward or downward.
• JL: If the stock you traded is going the opposite direction from what you expected, sell it quickly. This means your judgment was wrong. Cut your losses.
• JL: Wait, be patient, until as many factors as possible are in your favor. It's patience that makes the money.
• JL: Group action is the key to timing your move. Stocks do not move alone when they move.... If the basic reasons why US Steel's business should come into or go out of favor in the stock market are sound, then the rest of the steel group should also follow for the same reasons.
• JL: You should have a clear target price at which to sell if the stock moves against you, a firm stop. And you must obey your own rules!
• JL: A successful trader must bet only on the course of highest ??????
• JL: The stock market must be studied, not casually either, but deeply, thoroughly. It's my conclusion that most people pay more attention to the purchase of an appliance for their house, or when buying a car, than they do to the purchase of stocks. The stock market, with its allure of easy money and fast action, induces people to foolishness and the careless handling of thier hard-earned money, like no other entity.
• JL: Don't lose your stake. A speculator without cash is like a storeowner without inventory. Cash is your inventory, your lifeline, and your best friend. Without cash, you are out of business. Don't lose your line.
• JL: It is wrong and dangerous to establish your full stock position at only one price. Rather, you must first decide how many shares you want to trade. For example, if you want to purchase 1,000 shares as the full final position,, do it like this: "Start with a 200-share purchase on the PIVOT POINT. If the price goes up, then buy an additional 200 shares, still within the pivot point range. If it keeps rising, buy another 200 shares. See how it reacts; if it keeps on rising or corrects and then rises, you can go ahead and purchase the final 400 shares.
• JL: Remember, a successful speculator must set a firm stop before making a trade and must never sustain a loss of more than 10%. If you lose 50%, you must make 100% to get even.*
• JL: Let a position ride. As long as the stocks is behaving normally, do not be in a hurry to take a profit. You musht know when are right in your basic judgment, or you would have no profit at all. If there is nothing basically negative, then let it ride. It may grow into a very large profit. As long as the action of the overall market and the stock do not give you cause to worry, have the courage of your convictions, and stay with it.
• JL: I recommend parking fifty percent of the profits from a successful trade, especially when the trade doubled the original capital. Set this money aside, put it in the bank, hold it in reserve, or lock it up in a safe deposit box. Like winnings in the casino, its a good idea now and then, to take your winnings off teh table, and turn them into cash. There is no better time then after a large win on a stock. Cash is the bullet in the chamber; always keep a cash reserve.
• JL: I am fully aware that of the millions of people who will speculate in the stock market, few will spend their full time involved in the art of speculation. Yet, as far as I am concerned, it is a full-time job, perhaps even more than a job, perhaps a vocation, to which many are called and few are singled out for success.
• JL: Beware of inside information-all inside information!
• JL: Always remember; you can win a horse race, but you can't beat the races. You can win on a stock, but you cannot beat Wall Street all the time. Nobody can.
• JL: Greed, fear, impatience, and hope will all fight for mental dominance over the speculator. Then, after a few failures and catastrophes, the speculator may become demoralized, depressed, and desponded and abandon the market and the chance to make a fortune from what the market has to offer. Develop your own strategy, discipline, and approach to the market.
• JL: Before you can successfully play the market, you must have a clear, concise strategy and stick to it. All speculators must design intelligent battle plans, customized to suit their emotional makeup, before speculating in the stock market. The biggest thing speculators have to control is their emotions. Rememeber, reason, logic, and pure economics do not drive the stock market. It is driven by human nature, which never changes. How can it change? It's our nature.
• JL: This is not to say that things like sales, profits, world conditions, politics, and technology do not play a part in the ultimate price of a stock. These factors eventually come to bear, and the price fo the stock market and the individual stocks may reflect these factors, but it is always emotion that carries the exremes.
• JL: Livermore believed in cycles, life cycles and market cycles. They are often extreme, rarely balanced. Cycles come like a series of ocean waves, bringing the high tide when things are good, and the low tide as conditions recede. These cycles come unexpectedly, unpredictably. Good or bad, they have to be weathered with temperence and patience. Remember, the skillful speculator konw that money can be made no matter what the market conditions, if a speculator is willing to play both sides of the market.
• JL: The action is with the leading stocks, which change with every new market.
• JL: New all-time highs are to be bought on breakouts.
• JL: Cheap stocks often appear to be bargains after a large drop. They often continue to fall, or have little potential to rise in price. Leave them alone!
• JL: Use pivotal points to indentify changes in trends and confirmations in trends.
• JL: Don't fight the tape!
