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James Cramer's Trading Commandments

Never Turn Trades into Investment

When the market move against you, cut loss. If you are hoping for the trade to turn good, you know you are done. What is the probability of a bad trade turn good? How long will you wait?

Your First Loss Is Your Best Loss

When you trade turn awry, cut loss fast. The subsequent loss is likely to be more severe. When a stock is down, its momentum tends to move it down further. The only hope you have is when there is a knee jerk reaction where the sell down comes with spike in volume. Chances are you will get quick reversal. Other than that, just cut off and move on.

It Is OK To Take Loss When You Already Have One

Losses, realized or unrealized, are actual losses. Unrealized losses if not taken, may lead to bigger losses. Don't let you capital sit there even if the capital is depleted. Move them to a better place.

Never Turn a Trade Gain Into Investment

Do not be too greedy. Know when to get out. Market can turn anytime. When it comes, it may be swift and steep and you may be caught off guard. Don't let it turn into losses.

Tips Are For Waiters (Waitresses)

Don't be fooled by hot tips. If you want tips, go and become a waiter or waitress.

You Don't Have a Profit Until You Sell (Close the Trade)

Paper gains can be wiped out when market swings. Don't let your profit sit there for too long. It may get bored and go away.

Control Losses: Winners Take Care of Themselves

It is more important to pay more attention to losing trade and limit the losses. You don't have to worry too much for the winners. Monitor losing trade so that you have good feel of when to cut loss.

Don't Fear Missing Anything

The opportunities will come again. Don't chase any stock. When you miss one on the price, you can be guaranteed that it will come back again some day at even lower price.

Don't Trade Headlines

News headlines are too brief and inaccurate. They just want to get it out quick. Take time to read into details and in between the lines. The stock will not fly away. You will not miss anything if you wait.

Don't Trade Flow

Don't buy just because someone is trying to sell you and you think it is convenient. Do research before you buy anything.


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