How to Make Money in Stocks: A Winning System in Good Times and Bad, Fourth Edition

Most people with $20,000 to $200,000 to invest should consider limiting themselves to four or five carefully chosen stocks they know and understand. Once you own five stocks and a tempting situation comes along that you want to buy, you should muster the discipline to sell your least attractive investment. If you have $5,000 to $20,000 to invest, t

1. If you cut all your losses at 7% or 8%, take a few profits when you’re up 20%, 25%, or 30%. Compounding three gains like this could give you an overall gain of 100% or more. However, don’t sell and take a 25% or 30% gain in any market leader with institutional support that’s run up 20% in only one, two, or three weeks from the pivot buy point on a

Therefore, you should apply your CAN SLIM system and select the best possible stock at the best possible time.

High, Tight Flags Are Rare A “high, tight flag” price pattern is rare, occurring in no more than a few stocks during a bull market. It begins with the stock moving generally 100% to 120% in a very short period of time (four to eight weeks). It then corrects sideways no more than 10% to 25%, usually in three, four, or five weeks.

You can’t become a big winner in the stock market until you learn to be a good seller as well as a good buyer. Readers who followed these historically proven sell rules during 2000 nailed down most of the substantial gains they made in 1998 and 1999. A few serious students made 500% or more during that fast-moving period. Again in 2008, an even gre

following all of my selling rules had automatically forced me out of every stock. I was 100% in cash, with no idea the market was headed for a real crash that spring. This is the fascinating thing: the rules will force you out, but you don’t know how bad it can really get. You just know it’s going down and you’re out, which sooner or later will be

I learned that your objective in the market was not to be right, but to make big money when you were right.

Jesse Livermore and Pyramiding After reading his book, I adopted Livermore’s method of pyramiding, or averaging up, when a stock advanced after I purchased it. “Averaging up” is a technique where, after your initial stock purchase, you buy additional shares of the stock when it moves up in price. This is usually warranted when the first purchase of

Exhaustion gap. If a stock that’s been advancing rapidly is greatly extended from its original base many months ago (usually at least 18 weeks out of a first- or second-stage base and 12 weeks or more if it’s out of a later-stage base) and then opens on a gap up in price from the previous day’s close, the advance is near its peak. For