• JL: In a free market system, prices fluctuate. They never go up all the time, and they never go down all the time. This is good for the alert speculator, since either side of the market can be played.
• JL: The big money is made in the sitting, not the thinking. Once a position is taken, the hardest thing to do is to be patient and wait for the move to play out. The temptation is strong to take fast profits or cover a trade soley out of fear of losing the profit on a correction. This error has cost millions of speculators millions of dollars. Be sure you have a good reason to enter a trade, and be sure you have a good reason to close your position. It is the big swing that makes money for you.
• JL: Play the market when all factors are in your favor.
• JL: The speculator must know the overall trend of the market- the line of least resistance-before making a trade. Be sure you know whether this line of least resistance is upward or downward. This applies to both overall market and individual stocks. The basic thing you need to know is which way the overall market is headed: up, down, or sideways. If the overall trend of the market is not in your favor, you are playing at an extreme disadvantage.
• JL: Remember, go with the flow, bend with the trend, do not sail into a gale, and- most of alll- don't argue with the tape!
• JL: The only thing to do when you are wrong is to be right by ceasing to be wrong. Cover your losses quickly, without hesitation. Don't waste time- when a stock moves below a mental stop, sell it immediately.
• JL: Stocks often act like human beings, expressing different personalities: aggressive, reserved, hyper, high-strung, direct, logical, predictable, unpredictable. Study the stocks as you would study people; after awhile their reactions to certain circumstances become predictable and useful in timing the stock's movements.
• JL: In a market moving sideways in a narrow channel where stock prices are essentially stagnant, their is great danger in trying to predict or anticipate when and in what direction the market will move. You must wait until the market or the stock breaks out of the sideways channel in either direction. Don't anticipate! Wait for confirmation! Never argue with the tape. Follow the line of least resistance.
• JL: Do not spend a lot of time trying to figure out what moves the price of a particular stock. Rather, examine the tape. The anser lies in what the tape says, not in trying to figure out why the tape is saying it..
• JL: A danger signal to watch out for: the one-day reversal, when the high of the day is hier than the high of the previous day, but the close of the day is below the low of the previous day, and the volume of the current day is higher than the volume of the prevous day. Beware!
• JL: Wait, be patient, until as many factors as possible are in your favor. It's the patience that makes the money.
• JL: The market is operating in future time. It has usually already factored in current events.
• JL: It is the inception of a basic movement, the pivotal point, a change in trend, which indicates whether to buy or sell. It is this change in trend that, if caught, yields the most rewards. There are two kinds of pivotal points. It is the inception of a basic movement, the pivotal point, a change in trend, which indicates whether to buy or sell. It is this change in trend, which if caught, yields the most rewards. The reversal pivotal point is defined as the perfect psychological time at the beginning of a major market move, a change in basic trend. It does not matter if this is at the bottom or the top of a long-term trending move. The second pivotal point is called the continuation pivotal point. The reversal pivotal point marks a definite change in direction, the continuation pivotal point confirms it. Be alert- major pivotal points can often be accompanied by a heavy increase in volume.
• JL: New highs are very important for timing. A new all-time high can mean that the stock has broken through the overhead supply of stock, and the line of least resistance will be strongly upward. May people, when they see a stock has made a new high, sell it immediately, then go to look for a cheaper stock..
• JL: Group action is the key to timing your move. Stocks do not move alone when they move.
• JL: Confine your studies of the stock market movements to the prominent leaders of the day. If you cannot make money out of the leading active issues, you are not going to make money out of the stock market.
• JL: A successful market trader must bet only on the course of highest probabilites. Buy small positions, and probe to test your judgment before you commit to a large position Do not establish your full position at one time. Use probes to confirm your judgment and timing, and find the line of least resistance.
• JL: The trader must react quickly to the unexpected. If it is a windfall, grab it. If it is bad news, hit the road, and don't look back or hesitate-sell the position.
• JL: Beware when volume gets heavy ad stocks churn after a long upward trend. This is a clue, a warning that stocks are going from from strong hands to weak hands, from the professionals to the public. The public often views this heavy volume as the mark of a vibrant, healthy market going through a normal correction, not a top or bottom. The public tends to believe that the insiders are feeding out their stock on the upward rise of the stock. They are often wrong. They are often being fed the majority of the insider or pooled stock after the stock has crested at new highs and is rolling over. This is a distribution- is not always from insiders, but usually from larger shareholders, such as mutual funds.
• JL: Never meet a margin call, never average down in your buying.
• JL: Turn paper profits into real money periodically. Take a percentage of your winnings and put them in a safe place.
