Two years ago I wrote an article about my rules of trading. Here it is again, back by popular demand…
Some hoary old trader once told me it takes seven years to know what you are doing in the markets.
This is true.
It takes time to understand not just who is lying to you, but what their motive is — and most importantly, how to profit from it.
Believe me; everyone on Wall Street has a motive.
Mine is simple: If I make readers money, they continue with their membership, and therefore I make money. If I don’t make readers money, they fire me.
That said, I’ve been in business for fifteen years and I even have a few readers who go back to the beginning. Of this I am very thankful.
Because in truth, I couldn’t do what I love without you. If you don’t make money, you fire me. It’s that simple.
With this in mind, here are the first ten of my 40 Commandments of Trading.
1. The market is god. This means that the market is always right — even if it’s wrong. If you think the market should be in a double dip and it isn’t, then that’s your problem, not the market’s. Your theory is wrong. You missed something. Blaming the market never made anyone any money.
2. Buy the crisis. When a political or economic crisis occurs in a country, the best thing to do is to go to www.adr.com and find the bank, telecom, or brewery that has sold off the most and buy it. When Wall Street fund managers sell ETFs and country funds, they sell these large stocks that act as a proxy for the country as a whole. When the money comes back, it comes back into the blue chips.
3. Vancouver is full of liars, cutthroats, and thieves. When investing in Canadian resource companies, assume they are scams unless proven otherwise. (Update: The Venture Exchange has been selling off for two years. It is down about 50%.)
4. Wall Street’s Hippocratic Oath: First do no harm. In other words, it is better not to make money than to lose it.
5. Never apologize for a profit. The goal in investing is to make money. If you make 5% and the stock goes up another 1,000%, it doesn’t matter. You still made money, and that’s a good thing.
6. There is no success like success. When you make a winning trade, make it again. This means that if you trade dividend announcements, or you trade MACD crossovers, or whatever you do… if it works, keep going back to it until it doesn’t. One of the best years I ever had was shorting recent IPOs after the insider shares unlocked. This worked like a dream until it became too popular and IPOs started staggering their unlock dates.
7. Never put money in a hope. If you don’t have a clear investment strategy with a simple catalyst for share price appreciation, don’t buy the stock.
8. Be your own man. Do your own research and stick to your guns. You know more about the trade than they do.
9. Never step in front of a freight train. This is also known as the “don’t catch a falling knife” rule. There are bottom signs in the market. Know them and wait for them.
10. Buy big in stocks that trade less than cash. Every once in a great while, you will come across stocks that, due to margin calls or market crashes, have an income, zero debt, and more cash than their current market value.
I found four of these in November 2009 after hedge funds sold all their gold stocks…
They are now up about 1,200%.
If you only follow one rule, follow number 10.
Until next time,
Christian DeHaemer
Editor, Wealth Daily
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