Page 953 - How to Make Money in Stocks Trilogy

202 Appendix B

sometimes even a year of a declining stock market, it’s hard to stay
focused and positive. What’s fun about watching stocks grind lower day
after day?
Over the years I’ve talked with too many investors who turn away
entirely from the market during corrections. The irony is that market cor-
rections are when the big leaders of the next cycle are shaping up. These
companies are reporting strong earnings and innovations that can’t over-
come the general market weakness. But they are often the first stocks out
of the gate when the market turns back up.
Amy: You don’t want to miss those. Many of us have made our biggest gains
after staying tuned in during corrections and finding the real leaders.
Chris: Right—and three to six months into a new bull market, those dis-
couraged investors notice that stocks have really taken off. But now
they’re late to the party and find that most leaders have already broken
out and made big gains.
So stay in phase with the market. When the stock market follows
through after a correction, you want to be there and take advantage of all
the great opportunities that present themselves. Even in a modest rally,
you can make a lot of money by following the market rules and staying on
top of the current leadership.

Amy: Great advice that a lot of us live by. Once someone understands the
rules of the overall market, what is the next biggest challenge for
investors?
Chris: Portfolio management is absolutely essential. Once you understand
the basics of CAN SLIM stock selection and investing, you need to mas-
ter very specific buy, hold and sell rules.
Justin Nielsen, David Chung, and I teach the IBD Level 3 Workshop,
which focuses on advanced investment strategies. The primary element
of the seminar is a trading simulation where investors get to walk through
buying and selling scenarios with us from a real market cycle. You learn
to spot the right time to invest; find top stocks, and see how wise it is to
take many 20 to 25% profits so you’re making money along the way. Not
every stock will turn into a super winner, but many leading stocks in an
uptrend will deliver solid 20% profits. If you get into the habit of selling
and locking in those gains you’ll see real progress in your portfolio.

Amy: How do you know when you’ve found a big winner?