Easy Steps


Mervin Yeung Editor/Publisher

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E-mail: tinyeung@home.com

The article below was written on July 1, 1999. I believe that there are 2 very important reasons why many people lose money in the market. First, many don't follow the trend. Second, they don't cut their losses short. Actually, "follow the trend" and "cut losses quick" are the most basic idea in trading. Fighting a trend is like standing in front of a train. Refuse to take a loss is like refuse to leave the track when the train is coming. Occasionally, the train stops. That is good. However, most of the time, things don't turn out that way. I guess it is a curiosity of human nature that no matter how many books talk about these rules, and no matter how many experts offer this advice, many people make the same mistake again and again!



Easy Steps:


1. Observe if there is a trend. If a trend exists, wait for a retracement. If a retracement occurs, enter the position.


2. Don't have an opinion on the market. ( Opinion such as "Copper is bullish", "Lean hogs may have reached bottom", or "Crude may form a top" is completely useless. If your opinion is correct most of the time, you should be a multi-millionaire by now. If this is the case, don't read further. ) Observe, not interpret. Observe if there is a trend and if there is a retracement. Never try to interpret if a market is bullish or bearish: a trend is obvious, isn't it?


3. Don't over-trade. Use each retracement to add an additional position.


4. If something goes wrong, run! Either attack or retreat! If things go well, attack. If things go bad, retreat. Never freeze. If you freeze, you place your "troops" in a dangerous environment and you let your enemies encircle your armies. You need to cut losers and protect what you have.


5. Don't trade unless Rule #1 presents itself.


Follow Rule #1 to Rule #5 religiously.


All of the above are for general information only, not for trading purpose.


If you have comments or suggestions, email me at tinyeung@home.com

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