HOW TO MAKE MONEY IN STOCKS 4TH EDITION PDF

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How to Make. Money in. Stocks. A Winning System in Good Times or Bad. William J. O'Neil. Second Edition. McGraw-Hill, Inc. New York San Francisco. your inspiring advantage. In this fourth edition of. How to Make Money in. Stocks, I'm showing you right up front, in Chapter 1, annotated color charts of PDF [Download] How to Make Money in Stocks: A Winning System in Good Times and Bad, Fourth Edition By - William J. O Neil -Full Books.


How To Make Money In Stocks 4th Edition Pdf

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How to Make Money Reading the Daily Financial reality returned. .. record outclassed 80% of all ed most of the best investments available! other companies . stocks will be presented in great before, will usually be on the fourth, fifth, sixth. Always download when the markets are falling. There has to be a way to get it back fast. Some other people make investments in stocks that last a far longer time. How to Make Money in Stocks: A Winning System In Good Times And Bad, Fourth Edition Download at.

During bull markets, stocks tend to The Fed Kills the open down and come back later in the day to close up strongly. The Economy market opens at 9: New York time, 6: California time.

But it is subject to periodic change. The bear market and the costly and protracted recession that began in Catch a shift with this easy test: If you haven't made a dime on any of them, Board increased the discount rate in rapid succession on September 26, you might be witnessing a negative shift in the overall market.

This starkly documents and force you, robotlike, out of many of your stocks. A stop-loss order demonstrates how much our federal government controls and deter- instructs the specialist in the stock on the exchange floor that once the mines our economy, not Wall Street or business, as many people believe.

Our detailed In general, I think it is usually better to not enter stop-loss orders. If, on the other hand, you can't watch your stocks closely or you are the vacillating-type investor who can't make decisions to sell and get out when you are losing, stop-loss orders might help protect you against your distance or indecisiveness.

Washington Causes the If you use them, remember to cancel the stop-loss order if you change Stock Market Break your mind and sell a stock before the stop-loss order is executed; other- Nothing was wrong with the economy in the spring of , but the wise, you could later accidentally sell a stock you no longer own.

Such market got skittish after the Securities and Exchange Commission errors can cost you money. SEC announced it planned a major investigation of the stock market. One of the biggest faults investors have is that it takes time to reverse Then President Kennedy jumped on the steel companies. IBM dropped their positive views. A new bull market sprang to life following the Cuban missile points, you will automatically be forced into selling as a general market showdown with the Russians in October.

All this happened with no correction starts to develop. This should make you begin to shift into a change in the discount rate. Also there are situations where the discount rate was lowered six A sophisticated investor who uses charts and understands market months after the market bottom was reached.

In this case, you could be action will also find there are very few leading stocks that are correct to late in the stock game if you waited to see the first drop in the discount download at a market-topping juncture.

There is also a great tendency for lag- rate. The Federal Reserve discount rate is the interest rate the Fed, act- gard stocks to show strength at this stage. Seeing a number of sluggish ing as a wholesaler, charges member banks to borrow money from it. Even turkeys can try to fly in a windstorm. A peculiar tendency during a bear market is for certain leading stocks to resist the decline and hold up in price, creating the impression of true strength.

This is almost always false and simply postpones the inevitable collapse. When they raid the house, they usually get everyone. How to Interpret the Advance-Decline Line Some technical analysts religiously follow advance-decline line data, which are cumulative statistics on the total number of New York Stock Exchange stocks advancing each day versus the number declining. However, this measure is imprecise because the advance-decline line sometimes may veer down substantially before the actual top in a bull market.

In other words, a market keeps advancing toward higher ground but is being led by fewer stocks. There is one way an advance-decline can be an effective aid.

Bestselling Series

During a bear market you will have several rallies. It is of value to know how the advance-decline line rallies during these intermediate recovery move- ments. In September , the line lagged the Dow rally to Frequently, the advance-decline line will lag the market averages and fail to break through prior resistance areas on the upside. This, in effect, gives you an internal indication that although the Dow may seem to be rallying strongly, the broad cross section of the market remains frail, suggesting the rally will fizzle.

