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MY SECRETS OF DAY TRADING IN
STOCKS BY RICHARD D.
WYKOFF Chapter 2:
Getting Started In Tape Reading
Page 1
WHEN embarking on any new business enterprise, the first
thing to consider is the amount of capital required.
To study Tape Reading "on paper" is one thing, but to
practice and become proficient in the art is quite another.
Almost anyone can make money on imaginary trades because
there is no risk of any kind - the mind is free from the
strain and apprehension that accompanies an actual trade;
fear does not enter into the situation; patience is
unlimited.
All this is changed when even a small commitment is made.
Then his judgment becomes warped, and he closes the trade in
order to get mental relief. As these are all symptoms of
inexperience they cannot be overcome by avoiding the issue.
The business-like thing to do is to wade right into the game
and learn to play it under conditions that are to be met and
conquered before success can be attained.
(Continued after the box of related
articles.)
After a complete absorption of every available piece of
educational writing bearing upon Tape Reading, it is best to
commence trading in ten share lots, so as to acquire genuine
trading experience. This may not suit some people with a
propensity for gambling, and who look upon the ten-share
trader as being afraid and a 'babe in the woods'. The
average lamb with $10,000 in capital wants to commence with
500 to 1000 share lots - he wishes to start at the top and
work down. It is only a question of time when he will have
to trade in 50 share lots – having lost the majority of his
capital in large trades. To us it seems better to start at
the bottom with 50 shares. There is plenty of time in which
to increase the unit if you are successful. If success is
not eventually realized you will be many dollars better off
for having risked a minimum quantity. It has already been
shown by experience that the market for odd lots (100 shares
or less) on the exchanges is very active, so there is no
other excuse for the novice who desires to trade in round
lots than greed-of-gain, or a get-rich-quick mentality.
Think of a baby, just learning to walk, being entered in a
race with professional sprinters! In the previous chapter we
suggested that success in Tape Reading should be measured by
the number of points profit over points lost.
For all practical purposes, therefore, we might trade 10
share lots, were there no objection on the part of our
broker and if this quantity were not so absurdly small as to
invite careless execution. 50 shares is really the smallest
quantity that should be considered, but we mention shares
simply to impress upon our readers that in studying Tape
Reading, it’s better to keep in mind that you are playing
for points, not dollars. The dollars will come along fast
enough if you can make more points net than you lose. The
professional billiardist playing for a stake aims to
out-point his antagonist. After trading for a few months
don’t consider the dollars you are ahead or behind, but
analyze the record in points. In this way your progress can
be studied.
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