Frank Williams' Rules

 Frank Williams' Rules.

1. Pay all bills before speculating.

2. Don't speculate with another person's money.

3. Don't neglect your business to speculate.

4. If the market makes you irritable or interferes with sleep, you are wrong.

5. Don't use in the market money that you need for other purposes.

6. Don't go "joint account" with a friend - play a lone hand.

7. Don't give a broker "discretionary power." If you can't run your own account, leave the market alone.

8. The broker who demands a large margin is your friend. Only a bucket-shop wants you to trade on a slender margin.

9. Don't buy more stock than you can safely carry. Over-trading means forced selling and losses.

10. Get accurate information. Demand facts, not opinions.

11. Don't take advice from uninformed people - they know no more than you about the market.

12. Such advice as "I think well of it" or "It is a cinch" means nothing.

13. Use only a part of your capital in speculation.

14. Don't buy "cats and dogs" (unseasoned stocks).

15. Buy good standard stocks that have stood the test of time.

16. Remember that good stocks always come back - unknown stocks may disappear.

17. Don't buy in a hurry - there is plenty of time to buy good stocks.

18. Investigate each stock thoroughly before you buy.

19. Remember that it is easier to buy than to sell. The salability of a stock is very important.

20. The market moves up slowly, but goes down fast.

21. Be prepared to buy your stock outright if necessary. If you can't do this, you are taking chances.

22. Buy in a selling market - when nobody wants stock.

23. Sell in a buying market - when everybody wants stock.

24. The market is most dangerous when it looks best; it is most inviting when it looks worst.

25. Don't get too active. Many trades many losses.

26. Long-pull trades are most profitable.

27. Don't try to outguess the market.

28. Look out for the buying fever; it is a dangerous disease.

29. Don't try to pick the top and the bottom of the market.

30. Don't dream in the stock market; have some idea just how far your stock can go.

31. Remember that the majority of traders are always buying at the top and selling at the bottom.

32. Don't worry over profits you might have made.

33. Don't spend your paper profits - they might turn into losses.

34. Watch the news. Remember that the market actually is a barometer of business and credit.

35. Don't buy fads or novelties - be sure the company you are becoming a partner in makes something that everybody wants.

36. Don't finance new inventions unless you are wealthy.

37. Ask who manages the company whose stock you want to buy.

38. Don't follow pool operations. The pools are out to get you.

39. Don't listen to or give tips. Good tips are scarce and they take a long time to materialize.

40. Don't take flyers.

41. Don't treat your losses lightly; they are serious. You are losing actual currency.

42. When you win, don't get reckless; put your winnings in the bank for a while.

43. Don't talk about the market - you will attract too much idle gossip.

44. Sniff at inside information; it is usually bunk. The big people don't talk about their operations.

45. Don't speculate unless you have plenty of time to think about it.

46. Fortunes are not easily made in Wall Street. Some professionals give their lives to the market and die poor.

47. There is such a thing as luck, but it does not hold all the time.

48. Don't pyramid.

49. Don't average unless you are sure you know your stock.

50. Don't buy more stock than you can afford, just to look big. If you a ten-share man, don't be ashamed of it.

51. Beware of a stock that is given an abundance of publicity.

52. Use your mistakes as object lessons - the person who makes the same mistake twice deserves no sympathy.

53. Don't open an account at the broker's just to oblige a friend. Charity and speculation don't mix.

54. Remember that many people believe they can find better use for your money than you can yourself.

55. Leave short selling to experienced professionals.

56. If you must sell short, pick a widely held stock or you may get caught in a corner.

57. Money made easily in the market is never valued - easy come, easy go.

58. Don't blame the Stock Exchange for your own mistakes.

59. Don't shape your financial policy on what your barber advises - hundreds of experts are waiting to give you exact information.

60. Don't let emotion or prejudice warp your judgment. Base your operations on facts.

From If You Must Speculate Learn the Rules, Frank J. Williams, 1981, Fraser Publishing Company, extracted from Investment Psychology Explained, Martin J. Pring, 1993, John Wiley & Sons.