How to Make Money in Stocks Getting Started: A Guide to Putting Can Slim Concepts Into Action by Matthew Galgani

1 
• CHAPTER •
 Start Here
 Before we get into the details in later chapters, I want to make sure you see
 the primary goals—the big picture—here.
 So let’s start with a quick look at the investing forest, then we’ll start
 examining the trees.
 If you ever start to feel a little overwhelmed as we go through the
 checklists and charts later in the book, take a breather and come back
 here. You may even want to put in a bookmark or dog-ear this page as a
 reminder.
 That will help you stay grounded and focused on what matters most:
 Using basic rules and routines to both grow—and protect—your money.
 How to Protect Your Money
 The Basic Game Plan for Making Money in Stocks
 Action Steps
 How to Protect Your Money
 Talking about how to protect your money—how to avoid big losses—is not
 the most exciting way to kick off a discussion about building wealth. But it’s
 absolutely critical.
 Job #1 in making money in stocks is to protect the money
 you already have.

And you can do that just by following two basic rules. They will protect
 you even when—in fact, especially when—the market becomes volatile and
 slips into a downtrend.
 When we go through the Selling Checklist later in the book, you’ll see
 several common signals that tell you it’s time to lock in your gains or cut any
 losses. Over time, you’ll become better and better at spotting those signs, but
 for now—at a minimum—be sure to stick to these two rules. They’ll help
 you safeguard your money as you learn new ways to grow it.
 1. If a Stock Drops 7% to 8% Below What You Paid for It, Sell. No
 Questions Asked.
 This one simple rule puts a cap on potential losses—like having insurance to
 protect you against whatever the market does. Simple and sensible.
 You’ll find it’s much easier to grow your money if you follow this
 rule. Instead of trying to make up for larger losses, you’ll be adding to and
 compounding your gains.
 I can’t emphasize enough how important this rule is.
 Every investor—including legendary traders like Bill O’Neil—makes
 mistakes. But successful investors quickly acknowledge those mistakes—
 and cut their losses short. Always. You should do the same, and you can do
 it by following this one simple rule.
 See the Selling Checklist section for more on this rule—and how I
 learned it the hard way.
 2. Only Buy Stocks When the Overall Market Is in a “Confirmed
 Uptrend”
 IBD’s study of every market cycle since 1880 shows 3 out of 4 stocks move
 in the same direction as the overall market, either up or down.
 The “overall” or “general” market refers to the major indexes, primarily
 the Nasdaq Composite, S&P 500, and Dow Jones Industrial Average.
 When the market is trending down, about 75% of all
 stocks will eventually decline with it.

How to Make Money in Stocks Getting Started: A Guide to Putting Can Slim Concepts Into Action by Matthew Galgani