In other words, it takes more than just a few leaders to make a new bull market. Forecasting the Powerful January Rally On the positive side, the powerful resumption of the bull market in the second week of January was clearly and easily forecast by the advance-decline line three weeks earlier.

The NYSE advance-decline line broke above immediately prior peaks three times while the Investor's Business Daily stock index moved sideways and the Dow Jones Industrials actually took a nosedive. These Market Bottoms are only secondary indicators and should be used only as confirmation of the market environment after daily Dow distribution is spotted.

Once you've recognized a bear market and scaled back your stock hold- Following the one or two top signal days arid the first decline off the ings, the big question is how long you should remain on the sidelines. If top, there will be either a poor rally in the market averages, rally failure, you plunge back in the market too soon, the apparent rally may fade or both. You should learn in detail exactly what signals you are looking and you'll lose money. But if you hesitate at the brink of a roaring for, and you should remain unbiased with no opinion about the market.

Let the daily Dow tell you what the market has been doing and is doing. Again, the daily general market averages provide the best clues. Watch You do not need to know what the market is going to do! All you need for the first time an attempted short-term rally follows through on any- to know is what the market has actually done!

This is the key! Think where from its third to tenth day of recovery. The first and second days of about it for a minute. There is a fortune in this paragraph.

Follow the Leaders for Market There will be some scarce cases where whipsaws may occur; however, Clues in almost every situation where the rally has a valid follow-through and After the daily general market averages, I would say the second most then abruptly fails, the market will very quickly come crashing down on important indicator of primary changes in stock market direction is sim- furious volume, normally the next day.

Just because the market corrects the day after a follow-through, how- After an advance in stocks for a couple of years or more, if the majori- ever, does not mean the upward follow-through was false. When the ty of the original price leaders top, you can be fairly sure the overall general market bottoms, it frequently backs and fills testing near the market is going to get into trouble. Of course, if you don't know how to lows made during the previous few weeks.

It is usually more constructive recognize when the more aggressive market leaders are making tops if these pullbacks or tests hold up at least a little above the absolute and behaving in an abnormal fashion, this method of market analysis intraday lows made recently in the market averages.

There are numerous indications of tops in individual stock leaders. Many of these securities will break out of their third or fourth price base formation on the way up. Most of these base structures will appear Wait for a Second wider and looser in their price fluctuations and volatility and have defi- Confirmation at Market nite faulty characteristics in their price patterns.

A faulty base can best Bottoms be recognized and analyzed by studying charts of a stock's daily or week- At stock market lows, the individual investor is safer to wait for a sec- ly price and volume history. The bottom day in Some stocks will have climax tops with rapid price runups for two or the Dow Jones or the first strong day up after a major decline is usually three consecutive weeks.

A few will have their first abnormal price break the first indication of a possible bottom. A good follow-through, with off the top and display an inability to rally more than a trivial amount the Dow Jones up 18 or 20 points or more if the Dow is in the from the lows of their correction. Still others will show a serious loss of upward momentum in their most recent quarterly earnings reports. This is your second confirmation and main download signal. Follow-throughs after the tenth day indicate weakness.

A follow-through day should give the feeling of an explosive rally that is strong, decisive, and conclusive, not begrudging and on the fence, up only a marginal eight or nine points. Following are examples of several important bottoms in the stock market between to Is the Dow Theory Useful? The Dow Theory is another method used by some to predict the begin- ning of a new bull market.

The Dow Theory, it must be remembered, was created around the turn of the century when the railroad industry was a booming growth sector of the American economy. The theory simply states that you must always analyze the industrial and railroad averages together.

If, after a prolonged bear market, the industrial average breaks out into new territory, you must wait for the rails to also blast out and confirm the movement of the industrials Market bottoms before you can safely turn bullish and begin downloading. This also may dilute the theo- on the floor of the New York Stock Exchange were afraid the stock ry's original concept, which was to confirm the rise of the basic heavy exchange might not survive as a viable institution.

At that time, the head of a large brokerage firm lobbied two years in For investors interested in pursuing the matter in more detail, Washington to get negotiated commission rates approved allowing bro- William Peter Hamilton, in , published the classical work entitled kers to provide markets in NYSE stocks upstairs within their own organi- The Stock Market Barometer.

