Friday, September 26, 2008

Our Commandments for Trading

The Psychology of the Call team (POTC) wants to thank everyone for returning to our blog on a daily basis. We wish you a happy and healthy weekend, with dreams of better days ahead. We will continue to strive toward making Psychology of the Call the go-to financial portal for analysis and articles on geo-political macro issues as well as individual recommendations on micro ideas/stocks. Now we bring you the 11 Commandments. POTC wants every individual supporter to understand how critical they are to your financial success going forward. Without an actionable plan, many well known investors of our time have failed, but eventually succeeded due to diligent adherence to strict rules. Although there are thousands of financial forums on the Internet, filled with great facts, opinions, rumors, and educational information; POTC offers you a more scientific channel to help through this maze of information. We stress the need for an actionable plan rather than mere hope. Hope and faith should never enter into your investment ideas, ever. Perhaps no one is more qualified than "Master Kung", the great Chinese philosopher Confucius (479BC) to explain why modest words are important, but nonetheless, quantifiable methods of action must surpass well meaning words of hope: "The superior man is modest in his speech, but exceeds in his actions".
The Eleven Commandments of Trading
1. Never trade more than 10% of your total capital/account value in any one position. 2. Cash is King, and we recommend keeping 20% liquid to take advantage of dislocations and volatility. 3. Cut losses to 15% maximum whenever possible. If your psyche is shaken, step away and don't trade for 1 week. 4. Take and enjoy profits of 30% or more. 5. Never fall in love with a stock and never force trades or over trade; remember commandment #2. 6. Never accept excuses from management, period. 7. Use technical and fundamental data & psychology/sentiment from the conference call to select trades. 8. There are two sides to the market, long & short; take advantage of that leverage. 9. Understand the significance of the macro geo-political economic environment. 10. Unforeseen events/shocks will happen, inverting the market upside down (remember commandments #1 & #2) 11. All of the above are void without reading the Psychology of the Call.

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