If you can not follow a rule, do not begin speculating or investing, as you are sure to lose. Learn to adhere strictly to a rule or do not follow it at all.

The following rules should be carefully studied and applied in your trading:

Capital Required

You would not try to run an automobile and start out to travel several hundred miles unless you knew how much gasoline it required to run a given number of miles. Yet, you go into speculation without knowing one of the most important things, the amount of capital required to succeed and make speculation a business. Do not try to get rich in a few months or a year. A man certainly should be satisfied if he can acquire a competent fortune over a period of ten to twenty years. Often we have one year when a man with nerve and knowledge and a small amount of capital can make a fortune. I have been able to pile up enormous profits in a short time by pyramiding, but this can not be done continuously and I do not claim to be able to do it.

What I am trying to teach you is a safe, sure way, which will yield more profits than any other business on earth if you will only be conservative and not make speculation a wild gamble. A man may go into business and lose all of his money and then years pass before he has another opportunity to make a large amount of money in that or any other business. Yet, in the speculative markets opportunities return every year, provided a man has studied enough to see them when they appear. The chances for gain are so unusual and so many great opportunities do come in Wall Street that the average man gets greedy, gambles and does not wait between times for the real opportunity.

Limit Your Risk

A strong will power is just as essential as plenty of capital. If you have not the firmness, will power, and determination to protect every trade with a stop loss order, do not start trading, for you will fail. I have often heard traders say "If I place a stop loss order at a certain point the market is sure to catch it." Yet they realize afterward that the stop loss order being caught was the best thing that could happen to them.

There is nothing better than getting out quickly when you are wrong. The man who refuses to get out when he is wrong usually stays until his money is gone and the margin clerk sells him out. A lot of people do not know how to place a stop loss order on a trade when they make it. A stop loss order is an order given to the broker that becomes a market order when the stock reaches the price at which it is placed.

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