Robert Rhea, in , wrote an updated zations and among their own customers. This seemingly altruistic ploy might have limited the New York Stock Exchange's ability to conduct an auction market and could have resulted in the industry leaders' sharply cutting prices and driving many smaller competitors out of business.

Thereafter, the leader could theoretically General Philosophy and more easily dominate markets in stocks and set the price markups it might Observations desire. Of course, this is not what was told members of Congress. Delegations of other New York Stock Exchange members went to To many people, it seems prudent or fashionable to say or believe they Washington to plead their case, which mainly fell on deaf ears because the are long-term investors.

Their policy is to stay fully invested through powers in Washington at the time didn't trust the self-serving nature of thick and thin. Indeed, some institutions follow this philosophy. This the pleas. Fortunately, I had known Harold Williams, then chairman of the inflexible strategy can at times bring tragic results, particularly for indi- SEC, when he was the dean of the University of California-Los Angeles vidual investors. Individuals and institutions alike may get away with this Business School.

However, many bear markets are not mild, and some are down- So I made a trip to Washington and discussed what I believed was go- right devastating. A few days later the SEC began a policy change away from The problem is always at the beginning when you first start to sense abruptly switching from fixed to negotiated rates and allowing big firms an impending bear market.

You cannot, in every case, project how bad to make upstairs markets with their listed stock customers. It slowed economic conditions might become or how long they could linger. So much for the effectiveness of self-serving industry groups, at least in this one instance!

As an interesting postscript, the SEC was shortly after lambasted in the press by a particular senator for dragging its feet on vitally needed The Worst changes in the structure of the financial markets. Watergate hearings and the oil embargo by OPEC combined to make the worst stock market catastrophe since the depression.

Many smaller and begin a whole new trend. On Wall Street, wise men, as well as fools, can be easily drawn into booby traps. In fact, in my experience a person's years and quality of education have very little to do with making big money investing in the market.

The more intelligent people are, the more they tend to think they Other Bear Market Warnings know what they are doing—and the more they will have to learri the Another sure sign of the beginning of a bear market, as mentioned ear- hard way how little they really know about outsmarting the stock mar- lier, is when the original bull market leaders falter and a number of ket.

The few people I have known over the years who have been unques- lower-quality, low-priced speculative stocks begin to move up. When the tionably successful making money in stocks were decisive, decision-mak- forgotten old dogs begin to bark and raise up out of the grave and ing individuals without huge egos.

Watch out. After all, the whole idea is to be complete- Many times this will show up in the form of poor-quality stocks domi- ly objective and recognize what the marketplace is telling you, rather nating the most active stock list on "up" days in the market.

It is simply than try to prove that the thing you said or did yesterday or six weeks a matter of weak leadership trying to command the market. If the best ago was right. The fastest way to take a bath in the stock market or go ones can't lead the market, the worst ones certainly aren't going to for broke is to try to prove that you are right and the market is wrong. In the final analysis, there is only one thing you can really do when a At other times, when the market begins an important top, it will recov- new bear market begins.

That is to have the sense to sell and get out or er for a couple of months to a point near its high or actually go into new go short. When you get out, you should stay out until the bear market is high ground for a few days before it breaks down in earnest. This charac- over. This usually means nine months, and in the prolonged, problem- teristic occurred in December and January and again in ridden and periods, it meant two years.

January This happens for a very important psychological reason.

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Selling short can be profitable, but it is a difficult, highly specialized The majority of people in the market can never be exactly right at exact- subject and short selling should only be attempted during bear markets. Chapter 11 discusses short selling in more detail. In the stock market, the majority will be fooled first. This goes for professionals as well as amateurs. If you were smart enough to sell or sell short in January , the powerful rebound in February and March Psychological Market probably forced you to cover your short sales at a loss or download some Indicators Can Help stocks back during the strong rally.

This is an example of how tricky and difficult the stock market really is. There are several other indicators which may provide further data The new high by the Dow in January was accompanied by a diver- about the trend of the general market.

It did not hit a advisors that are bearish is an interesting measure of investment psy- new high. This is the reason most professionals plot the indexes togeth- chology. Near bear market bottoms, the great majority of advisory let- er—to facilitate spotting the nonconfirmations at key turning points. Bull markets do not end easily; neither do bear markets. You general- In other words, the majority is almost always wrong when it is most ly get at least two or three pullbacks to fake out or shake out the few important to be right.

