PART TWO
HOW TO SELL
You need to write down a selling plan before you place your buy order. Putting a plan on paper has a powerful psychological effect on most people. It reduces stress, which leads to an increase in profitability. We make our best decisions when we feel relaxed. Writing down your exit plan reduces tension by separating your two jobs: analysis and trading.
Give your “analyst” the luxury of peace and quiet, as he thinks and writes down his plan while the markets are closed. Give your “trader” the luxury of simplicity—a map with which to run, focusing only on implementing decisions. Keep these two jobs separate. Let the analyst think. Let the trader execute. Let them work as a team instead of pushing and stepping on each other’s shoelaces.
Warren Buffett, perhaps the most successful investor in the world, says that when you buy a stock you become a partner of a manicdepressive fellow he calls Mr. Market. This character runs up to you every day, offering to buy you out or sell you his share. You should ignore Mr. Market most of the time because he is crazy.
Occasionally Mr. Market becomes so terribly depressed that he offers to sell you his share for a pittance—and that’s when you should buy. At other times he becomes so manic that he offers you an insanely high price for your share—and that’s when you should sell. Unfortunately, Mr. Market’s mood is so contagious that it sweeps most people off their feet. They buy when he is manic and sell when he is depressed—which ...

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