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Hello list,
I got quite a few request for info on Amos Hostetter that I thought I would
post the info here. Unfortunately I don't have my chart notes with me
(where the bulk of my notes about Amos are) - they are back in the states.
I will be returning to the states in a couple weeks and I will then forward
them on to those that wanted them privately. Here are the text files I have:
Amos Hostetter 8/27/1902 to 1/30/1977
General Principles of Trading
1. Take care of your losses & and your profits will take care of
themselves.
a. You need big wins to pay for small losses.
b. Big Wins are only possible when you stay with trend all
the way.
2. When in Doubt get OUT!
a. Don't Gamble
b. Make sure the "doubt" is real.
1. Fundamentals
2. Market Action
3. Not your nervousness!
3. All Major Trends take a long time to work themselves out.
a. Let others argue about day-to-day news.
b. Be Patient
c. Pay attention to what the market heard, and how it reacted.
4. Must have steady devotion to facts, facts, and facts.
5. Draw charts by hand as it adds hand eye sensory input to help
price action sink in.
6. Only trade when major trend exist and only in that direction. Never
short a bull market to catch a dip, etc.
7. Never trade in a "trading market"
8. Stay with the trend don't grab a quick profit.
9. Once a position moves in your favor, sit stubbornly until you think
the trend has run its course.
10. If the 4pt profit shrinks to a 2 point profit don't panic.
11. Save your fears and panic for the position that starts with a
2-point loss.
12. Maximum exposure on any given trade must not exceed 25% of equity.
Ask these questions before making any trade (Created by Amos April, 1966)
1. Do you think a MAJOR trend has either started or is about to start?
2. IS the contemplated trade in the direction of this trend?
3. Do you think that the move will be a substantial one (at least 10%
of current price), and will run for a considerable period of time (3 9
months)?
4. Have you selected an actual or approximate stop loss where you
would be willing to admit you are actually wrong, and take your loss?
5. Summarize your ideas:
I believe that ________________ (commodity & contract month)
now selling at ______________ (current price) will advance/decline to
____________ in ___________ months. Meanwhile, I will stop my
position at ___________ .
6. Is the potential move that you visualize at least twice the loss
you will take if stopped out? (Minimum is 2:1 profits : loss, preferably 3:1)
7. Is the loss that you will take if stopped out (on the number of
contracts being considered) less than 25% of the equity in the commodity
account? (Preferably this loss will be less than 10%)
If ALL are yes do the trade but 1 NO kills the trade.
Before Exiting the trade (assuming the stop has not been hit) ask these
questions:
1. Does the position show a loss?
2. Has it reached the price objective, which you expected when trade
was initiated?
3. Have you held it for the period of time stated above?
4. Are you concerned that the major trend has changed since your forecast?
If ALL answers are NO then you must hold your position, 1 yes you may exit.
Suggestions:
1. Experience must teach. Follow it invariably.
2. Observation gives the best tips of all. Observe market behavior 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 the top prices, but to
buy as & sell at the right time.
4. Remember 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 unless the first shows 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. In a bear a market it is always wise to cover if complete
demoralization develops suddenly.
8. Stick to facts only and govern your actions accordingly.
9. What is abnormal is seldom a desirable factor in a traders
calculations. If a market doesn't act right, don't touch it.
Dont's:
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 look for the breaks. Look out for warnings.
8. Don't try to make an average from a losing game.
9. 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.
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 ones own judgement.
4. Never cease to do your own thinking.
5. A man must not sweat eternal allegiance to either the bear or bull
side. His concern lies in being right.
6. Laziness prevents a trader from keeping posted to the minute.
7. The individual fails to stick to FACTS!
8. People believe what it pleases them to believe.
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