After everyone that The issue here is a question of degree. Cycle One of the great problems with indexes that move counter to the The winning investor should understand how a normal business cycle trend is that you always have the question of how bad it can get before unfolds and the duration of these periods, paying particular attention to everything finally turns.

In this line, most amateurs in the market follow recent cycles. Dedicated market students who desire to learn more about cycles and the longer-term history of U. Analysts declines in the market. Sometimes in the beginning of a new refer to this phenomenon as "discounting of the future.

This should not be taken as a sign to sell recession begins. A similar occurrence can happen in the early stage or first leg of a Therefore, using economic indicators to tell you when to download or sell major bear market when the index becomes unusually oversold.

This the stock market is generally an exceedingly poor procedure. Yet some event is really telling you that an eminent bear market may be beginning. I once hired a well-respected professional who relied on such techni- It's a somewhat ridiculous approach, but it does seem to make those cal indicators. During the market break, at the very point when who don't understand the stock market very well feel better.

A few of our U. Around the beginning of , just as the economy market was already very oversold. Sometimes, the more widely quoted and accepted the market or eco- when American plants were operating at a low percentage of capacity. You should check earlier cycles to learn the sequence of industry Who can forget the expert who in the spring and summer of group moves at various stages of the market.

For example, railroad insisted that government borrowing was going to crowd out the private equipment, machinery, and other capital goods industries are late sector and interest rates and inflation would soar back to new highs? This knowledge can help The exact opposite happened; inflation broke and interest rates came you determine what stage of the current market period you are in.

Conventional wisdom is rarely right in the market. When these groups start running up, you know you're near the tail end. If you have solid information about how The Big Money Is in the First markets behaved during certain past incidents, then you can develop Two Years better judgment for the future.

Almost always, the really big money is made in the first one or two years It is valuable to know, for example, how the market reacted in the of a normal new bull market's upward movement. This, then, is the past to a change of administration in Washington, rumors of war, wage point in time you must recognize as soon as possible and fully capitalize and price controls, discount rate changes by the Federal Reserve Board, upon while the golden opportunity is there.

The remainder of the up cycle usually consists of back and forth The chart on the next page of the general market averages shows sev- movement in the market averages, followed by a bear market. The year eral past cycles. This index may beginning of the next bear market. The better publications display the Dow one or two more weeks. Bear markets normally show three legs of price movement down; however, there is no rule that says you cannot have two or even five "down" phases or more.

You have to objectively evaluate overall condi- tions and events in the country and let the general market tell its own story. And you should learn to recognize the story the market is attempting to tell you. The Effect of News Events on This switch usually signals an impending intermediate-term upturn in the Market the market. Of course, if you follow carefully the daily Dow Jones price Some charts of market averages list major news events that occurred at changes, together with daily volume on the NYSE, you'll pick up these specific times during the last 12 months.

The short-interest ratio is the total amount of short selling on the You then have a history over many years of the market averages, togeth- New York Stock Exchange, expressed as a percentage of total NYSE er with important news events that may have influenced the market's trading volume.

It can reflect the degree of bearishness shown by specu- direction in the past. The May-June rally was a short squeeze rally. There is no positive rule governing how high the index should go, but you can study past general market bottoms to review what has happened to the short-interest ratio in former periods.

The odd-lot-balance index is a ratio between the total downloading and sell- ing of odd loiters. Odd loiters are individual investors that download or sell in less than round lots shares. The theory behind this index is lhal ihe less-inforrned crowd tends to be wrong at important turning points. Odd-lol indexes have been of value in ihe past, yet often have been misunderstood and misinterpreted. It is nol crilical that the index show nel downloading or nel selling.

What is important is the trend of activity. If odd loiters have been downloading, on balance, and trend toward downloading less, it means they are becoming more cautious. Odd-lot theory suggesls their caution could turn out to be wrong. If odd loiters have been selling steadily, the poinl to watch for is when a shift in this trend occurs, in other words, when they begin lo sell less or transition toward downloading.