• JL: The successful investor is not invested in the market all the time. There are many times when ou should be completely in cash. Often, money that is just sitting can later be moved into the right situation once it has revealed itself. If you are unsure of the direction of the market, stay out, and wait for a confirmation of the next move. This is how to make a fortune. Patience, patience, patience is the key to success. Don't be in a hurry.
• JL: First, establish 20% of your planned position on the first purchase, 20% on the second, 20% on the third. Wait for a confirmation of your judgment, then make your final purchase of 40%.
• JL: Anticipation is the killer. Don't make a decision based on anticipation. The market always gives you time. If you wait for the clues, there will be plenty of time to execute your moves.
• JL: Never argue with the tape. It can't hear you.
• JL: Tips come from all sources-from relatives, loved ones, friends who have just made serious investments themselves and want to pass on their good fortune. They also come from hucksters and criminals. Remember: all tips are dangerous. None should be taken.
• JL: Remove hope from your lexicon. Hoping a stock is truly gambling. If you do not have good, solid reasons for holding a stock position, then move on to another more logical trade. Wishing a stock up or down has caused the downfall of many stock market speculators. Hope walks hand in hand with greed.
• JL: Be aware of your emotions at all times. Don't get too confident over your wins or too despondent over your losses..
• JL: Speculators are not investors. Their object is not to secure a steady return on their money over a long period of time. Speculators must either rise or fall in the price of whatever they have decided to specuate in.
• JL: Play a lone hand. Make your decisions about your own money by yourself. Be secretive and silent in your stock trading. Do not disclose your winners and your losers.
• JL: Never fight the tape; the tape is truth. Seek harmony with the tape.
• JL: Stay in the business you are good at.
• JL: Four strong mental characteristics needed: observation, memory, mathematics, experience.
• JL: Emotions must be understood and harnessed before successful speculation is possible: Gren, Fear, Hope.
• JL: Reasonable people act unreasonably when they are afraid. And they become afraid every time they start to lose money. Their judgment becomes impaired.
• JL: Hope lives and in hand with greed when it comes to the stock market. Once a trade is made, hope springs alive. Hope, like its stock market cousins ignorance, greed and fear, distorts reason. Hope clouds facts, and the stock market only deals with facts. It is like the spinning of a roulette wheel- the little black ball tells the outcome, not greed, fear or hope. The result is objective and final, with no appeal.
• JL: When the tape doesn't agree with your decision to buy or sell, wait until it does. Never try to rationalized your position with what the tape is saying.
• JL: Never become an involuntary investor by holding a declining stock.
• JL: The stock market is never obvious. It is designed to fool most the people most of the time. These rules are often based on thinking against the grain.
• JL: There is nothing new on Wall Street or in stock speculation. What has happened in the past will happen again and again and again. This is because human nature does not change, and it is human emotion that always gets in the way of human intelligence..
• Bill Cara: You have to learn to buy into weakness and sell into strength if you ever want to buy low and sell high.
• Buy on rumor, sell on fact.
• Don't try to call a top or a bottom. Wait for the trend to start reversing before investing. Buy after the selling has all been done
• Let winners run. Sell losers.
• Diversify through different equities, markets, currencies, sectors, nations, etc... Often "foreign" funds are strongly tied to the US market, and are more volatile; so beware.
• You can always wait one more day.
• Precious metals and their stocks hold much allure, but when they descend, descend violently.
• Precious metals can be very frustrating since they are tied the price of the metal, the USD, and as well the stock market, so a bump in metals prices doesn't necc. lead to an increase in the stock! Buying Puts on them on the way down can be very rewarding!
• Missed money from not entering a trade is better than lost money from a bad trade.
• Mao Xian: Buy 'em when they ain't!
• Great traders make very few trades. A great trade can last a lifetime.
• John Templeton: People are always asking me where is the outlook good, but that's the wrong question.... The right question is: Where is the outlook the most miserable? In almost every activity of normal life people try to go where the outlook is best.... But my contention is if you're selecting publicly traded investments, you have to do the opposite. You're trying to buy a share at the lowest possible price in relation to what that corporation is worth. And there's only one reason a share goes to a bargain price: Because other people are selling. There is no other reason.... To get a bargain price, you've got to look for where the public is most frightened and pessimistic.... The art of successful investment is counterintuitive. The time to buy is when everyone is scared and you are a bit scared yourself.
