Trend Qualification and Trading [PDF]

Summary
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Trend Qualification and Trading – Book

With every trading success comes to the problem of taking profits. When does a trader exit or reduce their position in a profitable trade? There are those who equate an exit with sin. They believe that once a stock is bought, it should be held indefinitely. Unless a trader is a stock picker extraordinaire, nothing could be farther from the truth.

Of the original 30 stocks in the Dow Jones Industrial Average, only one remains and the turnover rate is greater than just the other 29 original stocks.1 These were and still are the industrial giants of the country. They were handpicked to represent the top of their class, yet many have since disappeared from the business landscape.

If the largest companies in the world can cease to exist, is it not even more likely that the lesser names that most traders trade are bound to come and go as well? Even if they don’t disappear, few are likely to remain star performers.

Why own a stock that isn’t or doesn’t have the possibility of being a star performer? Is a winning football organization satisfied with also-ran players? Do they play simply to play or do they play to win? Trading is no different. You play to win. You pick and hold star performers while they are stars.