Page 1155 - How to Make Money in Stocks Trilogy

140 HOW TO MAKE MONEY IN STOCKS—GETTING STARTED

What’s the point of scoring nice gains in a strong rally, if you’re only
going to give them all back when the market direction changes? You can
easily avoid “round-tripping” your stocks simply by following the Selling
Checklist.
If you do hold stocks during a correction, understand that the market
tide is against you. You need to remain vigilant and ready to protect your-
self if your stocks start to seriously weaken. Here’s how to do that:
• Make sure you have a large enough gain to “cushion” yourself
against a potential drop. It’s risky to hold in a downtrend if you’re at
breakeven or just sitting on a small gain.
• Set a target sell price. Decide how much of your profit you’re will-
ing to give back if the stock sells off. For example, if you have a 75%
gain, you might be willing to ride that down to 50% but no further. If
the stock hits that price, cash in your remaining profits.
You can set automatic trade triggers to make sure you stick to your
target sell price (Chapter 4).

• Consider selling at least a portion of your shares. That’s a way to
nail down guaranteed profits, but still have a position in the stock if it
continues to climb.
3. Prepare now to profit in the next uptrend.
We touched on this earlier, but I want to make sure it really sinks in: If
you stop doing your investing routine while the market is down, you
won’t be ready to make big money when it moves back up!
In the stock market, good things don’t come to investors who just wait.
Good things—and stellar profits—come to those who prepare.
Now you may be wondering: Why should I keep doing my routine and
look for winning stocks if I’m not even supposed to make new buys in a
correction? Here’s the answer . . .

Why You Must Stay Engaged During a Market Downtrend
• The market direction can change very quickly.

When we’re in a correction, the market is never more than 4 days away
from a potential new uptrend. That’s all it takes for a “follow-through day”
to kick off a new rally (Big Rock #1, Chapter 3).
And remember: New uptrends often begin when the news is terrible.
So if you stay focused on the doom and gloom headlines and ignore the