• How Markets Really Work (Bill Cara): By testing 15 years of trading data, Connors Research proves that successful trading involves buying into weakness and selling into strength. In their words: “These conclusions were confirmed many different ways, by comparing multiple-days' highs to multiple-days' lows; comparing multiple days of the market rising to multiple days of the market declining; comparing multiple days of the markets rising higher intra-day to declining lower intra-day; looking at the days when the market rose strongly to the days it declined sharply; studying days when advancing issues were much stronger than declining issues; looking at the put/call ratio, and studying the effects of prices when VIX stretched to extremes. The test results, many using over 3,500 days of trading, all point us in the same direction—it has been smarter, wiser, and more profitable to be buying weakness and selling strength in stocks, than vice versa.”
• Research before investing; much like buying a car.
• The most powerful ally & enemy are your emotions.
• Buy with the long term in mind… think of winning and how good it will feel to have bought stock at a deep discount!
• Know your investing timeframe and strategy: day, swing, long-term. Don't mix strategies in a given trade!
• Like physics, stocks will not change direction until a force greater than their current momentum acts on them.
• Don't buy on emotion. Buy on a plan.
• Don't adopt All or Nothing thinking.
• No bull market lasts forever. Don't fall in love with a specific investment or sector.
• Beware of abnormally high volume as well as price crossing the 50 day moving average simultaneously.
• Invest with the general trend of the broader market. i.e. Puts in descending market, Calls in ascending market.
• Often dumb money invests the beginning of the day, smart money at the end of the day.
• (IBD) Buy stocks with earnings up 25% last 3 years, return on equity 17%, and recent earnings and sales accelerating.
• (IBD) Avoid stocks less than $15/share.
• (IBD) Learn how to use charts to spot sound bases and exact buy points.
• (IBD) Cut losses when it's 8% below your cost. Make no exceptions so you can alway avoid huge, damaging losses. Never average down in price.
• (IBD) Have selling rules on when to sell and take profit on the way up.
• (IBD) Buy when market indexes are in an uptrend.
• (IBD) Pick companies with management ownership of stock.
• (IBD) Buy stocks with increasing institutional ownership in recent quarters.
• (IBD) Don't buy because of P/E or dividends; buy based on sales and earnings growth.
• (IBD) Don't try to bottom-guess or buy on the way down. Never argue with the market.
• (IBD) Do a post-analysis of your buys and sells. Post on charts where you bought and sold. Evalute and develop rules to correct your major mistakes.
• By testing 15 years of trading data, Connors Research proves that successful trading involves buying into weakness and selling into strength. In their words: “These conclusions were confirmed many different ways, by comparing multiple-days' highs to multiple-days' lows; comparing multiple days of the market rising to multiple days of the market declining; comparing multiple days of the markets rising higher intra-day to declining lower intra-day; looking at the days when the market rose strongly to the days it declined sharply; studying days when advancing issues were much stronger than declining issues; looking at the put/call ratio, and studying the effects of prices when VIX stretched to extremes. The test results, many using over 3,500 days of trading, all point us in the same direction—it has been smarter, wiser, and more profitable to be buying weakness and selling strength in stocks, than vice versa.
• Terrific quote, brought to our attention via Jeff Saut (Raymond James): The absolute price of a stock is unimportant. It is the direction of price movement which counts.” During major sustained advances in stock prices, which usually occupy from five to seven years of each decade, the investor can complacently hold a list of stocks which are currently unpredictable. He doesn’t worry about the top because he knows he is never going to sell at the top. He knows that the chances are overwhelming in favor of the assumption that he will get far better prices by waiting until after the top is passed and a probable reversal in trend can be identified than he will ever get by attempting to anticipate the top, and get out on the nose.In my own experience the largest profits we have ever taken have come from stocks purchased while they were making a new high in a market which was also momentarily expecting the top. As I have already pointed out the absolute price of a stock is unimportant. It is the direction of the price movement that counts. It is always probable, but never certain, that the direction of the price movement will continue. Soon after it reverses is time enough to sell. You should sell when you wish you had sold sooner, never when you think the top has arrived. That way you will never get the very best price – by hindsight your individual transactions will never look daring. But some of your profits will be large; and your losses should be quite small. That is all that is necessary for a satisfactory, enriching investment performance.” Stock Profits Without Forecasting,” by Edgar S. Genstein

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Starting Position	Amount Lost	Remainder	Loss, %	Gain Needed to Recover Loss, %
$1000	$80	$920	8%	8.7%
$1000	$100	$900	10%	11.1%
$1000	$200	$800	20%	25%
$1000	$300	$700	30%	42.8%
$1000	$400	$600	40%	66.6%%
$1000	$500	$500	50%	100%