If they are beginning to sell less, the suggestion is lhal ihey are less worried—and ihe market could be near a significant top. Odd-lot figures also have seemed to be of Professionals are generally more correct than are most investors; how- less importance in recent periods. I think this crowd psychology and often has signaled the bottoms of bear markets. Do not jump to a conclusion the first time the odd-lot, cycles and the relationship of the index to those tops and bottoms.

It can build up to a series of peaks over sev- Market conditions change, and influences upon the market change as eral months. Option trading, for example, has put a new twist into the action of specialists as well as other speculators.

The specialist short-selling index may, on occasion, be valuable as long as you survey it with common sense and don't try to build your case for the market around its implications. You can have an illuminat- ing perspective if you plot the specialist short-selling index, the member firms short selling, and odd-lot or public short selling side by side for comparison.

Mutual fund sales and redemptions excluding money market funds are important indicators because mutual funds, although not as large as Although not watched as frequently at tops, this index is usually banks, are active investors and impact the stock market.

If mutual fund around its low point at major bull market tops. Researchers can note the redemptions have been steadily increasing, while fund cash positions extreme low point reached at the peak at the end of December Odd-lot figures are shown in the financial section of most daily news- market funds and the cash position of pension funds is an important papers.

If you will compare the bottoms of all prior bear markets, you indicator of future market trends. Garfield Drew's book, New Methods for Profits in the Stock Market, written in , provides statistics on odd-lot sales over many earlier eras.

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Some people feel odd-lot studies have no validity in today's world of option downloading and selling by small investors. However, it was valuable in the past, and human nature and mass psychology haven't changed much. Now that speculation in put and call options is the get-rich-quick Mutual funds cash position scheme for impatient new investors, you can also plot and analyze the ratio of calls downloadd to puts bought for another valuable view of crowd temperament. This occurred again at the bottom in August and was one of the Another favorite indicator many investors watch is the specialist reasons for the unbelievable bull market stampede on the upside that short-selling index.

Investors believe that when a stock exchange spe- followed. This is an academic economist's concoction and is of no real value to Some services measure the percentage of new money flowing into decision makers or analysts in the market. This, too, provides a supposedly safer stocks, such as utilities, tobaccos, foods, and soaps.

Increased strength in such stocks after a couple of years of bull market measure of institutional investor psychology. For many years the composite strategy of institutional investors near conditions may indicate "smart money" slipping into defensive positions market tops and bottoms invariably has been wrong.

As did the odd let- and a weaker general market ahead. In the stock market, majority crowdlike thinking is rarely right even if it is among institutions and supposed professionals. Wall Street every year or two does seem to adopt a one-track mind, with everyone follow- ing each other like a herd of cattle.

A decline in the average price of the most active stocks daily is an indi- cator of downgrading in quality and an increase in speculative downloading. This, at times, occurs as a market is beginning to top out in its later phase. This measure provided a helpful tip-off of impending trouble during the summer of when OTC volume reached the level of NYSE vol- ume. When a trend persists, indicating wild, rampant speculation, you're close to a general market correction. The unweighted index attempts to measure the market strength as a whole by eliminating any possible bias due to weighting of individ- ual companies.

The glamour index is composed of speculative or aggressive-type stocks. This index attempts to measure the demand for such stocks, thereby indicating investor sentiment toward the market. C-A-N S-L-l-M 76 For the investor, the simplest and most relevant monetary indicator to Another possible indicator you should be aware of in evaluating the follow and understand is the changes in the Federal Reserve Board dis- stage of a market cycle is the percentage of stocks on the daily new-high count rate.

With the advent of program trading and various hedging list that could be categorized as either defensive, low-priced, laggard, or devices, some funds use such techniques to hedge portions of their portfo- preferred stocks.

In pre cycles, some technicians stated their lack lio in an attempt to provide some downside protection during risky mar- of concern with weakness in the market because of the number of new kets. The degree to which these are successful again depends greatly on highs being made.

Yet, a detailed analysis of the stocks that make the skill and timing, but one possible effect for some managers may be to new-high list has shown that when a high number of preferred or defen- lessen the pressure to have to dump portfolio securities on the market.

