Sunday, December 23, 2012

Wise Words

Among technical traders, the book Technical Analysis of Stock Trends by Edwards and Magee has long been regarded as an essential read. Originally written in the late 1940's, it is a treasure trove of wisdom that is still relevant today. Although I do not specifically trade the various chart patterns that are discussed in the book, the principle of following trends is the cornerstone of my own methodology.

While reading this classic again last week for the first time in a while, I came across the following paragraph:

"The secret of success lies not in buying at the very lowest possible price and selling at the absolute top. It is the avoidance of large losses. (Small losses you will have to take occasionally).

One of the most successful "operators" Wall Street has ever seen, a multi-millionaire and a nationally respected citizen today, is reputed to have said that never in his entire career had he succeeded in buying within five points of the bottoms or selling within five points of the top!".

Sounds like a trend follower to me.

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