Page 386 - How to Make Money in Stocks Trilogy

When to Sell and Take Your Worthwhile Profits 261

For me, many long evenings of study led to precise rules, disciplines, and
a plan that finally worked. Luck had nothing to do with it; it was persistence
and hard work. You can’t expect to watch television, drink beer, or party with
your friends every night and still find the answers to something as compli-
cated as the stock market or the U.S. economy.
In America, anyone can do anything by working at it. There are no limits
placed on you. It all depends on your desire and your attitude. It makes no
difference where you’re from, what you look like, or where you went to
school. You can improve your life and your future and capture the American
Dream. And you don’t have to have a lot of money to start.
If you get discouraged at times, don’t ever give up. Go back and put in
some detailed extra effort. It’s always the study and learning time that you
put in after nine to five, Monday through Friday, that ultimately makes the
difference between winning and reaching your goals, and missing out on
truly great opportunities that really can change your whole life.

Two Things to Remember about Selling
Before we examine the key selling rules one by one, keep these two key
points in mind.
First, buying precisely right solves most of your selling problems. If you
buy at exactly the right time off a proper daily or weekly chart base in the
first place, and you do not chase or pyramid a stock when it’s extended in
price more than 5% past a correct pivot buy point, you will be in a position
to sit through most normal corrections. Winning stocks very rarely drop 8%
below a correct pivot buy point. In fact, most big winners don’t close below
their pivot point. Buying as close to the pivot point as possible is therefore
absolutely essential and may let you cut the smaller number of resulting
losses more quickly than 8%. A stock might have to drop only 4% or 5%
before you know something could be wrong.
Second, beware of the big-block selling you might see on a ticker
tape or your PC just after you buy a stock during a bull market. The sell-
ing might be emotional, uninformed, temporary, or not as large (rela-
tive to past volume) as it appears. The best stocks can have sharp
sell-offs for a few days or a week. Consult a weekly basis stock chart for
an overall perspective to avoid getting scared or shaken out in what may
just be a normal pullback. In fact, 40% to 60% of the time, a winning
stock may pull back to its exact buy point or slightly below and try to
shake you out. But it should not be down 8% unless you chased it too
high in price when you bought it. If you’re making too many mistakes
and nothing seems to be working for you, check and make sure you’re