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Pat HOR TO TRADE Aster you havs thoroughly mastored al] of the lessons, be sure you are right before you nake a trade, Novor guess. Trade on scientific indications only. ‘WHAT YOU MUST KNOW BEFORE YOU START TRADING: ‘You wust inow exactly how to epply all the rulesy how to drew the peonctricn! angles or moving-arerage Lines from tops and Lortoma; how to square Time with Pricey how to brinr tte dmportunt 45° ancles or Lines, wnich roprerant 7 roe ing average. You muct know where to place « eton lose ordar and mist Look un whee cycie the your iz an, that is, determine iru the Uaster Forecasting chert whether it ie @ bull or bear your, whothor cio Wan trend should be up or dom. Before you mako a trado, either buying or selling, consider the position of each individual stock on the monthly chart; next consider the weekly chart and then the daily chert. If they all confirm an uptrend, 1t is a eineh to buy, pro- ‘¥idee you have located the point at which to place a stop loss order. On the other hend, 4f the oyole shows that it is a beer year end the monthly, weekly end daily charts show downtrond, then it is the time to go chert, but agein you mist look for the noct Amportent point—where te place the stop loss order ao that it will uct be more than $ points amcy and closer if possible, WHAT T0_100K UP BEFORE YOU MAKE A TRADi Following are the most important points that you must eonsider before buying, or selling & stock: 2, Annual Forecest doternines yonr of Time Cycle, whether bull or bain trend of the general market, up or dum. F your, and 2. Cycle of individual stock, whether up or dow your, 3. Monthly position on angles fron.tops and bottoms und tine periods, 4. Weekly position on. time periods foo tops and bottoms and on angles from tops and bottons, See if 3% 12 squaring out Time fron top or bottom. 5. Daity position on angles from important tops and bottoms and tine periods, See whether « stock 4s meer square of recent top or bottom. 6. Resistance Levels on price. See whether the stock ig near any half-way point: or other points of support or resistance, 1, Look to see if stock haz hold for several days, wooks or months around samo Jovel ani whether it ta about resdy to cross or break important angles fron tops or votes. G8. Lost up volute of sales. Sox whether @ stock has increased or docroased volume over past Few days or wots. 94 Look wp spsce of price sovemmnt, up or dom, for past movenents. Find out what was the greatest advance or doclino for past few yoeks or months. For If @ atock hag reacted 5 points soveral timos end st tho timo you Fis look St up, you find it is 3 points dowm from tho last top end the trend 1s up oa monthly, weekly and daily with the price near @ support mglo, you could buy with a stop loss order 2 te 3 points away; then if tho stock broke vack ovor § pointe, tho previous reaction linit, it would ehow a chan and you should bo out of it. in trend 10. Renonbor, the most important factor to depend on to dotermine the position of a stock is Goonotrien? Angles, Bo guro tu bring up tho ungles fro "0" from recent tops and bottoms. 11. Never overlook the fact that you aust have a definite indication before nak— ing © trale, 12, Most important of all—Always lecete the point at which to place « step loss order to Limit risk. PRACTICE TRADING oN PAPER After you feel sure that you have mastered all the rules and know exectly how to determine the tread of @ stock and the place to begin trading, then to make yourself doubly sure enc establish confidence, practice trading on paper until you thoroughly undorstend how ts use the rules and when to use them, If you make mistakes trading on paper, then you would moko mistakes at thet timo in actual trading and you aro not ready to bogin trading. When you fool that you are conpetent tc start trading, apply all of the rules and trade only on Aefinite indications. If you are not sure of the tread or the buying and sell— ing price end not sure where to place a stop loss order, then wait until you gat a definite indication. You can always uake noney by waiting for opportunities, ‘There ts no use getting in partly on guesswork end losing. WORN To CLOSE A TRADE: Aftor you start ectual trading, when you make a trade, dontt close it or take profits until you have « definite indication eccording to the rules thet it is time to sell out or bay in or to move up the stop loss order end wait until it is caught. The way to make a success is to fellow the trend always and not get out or close a trede until the trend chenges. YOON TO AIT AND NOT TRADE: Tt ke just os imnortant to Inow when not to entor the markot as it is to now nen to enter it. The Lime not to naka @ rade ie when you find a stuck has been holding in a narrow trading range for come time, aay, @ S-point or a 3-point range, but has not broken under bottoms previously made or crossed tons previously mede. A stock may stay for warks or months or even years in a trading range ani will aot indicate eny big move or change in trend until it crossns « previous top or brasks a previous bottom, If a tock is inactive in it is ne time to stert trading in it. this pesitic Another tine not to make @ trade is when a stock Nas nerrowad down between tro important rarles—has not troien under one or crossed the other. Wait until ib gets out in the clear and rivos a definite indication befnra you trade. After a prolonged decline stocks neerly always narrow dom and hold in a trading renge for sine tims, Thon you should wait until the engles from the bottom ara broken or the angles fron the top aro crossed and the stock broaks ov- Fag er ax old top before you make @ trai you have # definite, wellsiofined trend. In other words, at all tines trate when CAPLTAL REQUIRED FOR TRADING Before you do may trading, you must lmow the smoust of capital required to eke a succor trading and the exect anownt that you must rick on ey ono trade in order to always have capital left to trade with. You can begin trading in 10 shares, 100 sharec, 1000 shares or eny other amount, but the mein point is te divide your capital yroporly end to distribute the risks equally to protect your capital. Whatever anount of capital you uss to trade with, follow this rule: Divide your capitel into 10 equal parts and never risk more