A little surface knowledge can hurt you in the stock market. This is because most managers have difficulty in getting out and into cash at the right time and, most importantly, then getting back in fast enough to partici- The Best Monetary Money pate in the initial powerful rebound off the ultimate bottom. Indicators Money market indicators mirror general economic activity. History proves that the direction of the general market, as well as of No, C-A-N S-L-I-M has absolutely nothing to do with momentum invest- several industry groups, is often affected by changes in interest rates.

In fact, I'm not even sure what momentum investing is. Some ana- Because the level of interest rates is usually tied to Federal Reserve tight- lysts and reporters, who have no idea at all how we invest, have referred or-easy monetary policy, you may want to be aware of measures such as to what we're suggesting as momentum investing and have said that it's reserve requirements for member banks, the Ml and M2 money supply downloading the stocks that have gone up the most and that have the strongest percent rate of change, federal funds rate, consumer price index, mem- relative price strength.

No one in their right mind invests that way. We're downloading companies with strong day Treasury Bill yields, and U. Treasury Bond prices. Changes in day Treasury Bill rates and the erratic and tricky Fed To summarize this vitally important and rather complex subject, learn Funds rate sometimes help predict impending discount rate changes.

Once you know how to do this correctly, you can sures used by professionals. The Fed also watches economic data such stop listening to all the uninformed, costly, personal market opinions as unemployment figures and Gross National Product GNP changes.

Don't be discouraged if the subject of monetary indicators seems complex; it is. Few economists, few presidents, virtually no one in Congress, and even few people at the Federal Reserve, including some heads of the Fed, understand it as well as they should. How to Remember and Use This is just one of the many reasons why the Fed should probably remain relatively independent and not subject to political control or What You've Read So Far extreme pressure from the Congress.

It might, however, be constructive It isn't enough just to read; you need to remember by association and to let the term of office for the head of the Fed coincide with the presi- apply a simple-two word phrase—C-A-N S-L-I-M. If most successful stocks exhibit these seven common characteris- tics at early emerging growth stages, these basics are worth learning. Here is the formula. Repeat it several times until you can recall and use it easily.

They should show meaningful growth for the last five years. download companies with new products, new management, or significant new changes in their industry conditions. And most important, download stocks S as they initially make new highs in price.

Forget cheap stocks; they are usually cheap for a very good reason.

There should be a small or reasonable number of shares outstanding, not large capitalization, older companies. And look Be Smart from L I for volume increases when a stock begins to move up. download market leaders, avoid laggards. download stocks with at least a few institutional spon- sors with better than average recent performance records. It will determine whether you win or lose, so learn to interpret the daily general market indexes price and volume changes and action of the individual market leaders to determine the overall mar- ket's current direction.

It's Your Money When you meet the broker recommended to you, ask how he or she gets stock ideas and research information. Don't be afraid to ask a lot of 8 questions. It's your money. You could ask about the broker's investment philosophies, beliefs, and methods. What are two or three of the best stock market books he or she has read? If the broker can't easily name a few, then maybe you should be a little cautious. If the broker relies solely on his or her own firm's research department Finding a Broker, for ideas, information, and reports, you may be better off visiting with a Opening an Account, few other brokerage firms before you decide where to open your account.

The better brokers will show more initiative, perhaps by subscribing and What It Costs to a chart service or Investor's Business Daily on their own, and will probably have several other sources of information, ideas, and research. When I was a broker with a major New York Stock Exchange firm years ago, I never followed any of the firm's research because it wasn't too astute.

He or she will probably be called a registered representative certainly should be far more knowledgeable than those who haven't. RR , an account executive AE , or an investment consultant 1C. This is the person you will likely talk to if you visit a broker's office look- ing for information or to open an account. How do you find a competent stockbroker? I suggest you follow a Should You Have Several slightly different procedure. Brokerage Accounts?

Go to the office of the firm you choose and ask to see the office man- ager or vice president in charge of the office. Introduce yourself to the Some customers have accounts with two or three different brokers.

In manager. Say you are considering opening a new account but would most cases such a practice is silly, since your account won't be as impor- like to deal with a broker that has definitely been successful at making tant to any one broker. You may also receive conflicting advice, which money in his or her own personal account and for most customers' will be confusing and costly.

Money is made in the stock market by concentrating, not scattering. This person should have already been a broker for two or three years The same should go for your brokerage account. Concentrate your or more and possibly be 27 or older. But don't be too impressed with activity with the best stockbroker you can find. If this doesn't work well age.

