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• C HAP T E R •
Kicking the Bag: Learning to
Take Losses and Sell Rules
“Pain is the best instructor, but no one wants to go to his class.”
—TAEKWONDO MASTER HONG HI CHOI
The repetition of kicking the bag in martial arts equals the true birth of skill. The
most important thing every investor must learn is to keep all losses small and
move on to the next trade. As legendary trader Jesse Livermore put it, “Take
your losses and don’t brood about them.”
No one is right 100% of the time in the stock market. Famous Wall Street
investor and political consultant to U.S. presidents Bernard Baruch said it
best: “If a speculator is correct half of the time, he is hitting a good average.
Even being right three or four times out of 10 can yield a person a fortune
if they have the good sense to cut their losses quickly on the ventures where
they have been wrong.”
The secret to winning big in the stock market is not to be right all the time
but to lose the smallest amount of money when you’re wrong.
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