I’ve always loved going to bookstores (ok, I’m a nerd)… because you never know the surprises that’s in store for you… Any day may be the day when u pick up a book that changes your life… The three books below are just some examples of ‘treasures’ I chanced upon while browsing in a bookstore…
The first book that is the all-too-famous book by Richard Kiyosaki… “Rich Dad, Poor Dad”.. I wished I read the book when I was much younger… maybe in my University days… If you have not read the book before, do yourself a favour, drop by one of your local bookstores and pick up a copy….
The second book is the book “The Complete Guide to Option Selling” by Michael Gross… This is the book that ‘converted’ me from being an option buyer to becoming a seller….
The third book is “How Legendary Traders Made Millions: Profiting From the Investment Strategies of the Gretest Traders of All time” by John Boik… Unlike the previous two books, I don’t really recommend this book… a previous book by the same author (“Lessons from the Greatest Stock Traders of All Time”) is much better….
But there is just that ONE point made in this book that gave me an “AHA” moment…. The author mentioned that all legendary traders add to their WINNING positions… None of them pyramid down… In other words, all great traders will buy more stocks as the stocks become more expensive… instead of buying more as the stock falls in price…
I’ve always believed that pyramiding up is the correct way to trade…. But at that point in time, I was also experimenting with pyramiding down since it is true that pyramiding down will help us break-even faster when the stock eventually recovers… However, after reading that statement by the author, I was totally convinced that pyramiding up is better….
My take on this is: If you are a technical trader (which I am), there is absolutely no reason for you to pyramid down… If u buy a stock and the stock immediately losses money, GET OUT… there is no reason to throw good money after bad money….
However, if you are a value investor (like Warren Buffett) and you are really skilled at identifying good companies, then pyramiding down may be a good way to buy the company’s stock at a bigger discount… But, that is only if you are a good fundamental analyst… and you are buying a business, not a stock….
Anyway, that’s just my $0.02 worth….
My Path to Millions 