One-way Pockets | stockbee


One-way Pockets

While going through all my books this week, I stumbled across this delightful small book: One-way Pockets: The Book of Books on Wall Street Speculation

This book will take you 15 minutes to read at best. The edition which I have is pocketbook edition, so the book just slipped inside some book and I found it while spring cleaning.

The book is written by someone who worked for a brokerage house in 1917. He analysed the trading accounts of retail customers at the brokerage house and based on the mistakes they make he wrote this book under a pseudonym.

The author details his results in One Way Pockets. He found that 95% of them lost money overall and displayed the same trading pattern. They would enter a trade, it would show a small profit, and they would sell too early. Then seeing the stock leave them behind, buy back in at higher prices. They would hold on too long after the stock peaked. Ride it all the way back down to the bottom. Then finally they would capitulate and sell. That is most cases would become the perfect entry point for the next cycle up

The book offers a simple advise on how to speculate in the market successfully. There are 14 chapters and the first half deals with his analysis of customers account from 1915-1917, the second part offers a plan for ""Coppering" the Public "

The main point to bear in mind is that the public's speculative play is wrong. If an opposite plan of operations can be adhered to, or , in gambling parlance, if the public can be "coppered," there would seem to be a reasonable chance to beat the Wall Street game.

The book offers a plan for long term traders on how to trade by determining how trend starts, how one must identify the "bell cow" or the leading stocks, how to be deaf to news and rumors,how to correctly use stops, how to see the first reaction through, when to sell, when and what to short, and when to cover shorts.

The 64 page book has a complete method to successfully speculate in the market. Nothing changes on the street, including the advise to chart readers and technical analyst:
On the other hand, the operating plan is not akin to any of the arbitrary systems of chart play which have been in vogue during recent years. There was a time in Wall Street when chart students could and frequently did make money by playing their various systems, but that was before the Street was surfeited with literature treating of market technique. Now the followers of charts are legions; two out of every three active traders keep either a written or a mental record of tops, bottoms and accumulating and distributing areas, and consequently are fooled persistently by the large operators, who "work" the chart readers and their following at every available opportunity.

Guess what is the last chapter title" The Method and the man" and it outlines the importance of following a method.


Semsons said...

Do you know a good book about corrections, and how to mitigate them?.


Pradeep Bonde said...

What kind of corrections.

Semsons said...

regular corrections of the market. Like the last in February, or in May 2006.
I'd like to deal with them.

Pradeep Bonde said...

If you read the IBD "Big Picture everyday, you will be on top of most corrections, start of new rallies and start of topping process.

Susan said...

pradeep, the 4% breakout stocks you normally have, are they a subset from ibd200 or a scan of total market? If its the whole market, don't u get hundreds/day? how do you eliminate the unsuitable ones? You trading style indicates you probably will use some kind of growth indicator? if the breakout is not earning related?

Susan said...

also i assume this is purely a 4% scan, doesnt include 260 day/65 days growth rule when you run telechart? Coz if you do, then the good neglected stock will be missed right?

Pradeep Bonde said...

The IBD 200 is a lazy investors strategy. I personally trade a bit modified strategy.
1) 4% scan is on entire universe, most days it gives you between 100-200 stocks.
2) From this large pool I segregate in to
a)IBD EPS 70 plus ratings
b) Those with less than 70 ratings

From pool B I look at neglect/virgin/ EP/biotech/ IPO/ catalyst play.

From the IBD pool I select based on composite ratings plus other IBD kindish criteria. So In most cases I might get in to IBD 200 or IBD 100 play before it hits the list on Thursday or Monday.

Going through the 4% pool also gives one a early indicator of sector moves.