One of my all-time favorite songs is from the Kenny Rogers album, "The Gambler" and every investor can learn something from the song's lyrics.
"If you're gonna play the game, boy, ya gotta learn to play it right.
You got to know when to hold 'em, know when to fold 'em,
Know when to walk away and know when to run.
You never count your money when you're sittin' at the table.
There'll be time enough for countin' when the dealin's done."
Here we are 34 years later and the words to that song are every bit as relevant as when they were written. When stocks go up, "you got to know when to hold 'em", and when stocks go south you have to "know when to fold 'em." The words to the song are very simple, but they are, in fact, the essence to successful trading.
If you are going to be a successful investor, you have to learn to manage losses. That sort of goes hand-in-hand with Warren Buffett's number one rule, "Don't lose money." His second rule is, "Remember rule number one." Managing risk and learning to take small losses are one of the key secrets to successful investing.
Another secret to making big money in the markets was expressed by Arthur W. Cutten, a major commodities trader from the 1920's. "I was never an in-and-out trader... Because most of my success has been due to my hanging on while my profits mounted. There is the big secret. Do with it what you will."
Two of the most successful traders in the history of investing cite managing risk and letting your profits build in the markets as keys to success. Now, how do you do that?
Yesterday, our Trade Triangles gave major exit signals on five stocks that I want to share with you. This warned us that the major trend had changed from positive to negative.
RANGE RESOURCES(NYSE:RRC) - Red Monthly Trade Triangle @ 74.66
CVS CAREMARK(NYSE:CVS) - Red Monthly Trade Triangle @ 56.67
RED HAT(NYSE:RHT) - Red Monthly Trade Triangle @ 45.33
GENERAL MILLS(NYSE:GIS) - Red Monthly Trade Triangle @ 47.50
SOUTHWESTERN ENERGY(NYSE:SWN) - Red Monthly Trade Triangle @ 36.06
We will follow-up in a month or two to see where all these stocks are trading. Don't forget, the line from "The Gambler" is your best protection, "You got to know when to hold 'em, know when to fold 'em."
Please feel free to comment, we will do our best to answer everyone.
Every success and have a great day.
Adam Hewison
President, INO.com
Co-Creator, MarketClub
I suspect there is a deal is working behind the scene on GIS. Warren did on Heinz, now some one will do on GIS, the fundamentals on GIS are great despite that the fact CAG had shortfall. So, The SP is "managed" down even with the dividend increase. There is a buy point @ $45.
Funny, the trade triangles make the "gambler" in me consider short positions in these stocks!
taiji,
Thanks for your feedback. There is an old trader's adage that goes like this, "They slide faster, than they glide", meaning stocks go down faster than they go up.
Shorting stocks can be very profitable, very quickly, but like everything else in trading there are risks that you must manage in order to be successful. I want you to be aware of that.
Appreciate your input.
Cheers,
Adam Hewison
President, INO.com
Co-Founder of MarketClub.com
Great post! Risk management isn't just a thing, it's the most important thing. I got out of CVS in June on a weekly Trade Triangle! Thanks Adam.
B Mason,
Thanks, I appreciate your comment.
Appreciate the question and your input.
All the best in your trading,
Adam Hewison
President, INO.com
Co-Founder of MarketClub.com