Page 397 - How to Make Money in Stocks Trilogy

272 BE SMART FROM THE START

sponsorship or strong group action. In many cases, stocks that advance dra-
matically by 20% or more in only one to four weeks are the most powerful
stocks of all—capable of doubling, tripling, or more. If you own one of these
true CAN SLIM market leaders, try to hold it through the first couple of
times it pulls back in price to, or slightly below, its 10-week moving average
price line. Once you have a decent profit, you could also try to hold the stock
through its first short-term correction of 10% to 20%.
When a stock breaks out of a proper base, after its first move up,
80% of the time it will pull back somewhere between its second and
its sixth week out of the base. Holding for eight weeks, of course,
gets you through this first selling squall and into a resumed uptrend,
and you’ll then have a better profit cushion.
Remember, your objective is not just to be right but to make big
money when you are right. “It never is your thinking that makes big
money,” said Livermore. “It’s the sitting.” Investors who can be right
and sit tight are rare. It takes time for a stock to make a large gain.
The first two years of a new bull market typically provide your best and
safest period, but they require courage, patience, and profitable sitting. If
you really know and understand a company thoroughly and its products
well, you’ll have the crucial additional confidence required to sit tight
through several inevitable but normal corrections. Achieving giant profits in
a stock takes time and patience and following rules.
You’ve just read one of the most valuable chapters in this book. If you
review it several times and adopt a disciplined profit-and-loss plan for your
own investments, it could be worth several thousand times what you paid
for this book. You might even make a point of rereading this chapter once
every year.
You can’t become a big winner in the stock market until you learn
to be a good seller as well as a good buyer. Readers who followed
these historically proven sell rules during 2000 nailed down most of
the substantial gains they made in 1998 and 1999. A few serious stu-
dents made 500% or more during that fast-moving period. Again in
2008, an even greater percentage of Investor’s Business Daily read-
ers, although not every one, after much work and study were able to
implement proper selling rules to protect and preserve their hard-
earned capital rather than succumb to the dramatic declines in the
year’s third and fourth quarters.