Fred Lange’s Classic Trading Guideposts From 1968 With New Comments From Mr. Lange After 43 Years.
We absolutely believe the Trading Guideposts below, written by Fred W. Lange in 1968, are timeless and as valuable today as they were in 1968. Mr. Lange was the Director Of Research for Blair & Company in N.Y.C. at the time he wrote these classic guidelines. He went on to manage the Neuwirth Fund- the number one performing fund in the world during the time Mr. Lange co-managed it with Mr. Marty Sass. From The 60′s through the 80′s Fred was one of the most regularly quoted market professionals in Barron’s and The Wall Street Journal, especially in the “Abreast Of The Market” column.
These Trading Guideposts were widely distributed at the time and eventually became a Feature in BARRON’S. Reading and developing a thorough understanding of these trading principles will significantly help a trader/ investor in their approach to investing generally and enhance profitability.
We are extremely fortunate to have a wonderful relationship with Fred Lange and his son/ partner Rob- “Lange Financial Services”. Anyone who follows this site will know how valuable their contributions are to the sites readers, as well as how uncannily accurate they have been since we started the site in July 2010. We are even more fortunate in that Fred has offered to share with The Wall And Broad Report even more detailed trading and investing lessons and thoughts he has learned over his 45+ year amazing career on ” Wall Street ” in future posts here on the site. So make sure you check back often!
From Fred Lange, July 19, 2011:
While we do not want to encourage excessive trading, there are times and market conditions when trading activities should be pursued. We believe that a profits cushion should be built to absorb inevitable losses especially early in the year. Under ideal conditions, one should sell a partial position during periods of strength and buy during periods of weakness. There is always the risk of losing a position or a portion of a strong position. Philosophically, there are more fish in the ocean and more sand on the beach. Most important, do not second guess a trade. Tax considerations should be of secondary importance.
Trading is an aggressive activity. There are risks but also there are benefits like learning to protect your investment account during periods of uncertainties;
Fred W. Lange
Again, we at The Wall And Broad Report strongly recommend reading, understanding, and often reviewing these classic TRADING GUIDEPOSTS. We believe that implementation will enhance your overall market performance.
TRADING GUIDEPOSTS By: Fred W. Lange November, 1968
“Presented below are some TRADING GUIDEPOSTS which we believe can be useful by investors who persist in the pursuit of shorter term profits. Remember that short-term market activity to be successful requires an extremely high degree of self-discipline, flexibility and sophistication. While the rationale behind each of the GUIDEPOSTS listed can be expanded upon, the point made in each case should be readily understandable. However, despite the apparent benefits that can be achieved by short term trading, we remain of the opinion that capital enhancement is best accomplished by making commitments in a cross-section of growth-oriented companies taking an intermediate to longer term viewpoint.
1. Buy only stocks that either the investor or the RESEARCH DEPARTMENT know thoroughly and where up-to-date information and opinions are readily accessible.
2. Do not take extreme positions.
3. Buy stocks only when the technical pattern confirms fundamental judgment.
4. Sell quickly if the stock does not act as anticipated.
5. Do not be afraid to buy back quickly if the stock continues to act exceptionally strong even if it is higher.
6. Do not ever become overly enthusiastic despite what current trends appear to be (lose objectivity).
7. Do not ever become overly pessimistic despite what current trends appear to be (lose objectivity)
8. Do not over-trade.
9. Act according to your convictions – learn to trust your doubts as well as your expectations.
10. Seek to buy strong stocks on weakness.
11. Seek to sell strong stocks on strength.
12. Anticipate at least 10% to 15% after commissions.
13. Trade evenly – doubling up on a new position to offset a prior loss may create additional problems.
14. Be patient.
15. Try to trade with the market trend and not against it.
16. Do not attempt to squeeze out the last point(s) on either the buy or the sell side.
17. Tentatively know where the market can run into supply or possibly meet support.
18. Tentatively know where the stock can run into supply or attract support.
19. Let profits run – limit losses to a predetermined price and/or percentage.
20. Determine what industries and issues are the current market leaders – often invaluable since a basic understanding of general market conditions can be quite beneficial in anticipating market trends and reversals.
21. Remember the market may do the unexpected.
22. In an up market, the trend probably will at least continue into early the following day before any reversal.
23. In a down market, the trend probably will at least continue into early the following day before any reversal.
24. Commissions are a small price to pay for preservation of capital.
25. Do not overstay trading positions – greed is a trader’s constant and greatest enemy.
26. Do not trade on tips.
27. Do not short stocks that are heavily shorted unless perhaps the downtrend is well defined and preferably in a down market.
28. Hedge strong stocks by selling a portion on strength and buying back on weakness particularly in an up market.
29. Do not fight the tape.
30. Do not let interpretations of market movements by the writers of leading financial publications distort your thinking.
31. For the minority to make money on the shorter term, the majority has to be wrong.
32. Do not become excessively keyed to the fluctuations in the popular averages; concentrate on the trends of individual issues.
33. Lighten commitments in a down market or in a market that appears “toppy” after an extended or rapid advance; it is important to preserve capital during uncertain periods.
34. Learn by mistakes.
35. Do not look back (in a wishful manner) – can easily distort current and future judgments.
36. Study your own weaknesses.