then 10% of your capital on any one trale, Should you lose three consecutive times, then reduce your trading unit ond only risk 10% of your remaining capital. Tf you fellow Chia rule, your success ie aure. As a general rule, I have always considered it adviseble to use at least $3,000 capitel for every 100 shares of stock traded in end to limit risks to 3 points or less on evory trede, In this way you will be able to make 10 trades on your capital ond the narket would have to beat you 10 consecutive tines to wipe out your capital, which 1t will not do. You should try to make trades at a price whore it will only be veosssary to use one to two-point stop less orders, which will out down the risks If you want to start trading in small mite of ctock, use a capital of $200 for each 10 shares and never risk nore than 3 points on the initial trado, Try to make tho firet trade, if possible, whera your stop loss order will not be nore than ene or two points. ADIAYS FOLLOW RULES: Decide this important point before you stert trading. If you do not intend to follow tho rules strictly, do not begia trading. Never allow pune:work or the human olement to enter inte your trading, Stick to the “capital” rule ead under no condition risk mora than one-tenth of your capital on eny one trade. Follow the mathentical rules end you will make « success. PYRAMIDING You should only pyramid or increase your trading in active markets where volun is above normal. The position on angles end volume of activity Will show you when to pyramid, You chowld never vegin pyremiding until a stock has gotten Ante © strong position on angles or inte m woak position on angles, or until it has broken out of a trading range by crossing old tops or broeking old Uottum. OW _T0_PYRaMt! If you are trading in 100 shares, after you heve made your first trede with a risk Limited to 5 points or 10f of your capital, then do not pyramid, or buy or sell a second lot, until the market has mved at least § points in your Paver; then when you buy or sell a second lot, use a stop loss order not more than 5 points eway on both trades, Bxemplo: Wo will essume thet after buying the gecond let, the trend re~ verses and the stop loss orders on both trades are cought 3 points away fron F-20 where you bought the last let, This will give you @ loss of 3 points on tho lect ‘trade end e profit of 2 points on the first trade, or a net Ios of only one point. On the other hand, if the market continues te move in your favor, your profits will be twiee ac uch after buying the socend lot, Wao the market has mved § points more in your favor, you buy a third et, noving up the stop less orders on the first and second lots end placing « stop on the entire lot of threo tredes not nore then 3 soints away end closor, if possible. Continue to pyramid as long as the market roves 9 points im your favor, al- vays following up with stop loss orders. When a stock selling botweon 5 and 75 a share hes moved 15 te 25 points in your favor, you should begin to wateh for a chengo in trond and bo careful about buying or colling encthor lot om which you may havo to take a lose. THE FUN_OR PYRAMIDING NOVE: ‘The big money in vyremiding 1a mada in the rum between ozcumilation and dis tribution, thet is, after a stock passes out ci chs zone of accumulation, Pyrue mids should ve startod aitor double or triple tops ure erosset and the rock clears the sone of accumulation. Then. when you get into this rim, buy avery 5 pointe up, protesting with © ctop loce order sot mora then 3 points amay frou the last trade, Revers thir rule ine declininr narket: After double or trivle bottoms are broken an the stock clears the tone of distraoutson, sell every § points down, protecting wth stop loss orders not sore taen 3 points shove the last trate. FAST MARKSTS {ND WIDE FLUCTUATIONS: When stocks are very active end moving very fast, calling abova $100, than you will find it bost to make trades 7 to 10 points apart. The ongles end price Resistance Points as well as old tops end tottons will determine peints to place stop loss orders with safety. In fast-noving narkots, 1ike tho punie of October and November, 1929, wher you pyrazid op active stocks ané nave vory Large profits, you should follow dom, with e stop less ordor about 10 points evay from the warkot. Thea, after a sc- vore decline reduce stop lose ordera, plucing then cbout 5 pointe above tho lov oval. Whos « narkot is moving az fort ex this, you should not wait for the stock to got into a strong position on anglos. | Reverse this rule in an advancinr morkot, SAFEST PYRAMIDING RULE: ne of tho safest rules to use for pyremiding when stocks aro selling nt ex tremoly high levels or extromoly low lovels ig to start with 100 sharos end when ‘tho narket moves § points in your faver, buy ansther 50 shares; then when it move 5 points more, buy or coll $0 charosy then on the next S-point move in your fever buy or sell 20 shares, and continue to follow the merkot up or dew with this emount until there is a chango in tho mein trend. WEEN NOT TO PrRAMGD: Safety is the first considerction in starting or continuing a pyroniding Par campaign in a stock. Mistakes are modo by buying or selling @ second lot too pear tho accumulation or the dictribution point. After a big move up or dom, you must always wait for a definite chongo in trend before starting © pyramid, Never buy a second let for a pyramid when a stock is near « double top or sell @ second lot whon a stock is near a double bottom, ‘A stock often holds several days or wooks in a range of 10 to 12 points, moving up and down, not crossing the highest top or breaking the last bottom nae. fs 100g as iL ronains in this range, you should not pyramid, Whor St gots out of this range, croeeing tho highost top or breaking the lowest bottom, thon it will inddeate 9 bigger move and you should start to pyromid. Always check and double check, follow all the rules, stuly the major and wins tine oycles fer forecasting, the angles fron tops and bottoms, tho Rosictance Points of Price botwoox tops end bottone, If you ignore ono important point, st nay got you wrong. Rononbor, tho whole can nover excood all of its parts, and all ef the parts make up the whole. If you leave out one of tho parts or ono of the rules, you do not hao a coupleto trend indicoter. Novenbor, 1935