Page 803 - How to Make Money in Stocks Trilogy

82 HOW TO MAKE MONEY IN STOCKS SUCCESS STORIES

Learning to Invest Enough Capital in a Big Winner
In 2002, a colleague at work introduced him to IBD and Bill O’Neil’s book
How to Make Money in Stocks. In 2003, he bought Sina Corp, a Chinese
Internet gaming company, and made a 100% gain. K. Basu thought this was
great; the only problem was, he didn’t have a large enough position, so his
actualized gains were relatively small.
Then he attended several advanced IBD workshops as well as the New
York City IBD Meetup Group and met other like-minded investors who
helped him learn how to follow the market every day, and how to be active
rather than passive in the market. He considers this a turning point in his
investing, and he is grateful for meeting some terrific people from that IBD
Meetup Group that would become his mentors. They really helped change
his thinking about his overall investing strategy.
From then on, K. Basu would treat investing more like a job than a hobby.
He took investing more seriously and started doing better in the market as
a result.
His advice to other investors is simple: wait for a follow-through day, and
scale in slowly to see if the market is working or not. Then take most profits at
20 to 25%. “If you do those two simple things,” he says, “your yearly returns
will probably be 25 to 50% in a decent market.”
In terms of follow-through days, K. Basu learned to see how stocks are
working a week or two into the new uptrend. “If stocks are acting well and
moving higher,” he says, “then the follow-through day will probably work.
But if stocks are faltering and not holding onto their breakout moves, the
follow-through day will probably fail.”
If the market is in a correction, he keeps it simple and looks at the IBD
50 to see what the top 10 stocks are doing. Are they setting up in bases,
preparing to break out, or stalling? It’s a quick and easy way to gauge the
health of the overall market.
K. Basu encourages other people who have a full-time job and says, “You
can invest even if you’re busy. Do your homework on the weekend, find
stocks that are setting up, then put in your buy-stop orders on Sunday night
with your brokerage firm.
“That way, your trades can be executed or sold when you’re busy at work
and you don’t have to worry during the day.”
“If you do the numbers and understand the value of compounding the
gains that you make in the market, and you keep your losses small and fol-
low the CAN SLIM rules, you can do extremely well over the long term.”