Trench Trading Tactics

30 04 2008

Gerald M. Loeb was a highly successful trader who wrote the classics “The Battle For Investment Survival” and “The Battle For Stock Market Profits.”

Loeb’s Trading Tactics:

• The market is a battlefield. Make sure you are on the winning side
• You must trade with the actions of the market and not simply by how you might think the market should trade
• Knowledge through experience is one trait that separates successful stock market speculators from everyone else
• To do well in short-term trading, it takes full-time attention and dedication
• Exploit all new trends quickly and aggressively
• The best traders are usually psychologists. The worst are usually accountants
• Stocks act like human beings and go through the same stages and phases as people do, including infancy, growth, maturity, and decline. The key in trading is to be able to recognize which stage the stock is in and to take advantage of that opportunity
• Successful traders are intelligent, they understand human psychology, they practice pure objectivity, and they have natural quickness
• To succeed in trading you must
1) aim high,
2) control the risks, and
3) be unafraid to keep uninvested reserves and be patient
• The stock market is more an art than a science and far more complex than most people understand
• It takes considerable amount of self-control to trade well
• The more experienced and successful you become, the less you should diversify
• Big money is always made in the market’s leaders
• The best stocks will always seem overpriced to the majority of investors
• Resist the urge and temptation to change your strategy for each and every different market cycle
• Traders should always close a trade when good reasons exist to do so
• Tops in stocks usually occur when the advance in price stalls as volume or activity increases, or if the prices decline and the activity increases
• A sell signal occurs when a stock rises sharply on big volume but ends the day at no gain or at a loss
• Every new market cycle produces a new list of fresh leaders
• Pyramid your buys – start with an initial position and then add to it only if the trade moves in your favor
• Stocks are always way overvalued in a bull market and way undervalued in a bear market
• Expectation, not the news itself, is what moves the market
• What everyone else knows is not worth knowing
• Three basis elements should be considered when evaluating a stock –
1) quality (fundamentals, liquidity, management),
2) price, and
3) trend (the most important)
• Always sell when you start patting yourself on the back for being smarter than the market


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