Winning Five Words


Having been an exchange member and floor trader for 17 years I had to learn those words the hard way. Few investors ever learn and even less practice them.

Having seen many new members come into the pit it was always educational to watch the old timers slowly strip the newbie of his money. Most only lasted about 6 weeks.

The new members were not stupid and in almost every case were experienced traders, but they seem to have left their sense at the door when they entered the trading floor.

I remember selling soybeans to the guy standing next to me as I saw the market break and then buy them back from the same person after they had dropped 10 cents in less than 5 minutes. That’s $500 per contract. He was frozen to inaction while his money was disappearing. The shouting and jostling of other traders did not penetrate his skull.

Whether it is in the pit or at the peace and quiet of home where trading occurs the trader must always remember the five words.

If he doesn’t he will curse everyone else, but fail to notice it is the guy in the mirror who was the cause of failure.

There is a discipline to trading whether it be for a day trader or for the very long term investor. The old folks say they are investors and not traders. As a professional trader I will tell there is no difference except the time period. Both must learn the five words.

It doesn’t make any difference whether the trader/investor is scalping for pennies in pork bellies or long term dollars in mutual funds. The same words apply.

Unfortunately brokers are not taught the five words and if they knew them would not pass them on to their clients. Clients might think they were not as smart as they make out to be. Of course, we know they are not.

When any new position is initiated these words are immediately put into practice. This little phrase is the gap between the winner and loser. Unless they are learned and practiced by both the long and short term trader/investor they will go broke in the market.

Investors and brokers believe you have been taught that you have to “buy it right”.
Any fool can buy. Without the added five words he will go broke. Anyone who has been successfully trading, any professional floor trader will tell you the five key words that go along with every trade which is the secret of financial success prior to every transaction:.

“How much can I lose”

Getting out with a small loss is the key to market success. Know your loss limit and apply it.

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