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
executive chauffeured services Bradford .. Madison to Airport carThe single most expensive stock market trades are those made... Read More
What a great statement!I just heard someone use it in... Read More
It depends on your level of understanding of the market... Read More
Every year I go to the Money Show in Orlando,... Read More
It is wonderful to be alive in the information age.... Read More
A common problem I often see when working with living... Read More
If you are serious about making and keeping money by... Read More
Any online investor / trader seeks an excellent off or... Read More
Because there are so many stocks that are NOT paying... Read More
An insane person cannot evaluate an insane evaluation system.As you... Read More
There is nothing more exciting than finding an undervalued stock... Read More
You have a lock on your house. You have a... Read More
The Shadow knows. Remember him? It seems a shadow has... Read More
At some time in your life you have been on... Read More
If you're a normal human being, your need to feel... Read More
As a novice trader, you'll often feel the need to... Read More
The higher the market goes the more confusing are the... Read More
The Law of Chaos is the theory of random unpredictable... Read More
Starbucks earnings are up again and so is their stock... Read More
Before they go over the cliff to their destruction these... Read More
In my opinion, due to the volatility of stock market... Read More
It takes a total mental commitment to the task. It... Read More
How do you invest? What do you really pay? At... Read More
Are you one of those many people who dread reading... Read More
Caught in a whirlpool and being sucked under. No life... Read More
O'Hare Chicago prom limo ..Financial markets provide their participants with the most favorable conditions... Read More
Let me start by saying that...Most online brokers do not... Read More
To become a successful trader you must have some kind... Read More
For the last 12 years we have seen the Japanese... Read More
During the month of January the Dow Jones Industrial Average,... Read More
The trash business in its efforts to cook their books... Read More
Caught in a whirlpool and being sucked under. No life... Read More
In a previously written article, we expanded the use of... Read More
I made my very first investment in the stock market... Read More
The big bad bear is stirring again. So far he... Read More
Before you buy another car you walk around the lot,... Read More
Economists know more about how the fragments of society work... Read More
As an investor you will want to check out any... Read More
Mutual fund investing is a lot like Thai cooking. Everyone... Read More
As I have said many times before in this column... Read More
Trading is a fascinating activity.There are so many layers to... Read More
How do you make money without picking tops and bottoms?I... Read More
In my opinion, due to the volatility of stock market... Read More
I often play a little game with myself when I... Read More
(1) Stock Market is Tough Place to Make Any Money... Read More
Do you have a nest egg? You know, a place... Read More
You remember (they show it on TV every year) the... Read More
According to Investopedia Inc. the penny stock market has seen... Read More
An insane person cannot evaluate an insane evaluation system.As you... Read More
Mutual funds are doing more and more to discourage investors... Read More
Stocks & Mutual Fund |