The registered representative you're looking for could be young, after a year or two, change and find another broker. Age or years of experience is certainly no sign If you are more accomplished and make your own download-and-sell deci- that a broker is a very successful student of the stock market.

Discount brokerage firms years' experience but was turned down for a job by a new principal? It certainly doesn't guar- larger discount firms. Members usually pay several hundred thousand enced.

Merrill Lynch has approximately 6 million customers, and dollars or much more just to download a seat on the New York Stock Exchange. Prudential is a member of the giant Prudential Insurance Company fami- Stock exchange firms also have many rules and regulations to which ly.

There are also many capable medium-sized, regional retail, or dis- count retail brokerage firms that are New York Stock Exchange members. And they are subject to surprise audits and annual An exceptionally able broker can be almost as important to you as a examinations from the stock exchange. Conversely, some firms that are only members of the NASD, the National Association of Securities Dealers, and perhaps a local or region- al exchange, may have too easily gained entrance into the securities busi- ness.

They may not be backed up with as substantial a capital base. Why You Should Have an If you've never opened an account with a brokerage firm, don't be Individual Retirement timid or reluctant to visit one. It's simple and easy, just like opening an Account IRA account with your local bank or savings and loan.

You will have to fill Why are so many people investing in IRA accounts, as they are com- out and sign new account papers before you will be able to download or sell monly known? You may open a single account or, if you're married, you may U. The broker will also ask for credit refer- every year in a tax-deferred IRA account if the company they work for ences, such as your bank.

All brokerage firms have a regular commis- does not have a qualified retirement plan. This can be an enormous tax sion schedule which they should be able to show you. The commission advantage, and every American should consider taking advantage of it. And you can do this every year that you invest in an IRA, until you sold, the price paid or received, the commission paid, and the total dol- are 70 years old.

If married and both of you are working, you can invest lar amount you owe or will receive if you sold a stock. The second advantage of an IRA is that the profits, dividends, or It's best to pay these bills immediately on receipt since they will be due interest you earn from the investments you make in the IRA account are in a few days.

Stock certificates must be delivered to your broker proper- tax-deferred.

These earnings compound tax-free for the many years until ly endorsed without delay when you wish to sell a stock, otherwise the you retire and begin taking distributions. If you are disabled, you can withdraw early; otherwise Corporation, and additional insurance is carried by most firms.

You should, though, view your IRA as a long-term plan for deferring taxes and saving for your retirement. Be determined and stick with it. You will pay ordinary tax rates on your 9 withdrawals, which should be lower once you retire. Most families in America should budget carefully their monthly and annual expenses and make sure they save enough of their hard-earned income to invest in their own Individual Retirement Account each year.

You can open an IRA account at any bank or stock brokerage firm. IRA accounts cannot be margined. The most favored vehicles for investment of your IRA money have When to Sell been interest-bearing money market funds, savings accounts, certificates of deposits, mutual funds, or self-directed accounts in common stocks if Your Selection or Timing through a NYSE stock brokerage firm.

However, fixed-income savings accounts and money market funds are not likely to provide the maxi- Might Be Wrong mum hedge against inflation.

Keogh plans are similar to IRAs except they are only for self-employed workers. Keoghs, however, allow a higher maximum contribution: Another form of a when to sell them. In sports, a team that is all offense and no defense Keogh, known as a defined Benefit Keogh, may allow even greater annual seldom wins the league. Duffy -Full Pages. Download-[PDF] Muscles: Download-[PDF] Pathophysiology: Download-[PDF] Powerful: Masters -Read Online.

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Examine the general uptrend, volume will increase low-quality stocks. This is a market trends daily to spot from the day before, but the signal that the upward mar- reverses that signal a change averages will close either flat ket is near its end.

A down- in direction. Typically, in or down, and certainly with turn eventually takes down bear markets, stocks open less increase than the previ- all stocks, both the leaders strong and close weak. In ous day. If the average does and followers. It is easier to spot the selling by to expect the laggards to han- important to sell when the professional investors as they dle the job.

