Secret to Success in the Stock Market!

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“The whole secret to winning big in the stock market is not to be right all the time, but to lose the least amount possible when you are wrong” – William J. O’Neil, MarketSmith Founder

Whether you are a novice or an experienced investor, everyone makes mistakes from time to time. It is easy to get discouraged if your losses pile up faster than your wins. But, tackling your losses holds the key to success in the stock market.

How so, you might ask?

The answer lies in this: Lose a little when you lose, and gain a lot, when you win. An 8% stop-loss and selling a stock when it breaks key support levels can save you from huge capital erosion.

After studying stocks for years, MarketSmith founder, William O’Neil, found that the best institutional-quality stocks rarely fall more than an 8% from a proper buy point in a sound chart pattern.

“If a speculator is correct half of the time, he is hitting a good average,” famed Wall Street investor, Bernard Baruch has said. “Even being right three or four times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong.”

If a stock is falling below its key support levels such as a 50-day moving average or a 200-day moving average (more applicable for low-cost holdings), it means it is not finding institutional support. A fall on high volume below these support levels warrants extra caution.

When you follow such sell rules, you do not let let the losses become too big, and cut them short quickly. Stocks might rebound, but you are saving yourself from the probability of a higher sell-off.

Below recent examples of remove recommendations made by MarketSmith India demonstrates the amount of capital saved on a timely exit.

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