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Strategies & Market Trends : Pump's daily trading recs, emphasis on short selling
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To: Michail Shadkin who started this subject5/20/2001 6:38:34 PM
From: Michail Shadkin  Read Replies (3) of 6873
 
THE ART OF TAKING LOSSES AND DIVERSIFICATION

Over the last 3-4 days I have received several troubling emails regarding RRRR and even ADIC.

Some followers of this thread decided not to take their losses immediately in these stocks, but rather wait for a dead cat bounce or a correction.
These decisions have so far proved to be fatal.

Some of the followers, went as far as investing 40-50% of the total portfolio into each stock.

This post is not really about RRRR or any other trade in particular.
(I have already taken full blame regarding RRRR debacle.)

This post is about 2 major rules that I always follow and very much hope to convince others to follow as well.


1. If I am trading a stock based on a future event (earnings, lockup, fda approval, etc) and that event occurs and the stock trades against me afterwards, I WILL ALWAYS SELL AND TAKE MY LOSS IMMEDIATELY.
9 out of 10 times the stock will continue moving in the same direction for many days to come.
NEVER LET A SMALL OR REASONABLE LOSS BECOME A GIANT LOSS.
Very hard to overcome giant losses financially as well as mentally.

2. NEVER LET 1 OR 2 STOCKS DESTROY YOUR PORFOLIO. ALWAYS DIVERSIFY YOUR HOLDINGS.

IF ANY OF YOU DONT HAVE THE DISCIPLINE TO FOLLOW THESE RULES, I WOULD STRONGLY ADVISE NOT TO FOLLOW ANY OF MY TRADES.


Good Luck
Michail
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