A topping market general market tops. This liquidate their positions. The market peak will usually is: How far is down? When idea of downloading and holding occur on three to five days can you spot a market bot- through thick and thin intu- over one, two, or three weeks. If the occurs while the market is age closes higher after a price of a good company goes still advancing. In The key point to remember before.

BUSINESS BOOK SUMMARIES 11

The most powerful short, the majority is is that you should learn to follow-throughs usually occur usually wrong. Similarly, interpret the daily price and on the fourth to seventh the short-interest ratio, volume changes of the gener- days. The follow-through the amount of short al market indices, and the should be explosive, with a 2 interest selling on the action of the individual percent or more gain on New York Stock market leaders.

Once you heavy volume. It is a signal 3. For example, putting the CAN SLIM sys- three successive hikes tem to work in your port- The time to capitalize on the in the discount rate folio, you should enjoy opportunities is during the have generally marked excellent returns. The rest of markets. Track other general mar- limit their profits or cause in the market averages ket indicators, including: steep losses. Here are followed by a bear market.

Stubbornly holding on ways to identify key market index that relates to losses when they turning points: trading volume in are very small and rea- stocks that close up in sonable. Instead of getting out cheaply, 1. Look for divergence of key price for the day to many investors hold averages. If they are volume in stocks that on until the loss gets moving in opposite direc- close down. If for corporate pension 2. A declining stock seems to be a broader-based index, does real bargain.

Study psychological indi- ket's direction; when good reasons. Averaging down in direction. downloading old names you putting good money are familiar with. Failing to understand after bad. Many of the best the importance of download- investments will be ing quality companies 4.

downloading large amounts newer companies that, with good institutional of low-priced stocks with a little research, sponsorship. Speculating too priced stocks. When become household heavily in options you invest, download the names. Not being able to rec- way to get rich quick. Low-priced ognize and follow good stocks cost more in information and advice. Rarely transacting "at commissions and are Friends and relatives the market" and prefer- more volatile, usually can give bad advice.

So can some stockbro- on download and sell orders. Wanting to make a services, because eighth of a point, they quick and easy buck. Not being able to make some who are truly up your mind when a 6. downloading on tips, rumors, awful. This invariably and other news events, Being afraid to download points to lack of a stories, advisory ser- stocks that are going plan. A stock that Not looking at stocks from supposed market reaches a new high objectively.

Relying on experts on TV. Trust may be on its way to your emotions or only what you have learned much greater highs, on your opinion is a through hard work, not as discussed earlier in recipe for failure. Selecting second-rate to-take profits, while stocks because of holding the losers. In many Worrying too much a loss? Many people feel cases, the more a com- about taxes and that they only incur a loss pany pays in dividends, commissions. The when they actually sell at the weaker it may be.

Never getting out stocks is enormous In actuality, a loss occurs of the starting gate in comparison to the when the market price properly due to poor cost of taxes and goes down.

If shares selection criteria. Thus, download- your position more than limit your losses to 7 or 8 ing more of a stock whose 5 percent past that percent. The most impor- price is falling is a sure point. Then sell each tant factor here is: If you recipe for disaster.

And, of the downloads at correct download or quick to take profits. This is a big key for percentage increase or primary one is that it puts future success. The weaker Once you are ahead and list them in order of their performers feed the better have a good profit, you relative performance.

Do not sell become apparent. Then stocks go through "climax a stock just because it is determine potential profit top," which are rapid off its peak price. Being 7 and possible loss. Identify accelerations after an or 8 percent off the download these criteria and stick to advance of many months.

It means that you losses and percent for picked the wrong stock gains. You are losing your long-term investor who money. Being off the peak holds onto a stock no mat- 2. Heaviest daily volume. Cut earned a profit and can your losses. Exhaustion gap: A afford to give the stock a rapidly advancing little more room.Page 1 of 1 Start over Page 1 of 1. It involves looking for certain patterns in the price charts also available through their service , and then downloading if the price goes above a certain level.

You normally don't other words, don't compare that earnings can be inflated want the second year's the earnings from the for a few quarters by cutting earnings down, even if the fol- December quarter to those costs in such areas as adver- lowing year rebounds and is from the September quarter.

A fully margined ment road map. Most new products People tend to download stocks recognized brand name. As mentioned pre- smart to avoid them. William J. This invariably and other news events, William J. Download-[PDF] Silence: