Amos Hostetter's trading principles:
- Try to find a long term trend and ride it up. Stay with the trend and
don't be tempted to grab a quick profit. Patience is one of the most
important traits of a trend follower.
- Be careful not to be shaken out by market fluctuations. Instead try to
sit tight as long as there are no warnings showing up. Prices that
come back so that your initial gain halves are not necessarily a
reason to sell.
- Big wins can only be achieved with major trends. Find them and don't
hesitate to buy at high prices when you may think it is too late. A
market is never too high to buy or too low to sell.
- Necessary is of course a stop loss near the entry point. A stop is the
easiest way to put your capital at work on a trend, because otherwise
you are too often and too long stuck in a trading market which goes
nowhere or worse in a falling market.
- Absolutely forbidden is averaging down or fighting the market trend.
- To think that a market is cheaper now after prices came down and
therefore must offer a better chance than it did when prices were
higher, will put you in the wrong stocks at the wrong times.
- Never try to sell at the top. The trend may continue. Sell after a
reaction if there is no rally.
- On the other hand don't expect the market to end in a blaze of glory.
Look out for warnings.
- Tape reading can tell you only that something is wrong. Don't try to
analyze the flow of transactions as the tape shows them in too much
- Don't look for breaks. Look out for warnings.
- Pyramid stocks only if the initial investment shows a gain.
- Look out for normal market behavior. If a market doesnít act right,
donít touch it.
- If in a bear market a complete demoralization develops suddenly it may
be a sign for a starting bull market.
- Observation of the market gives the best tips of all. Follow your
experience to exploit them, while sticking to facts only.
Under the millstones of the banks
Hoping for the trend and finding chaos
Above average? You will still lose!
The negative-sum game for investors