Amos Hostetter Ė 8/27/1902 to 1/30/1977
1. Experience must teach. Follow
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 donít 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
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 doesnít act right, donít
1. Donít sacrifice your position
2. Donít expect the market to
end in a blaze of glory. Look out for warnings.
3. Donít expect the tape to be
a lecturer. Itís enough to see that something is wrong.
4. Never try to sell at the top.
It isnít wise. Sell after a reaction if there is no rally.
5. Donít imagine that a market
that has once sold at 150 must be cheap at 130.
6. Donít buck the market trend.
7. Donít look for the breaks.
Look out for warnings.
8. Donít 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
1. Fear Ė fearful of profit and
one acts too soon.
2. Hope Ė hope for a change in
the forces against one.
3. Lack of confidence in ones own judgment.
4. Never cease to do your own
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
8. People believe what it pleases
them to believe.
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
b. Big Wins are only possible when
you stay with trend all the way.
2. When in Doubt get OUT!
a. Donít Gamble
b. Make sure the "doubt"
2. Market Action
3. Not your nervousness!
3. All Major Trends take a long
time to work themselves out.
a. Let others argue about
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 Ė 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
8. Stay with the trend Ė donít
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 Ė donít 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 Ė 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 Ė do the trade
Ė 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
2. Has it reached the price
objective, which you expected when trade was initiated?
3. Have you held it for the period of time
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 Ė you may exit.