Sunday 5, December 2021

Mr Hostetter’s Rules for Trading

If you search for “A successful speculator’s approach to commodities trading” by Morris Markovitz, you’ll probably find a pdf of a scan of this book. The whole book is worth reading, but I thought I’d transcribe the rules. The book is from 1977. The book was written by his colleague, as a sort of memorial to a great trader.

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 one’s own judgement.
4. Never cease do to your own thinking.
5. A man must not swear eternal allegiance to either the bear or the bull side. His success lies in being right.
6. Laziness prevents a trader from keeping posted to the minute. [This was written in a time before charting software.]
7. The individual fails to stick to facts.
8. People believe what it pleases them to believe.

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 try to make an average from a losing game.
8. 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.

Suggestions

1. Experience must teach. Follow it invarariably.
2. Observation gives the best tips of all. Observe market behaviour 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 top prices, but to buy and sell at the right time.
4. Remember that 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 until the first makes 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. Stick to facts only and govern your actions accordingly.
8. What is abnormal is seldom a desirable factor in a trader’s calculations. If a market doesn’t act right, don’t touch it.