Profit Without Forecasting

Great advice from the book “Stock Market Profit Without Forecasting” by Edgar Genstein :

"During major sustained advances in stock prices, which usually occupy from five to seven years of each decade, the investor can complacently hold a list of stocks which are currently unpredictable. He doesn’t worry about the top because he knows he is never going to sell at the top. He knows that the chances are overwhelming in favor of the assumption that he will get far better prices by waiting until after the top is passed and a probable reversal in trend can be identified than he will ever get by attempting to anticipate the top, and get out on the nose. In my own experience the largest profits we have ever taken have come from stocks purchased while they were making a new high in a market which was also momentarily expecting the top.

As I have already pointed out the absolute price of a stock is unimportant. It is the direction of the price movement that counts. It is always probable, but never certain, that the direction of the price movement will continue. Soon after it reverses is time enough to sell. You should sell when you wish you had sold sooner, never when you think the top has arrived. That way you will never get the very best price—by hindsight your individual transactions will never look daring. But some of your profits will be large; and your losses should be quite small. That is all that is necessary for a satisfactory, enriching investment performance."

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It’s only great advice if the author explains in considerable detail, with historical examples showing why hindsight played no part whatever, how the investor identified that moment which comes ‘after the top is passed’ and when ‘a (sic) probable (!) reversal in trend’ has occurred and carefully defines the term (sic) ‘soon’ (!) as in ‘soon after it reverses.’. In addition, current examples should be given for future (or present) action, demanding that the author gives a few hostages to fortune so that future readers may know if he turned out to be right.

I do get what he means but the qualifying terms betray the fact that this supercool operation is not simple, as implied, but extremely difficult.

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