Safety in the trading should come not from the selection of “safe” stocks # :
- a slow mover or
- a cheap issue or
- worse yet, a group of such shares.
Safety should be by concentration in the one outstanding, fast-trading leader that is jumping in the right direction.
There is more safety and more profit in so timing one’s buying in the one outstanding, fast-trading leader type of issue that when one gets a report on the purchase, the bid is then already in excess of what one has paid.
One cannot afford to be wrong in such a fast-moving issue and one is sure to be
- much more certain about one’s opinion before one acts to get in than in the case of a slow issue, and
- likewise much more watchful to get out quickly if the stock doesn’t act as anticipated or reverses its action.
Here is the real safety.
Here also is a chance to build a backlog of profit which is partly a safety fund against future errors.
Use of Margin
In the same way, a sizable position in an issue, even on margin if that is what the individual’s situation calls for, is relatively safer than the imagined security of having something paid for and locked up.
One is more careful establishing the margin position and one watches it more carefully.
In short, know you are right and go ahead. If in doubt, stay out.
# The issue which is “safe” because it is low and cheap is ordinarily a poor mover, usually creeping or backing and filling without getting much of anywhere while the sensational trading moves are practically all in shares which have broken out of the accumulation stage.
# With regards to these “safe” stocks, it is likely to be most exasperating during a rising market when other shares are scoring rapid advances; and during a period of decline when one is long, then the slow action of the safe stock will lull one into a sense of false security.
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