Dennis Gartman's Rules of Investing

Dennis Gartman's Rules of Investing

1. Never, Ever, Under Any Circumstances, Add To A Losing Position. Not ever. Adding to a losing position is trading's equivalent of driving while intoxicated. It will lead to ruin. Count on it.

2. This Is Not A Business Of Buying Low And Selling High. It's a business of buying high and selling higher. Strength tends to beget strength, and weakness, weakness.

3. 'Markets Can Remain Illogical Far Longer Than You Or I Can Remain Solvent' is a brilliant statement from good friend Gary Shilling. Illogic often reigns and markets are inefficient — despite what the academics try to tell us.

4. Sell That Which Shows The Greatest Weakness; Buy That Which Shows The Greatest Strength. Metaphorically speaking, when bearish throw rocks into the weakest paper sack, for it will break the most easily. In bull markets, ride the strongest winds.

5. Think Like A Fundamentalist, Trade Like A Technician. It is imperative that we understand the fundamentals driving a trade, and that we understand the market's technicals as well. If the chart is not bullish, why buy?

6. Understanding Psychology Is Usually More Important Than Understanding Economics. Simply put, 'When they are cryin', you should be buyin'. And when they are yellin', you should be sellin'.'

7. Bear Market Corrections Are More Violent And Far Swifter Than Bull Market Corrections. Why they are is still a mystery to us, but they are. Accept it and move on.

8. Be Patient With Winning Trades; Be Enormously Impatient With Losing Trades. Remember, it is quite possible to make large sums of money if we are only 'right' 30% of the time, as long as our losses are small and our profits are large.

9. The Hard Trade Is The Right Trade. If it is easy to sell, don't. And if it is easy to buy, don't.Do the trade that is hard to do and that the crowd finds objectionable.

10. Do More Of That Which Is Working And Less Of That Which Is Not. This works in life as well as in trading. Do the things that have been proven of merit. Add to winning trades, cut back or eliminate losing ones. If there is a 'secret' to trading (and to life), this is it.

11. There Is Never Just One Cockroach. Bad news about a stock is usually followed by more bad news. This continues until such a time as panic prevails and the weakest hands finally exit their positions.

12. All Rules Are Meant To Be Broken. But very, very infrequently. Genius comes in knowing how truly infrequently one can do so and still prosper.

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