As I said in Part I everyone in the insane asylum looks normal, but at least the doctors are sane. Unfortunately, in the insane asylum known as the stock market all the doctors (brokers) are also insane.
The doctors in the insane asylum went to medical school to learn how to treat the patients so the could get well. On Wall Street you go to the doctor (broker) who is supposed to help you become financially well, maybe wealthy. Almost none of these Wall Street experts ever learned their profession. They have all been taught the three great prescriptions that make no sense at all: Do Your Research, Buy and Hold and Dollar Cost Averaging. This is what the brokerage houses teach.
As I said previously research is worthless, as it will not tell you if a stock is going to go up. Buy and Hold is taught the wrong way. It is OK to Buy and Hold as long as the stock is going up, but not when it goes down. No broker is taught how to protect a customer's money.
When I was a floor trader I learned in a hurry not to hold on to something that was losing money. The very simple prescription for this is called a Stop Loss Order. Brokers hate them and will discourage you from entering them. Why? Because it means he will have to watch your account because if a stop order is not properly and timely executed he must pay it out of his pocket.
Brokerage houses do not teach brokers how to use this simple method to protect capital. The house does not want to become known that it will sell a company's stock when it turns weak. The brokerage company makes more in good will from the poor performing company than they do in commissions from you because if they ever encourage selling it means they will not get a chance to handle an Initial Public Offering (IPO) for that company. Suppose they did have a stop protection policy for customers and they then had an IPO that came out at $30 per share, but instead of going up it went down. The customers would not lose more than $3 or $4 per share because of their protective stops, but the house would then be stuck with all the unsold stock. It is OK for you to have this money-losing dog, but they sure don't want it in their inventory. You can see how logical this is, but you won't hear it from a broker. Stop orders are not insane.
The insane conventional wisdom that both brokers and customers have been taught cannot remain once it is exposed to truth.
You must take the initiative with the stocks you own to protect yourself from loss of capital. If your broker argues with you there is one solution - fire him and find a good broker who will protect your money. Just because he has learned an insane system doesn't mean you have to be nuts too.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Copyright 2005
http://www.mutualfundmagic.com; 1-888-345-7870
Ashton group transportation logistics management .."There is nothing more frightful than ignorance in action!" Johann... Read More
The trash business in its efforts to cook their books... Read More
Duck! No I don't mean a quack, quack. I meant... Read More
Day trading is all about making buy and sell decisions.... Read More
If you go to Haiti or other places in the... Read More
Before you embark upon a journey of trading stocks or... Read More
Well maybe that's overstating it a little, but it's certainly... Read More
I use the P/E ratio as a secondary indicator for... Read More
Alfred Winslow Jones started hedge funds in 1949. He was... Read More
Caught in a whirlpool and being sucked under. No life... Read More
Have you seen all those big full page ads for... Read More
I have watched my cat play with a bag of... Read More
We learnt the following the hard way! If any of... Read More
How do you invest? What do you really pay? At... Read More
You must take the time once a month to review... Read More
One of the greatest challenges of investing in stocks is... Read More
With all the bad news that has been dumped upon... Read More
Humpty Dumpty had a great fall and all the King's... Read More
You probably have been told that options are risky. Even... Read More
The stock market can present you with a lot of... Read More
When you stand on the ocean shore and watch the... Read More
With the stock market stubbornly refusing to settle down and... Read More
Have you been listening to the talking heads on CNBC-TV?... Read More
Money: the most charged word in the planet. It means... Read More
From the book 'The Stockopoly Plan' by the author Charles... Read More
group transportation logistics management Highland ..Now that you have some money burning a hole in... Read More
AS BUILDERS BEGIN WORK ON THE FREEDOM TOWER in New... Read More
Much like the middle child, mid-cap stocks have long struggled... Read More
It is commonly reported that the stock market averages about... Read More
From the book 'The Stockopoly Plan' by the author Charles... Read More
Day trading is all about making buy and sell decisions.... Read More
For years I have been saying you must have a... Read More
Every year I go to the Money Show in Orlando,... Read More
As an investor you will want to check out any... Read More
You remember (they show it on TV every year) the... Read More
Many people would like to diversify their portfolios to expand... Read More
People are always asking me when should I sell my... Read More
Most stock market traders have a favorite technical indicator.The one... Read More
I constantly hear the talking heads on CNBC-TV, the radio... Read More
How is it possible that trash Companies are posting less... Read More
Most advisors will tell you they can beat the market.... Read More
I often hear from people, "I don't trade. I invest.... Read More
Trading is a fascinating activity.There are so many layers to... Read More
At some time in your life you have been on... Read More
This is the continuing story of our two imaginary traders,... Read More
Now where have I heard that before? I know. It... Read More
The bear market that showed up at the end of... Read More
It is finally catching up with them. The brokerage companies... Read More
I continually hear from economists, talking heads, other market letter... Read More
THERE'S SOMETHING TO BE SAID FOR standing firm in the... Read More
Stocks & Mutual Fund |