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GERALD M. LOEB on GAINING PROFITS BY TAKING LOSSES

One of the many books on my desk right now is a classic written over 70 years ago by the stock market legend Gerald M. Loeb.  Loeb was a well respected Wall Street broker, not because he possessed some magic investing genie lamp but because of the following nugget of wisdom, one of many from The Battle For Investment Survival in a section entitled Gaining Profits By Taking Losses:

Accepting losses is the most important single investment device to insure safety of capital.  It is also the action that most people know the least about and that they are least liable to execute.  I’ve been studying investments, giving investment advice and actually investing since 1921.  I haven’t found the real key yet and don’t ever expect to, as no one has found it before me, but I have learned a great many things.  The most important single thing I learned is that accepting losses promptly is the first key to success.
 

Some things never change.

What is Money

I came across the nugget of wisdom last night in Farmer Boy.

He waited till Father stopped talking and looked at him.
“What is it, son?” Father asked.
Almanzo was scared. “Father,” he said.
“Well, son?”
“Father,” Almanzo said, “would you–would you give me–a nickel?”
He stood there while Father and Mr. Paddock looked at him, and he
wished he could get away.
“What for?”
Almanzo looked down at his moccasins and muttered:
“Frank had a nickel. He bought pink lemonade.”
“Well,” Father said, slowly, “if Frank treated you, its’ only right
you should treat him.” Father put his hand in his pocket. Then he
stopped and asked:
“Did Frank treat you to lemonade?”
Almanzo wanted so badly to get the nickel that he nodded. Then he
squirmed and said:
“No, Father.”
Father looked at him a long time. Then took out his wallet and opened
it, and slowly he took out a round big silver half-dollar. He asked:
“Almanzo, do you know what this is?”
“Half a dollar,” Almanzo answered.
“Yes. But do you know what half a dollar is?”
Almanzo didn’t know it was anything but half a dollar.
“It’s work, son,” Father said. “That’s what money is; it’s hard work.”

……

“How much do you get for half a bushel of potatoes?”
“Half a dollar,” Almanzo said.
“Yes,” said Father. “That’s what’s in this half-dollar, Almanzo. The work that raised half a bushel of potatoes is in it.”Almanzo looked at the round piece of money that Father held up. It looked small, compared to all that work.”You can have it, Almanzo,” Father said. Almanzo could hardly believe his ears. Father gave him the heavy half dollar.”It’s yours,” said Father.  “You could buy a suckling pig with it, if you want to. You could raise it and it would raise a litter of pigs,worth four, five dollars apiece. Or you can trade that half-dollar for lemondade, and drink it up. You do as you want, it’s your money.”

Nugget's from Nisons Beyond Candlesticks book.

Beyondcandlestick

Here’s the first nugget from Nisons Beyond Candlesticks book.

(It’s A BIBLE and my Hot favourite Book )

“A single candle by itself is rarely sufficient reason to forecast an immediate
reversal” (21)

When you cannot see the state of your opponent, you pretend to make a powerful attack to uncover the intention of the enemy. This concept, as related to trading, is one of the reasons a spring is so important. 57

In effect, these traders act like the aforementioned “moving shadow,” testing the battlefield by entering a large order to try and break support (or resistance). (more…)