NQoos TradingNaked - AmosHostetter

Posted on July 18, 2005
Tags: General rant |

Amos Hostetter � 8/27/1902 to 1/30/1977

Suggestions:

1. Experience must teach. Follow it invariably.

2. Observation gives the best tips of all. Observe market behavior and experience shows how to profit.

3. Buying on a rising market is the comfortable way.

The point is not so much to buy as cheap as possible or go short at the top prices, but to buy as & sell at the right time.

4. Remember a market is never too high for you to begin buying or too low to begin selling.

Let your tape reading show you when to begin. After the initial transaction don�t make a second unless the first shows a profit.

5. There is a great deal in starting right in every enterprise.

6. When something happens on which you did not count when your plans were made, it behooves you to utilize the opportunity.

7. In a bear a market it is always wise to cover if complete demoralization develops suddenly.

8. Stick to facts only and govern your actions accordingly.

9. What is abnormal is seldom a desirable factor in a traders calculations. If a market doesn�t act right, don�t touch it.

Don’ts:

1. Don�t sacrifice your position for fluctuations.

2. Don�t expect the market to end in a blaze of glory. Look out for warnings.

3. Don�t expect the tape to be a lecturer. It�s enough to see that something is wrong.

4. Never try to sell at the top. It isn�t wise. Sell after a reaction if there is no rally.

5. Don�t imagine that a market that has once sold at 150 must be cheap at 130.

6. Don�t buck the market trend.

7. Don�t look for the breaks. Look out for warnings.

8. Don�t try to make an average from a losing game.

9. Never keep goods that show a loss, and sell those that show a profit. Get out with the least loss, and sit tight for greater profits.

The Dangers in Trading caused by Human Nature:

1. Fear � fearful of profit and one acts too soon.

2. Hope � hope for a change in the forces against one.

3. Lack of confidence in ones own judgment.

4. Never cease to do your own thinking.

5. A man must not sweat eternal allegiance to either the bear or bull side. His concern lies in being right.

6. Laziness prevents a trader from keeping posted to the minute.

7. The individual fails to stick to FACTS!

8. People believe what it pleases them to believe.

Amos Hostetter

General Principles of Trading

1. Take care of your losses & and your profits will take care of themselves.

a. You need big wins to pay for small losses.

b. Big Wins are only possible when you stay with trend all the way.

2. When in Doubt get OUT!

a. Don�t Gamble

b. Make sure the “doubt” is real.

1. Fundamentals

2. Market Action

3. Not your nervousness!

3. All Major Trends take a long time to work themselves out.

a. Let others argue about day-to-day news.

b. Be Patient

c. Pay attention to what the market heard, and how it reacted.

4. Must have steady devotion to facts, facts, and facts.

5. Draw charts by hand as it adds hand � eye sensory input to help price action sink in.

6. Only trade when major trend exist and only in that direction. Never short a bull market to catch a dip, etc.

7. Never trade in a “trading market”

8. Stay with the trend � don�t grab a quick profit.

9. Once a position moves in your favor, sit stubbornly until you think the trend has run its course.

10. If the 4pt profit shrinks to a 2 point profit � don�t panic.

11. Save your fears and panic for the position that starts with a 2-point loss.

12. Maximum exposure on any given trade must not exceed 25% of equity.

Ask these questions before making any trade (Created by Amos April, 1966)

1. Do you think a MAJOR trend has either started or is about to start?

2. IS the contemplated trade in the direction of this trend?

3. Do you think that the move will be a substantial one (at least 10% of current price), and will run for a considerable period of time (3 � 9 months)?

4. Have you selected an actual or approximate stop loss where you would be willing to admit you are actually wrong, and take your loss?

5. Summarize your ideas:

I believe that ________________ (commodity & contract month) now selling at ______________ (current price) will advance/decline to ____________ in ___________ months. Meanwhile, I will stop my position at ___________ .

6. Is the potential move that you visualize at least twice the loss you will take if stopped out? (Minimum is 2:1 profits : loss, preferably 3:1)

7. Is the loss that you will take if stopped out (on the number of contracts being considered) less than 25% of the equity in the commodity account? (Preferably this loss will be less than 10%)

If ALL are yes � do the trade � but 1 NO kills the trade.

Before Exiting the trade (assuming the stop has not been hit) ask these questions:

1. Does the position show a loss?

2. Has it reached the price objective, which you expected when trade was initiated?

3. Have you held it for the period of time stated above?

4. Are you concerned that the major trend has changed since your forecast?

If ALL answers are NO then you must hold your position, 1 yes � you may exit.