Joe’s Rules
1- Try your best to stay away from the market for the first 45 minutes, I call that period the “wild wild west”, you will usually get a better price if you wait for the dust to settle, that goes for longs and shorts. My experience tells me that you will get a better entry if you are patient, strong stocks usually pull back to a more “buyable” level, same with short ideas. If we miss an idea that’s OK there are 3000 stocks and I will find another one.
2- I will usually give advice on exiting a recommendation either on Twitter , email alert and the chat room, so none of you will ever miss anything. I won’t always give an exit because I don’t want to limit your upside, you should know what kind of profit satisfies you. I usually always recommend though, the sale of 1/3 to 1/2 of your position when a stock breaks out from my trigger price. Example, if a recommend to buy a stock at $40 and it breaks out and trades to $41-43 take 1/3 to a half position off the table. We are trying to capture short term gains here, I don’t buy and hold. Some stocks will move higher after the partial sale, that’s OK you will still have a half or two third position remaining.
3- After I take a partial gain I will usually raise our stops so I am protected.
4- We NEVER average down on a stock and we NEVER chase a stock.
5- We will have periods where we have a good run and then things can get a little cooler, when the market is in a strong uptrend we will be mostly long with some short exposure, when the market is in a downtrend we will probably be mostly short with reduced long exposure.
6- Be diversified, meaning have exposure to all the names on the list as a percentage of your portfolio. You may pick the one that fails.
7- I will trade opportunistically and I will change my mind based on events. Good traders change their mind.
8- I shun conventional wisdom and NEVER listen to the pundits, I think the financial media is dangerous to a traders health.
9-I never watch the financial media during trading hours, or ever for that matter.
10-Economists never traded and they are usually wrong.
11- Don’t EVER buy a “tip”, it’s like borrowing someones Chapstick, you don’t know where it started.
12- JP Morgan said ” I will never buy at the bottom or short at the top, but I will make my money in that 60% area” I feel the same way.
13-The market is the one place where following trends and not making them is cool.
14- STOPS- as you will see on the P&L, I always have stops for each stock. I want you to honor those stops to the best of your ability, HOWEVER, stops are not an exact science, merely a level to protect yourself, so I usually give the stop a little ” wiggle room” depending on the action of the tape. Sometimes a stock will “gap” down through a stop and those are best addressed on an individual basis.
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Joe was on Wall St, for twenty five years and his career took him to the retail, institutional and capital markets... More »
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