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No Sale? No Profit



Commandment 6

The game's tough right now. So tough that you have to be thinking, "It's just not worth it. When 50,000 people close accounts at Ameritrade (AMTD - news) in a quarter, you have to know that you aren't suffering your misery all by your lonesome.

It's always that way when you are rooting for bad news. It's always that way when you are playing defense.

This is one of those moments when people are looking at some rather huge gains in sectors that may be giving way and they don't want to ring the register.

All of you in that situation, I want you to remember one of my most important Trading Commandments:


You don't have a profit until you sell.


The way this market looks right now, if you have a big gain in one of these heavy cyclical stocks, you need to think about whether that gain is going to get wiped out or not.

Let's take Phelps Dodge (PD - news). I genuinely feel that those who bought Phelps Dodge in the $60s and $70s believe that they are so far away from where they bought the stock that they have the gain. You do not have the gain until you take it. And some needs to be taken.

If we truly are in rotational hell — which I think we are, by the way — you have got to take some of the cyclical winnings off the table, you just have to. Right now, right here.

Stop thinking that you have it in the bank. Instead, put it in the bank. And accept the fact that the offense has made about all it can here and you have to be defensive to play the next move correctly.