The stock market has been going up for more than 7 months and many investors who held on through the big crash of 2000 are seeing their portfolios get back some of what had disappeared. Is now the time to sell those equities that are even with what you paid for them? No.

The reason I say no is because that is a guess and to be a successful investor you dont want to be guessing. That is a sure way to go broke. Then what is a better way? When you talk with a broker he never advises you to sell. In that case you could be sucked into another huge downward move. There must be a way.

Yes, there is. You let the market tell you. No, you dont have to be clairvoyant. When you buy any stock or mutual fund the first question for your broker should be, When do I sell? If he says you should hold on for the long haul I definitely recommend you fire him and find someone who knows how to protect your capital. If you buy a stock or fund for $40 per share you must know immediately how much you are willing to risk (lose) if that equity starts down instead of up. The same applies to giving back any of the profits you have earned.

When you are playing poker you dont put more money in the pot when you have a mixed suit 2, 5 and 10. The best thing to do is fold.

Over the last few months almost everyone has seen his stock and funds go up and he thinks he is a genius for hanging on. Dont confuse genius with a bull market. So what do I mean let the market tell you? It actually is very simple. You place an Open Stop Loss Order with your broker on all your stocks. You determine the risk and place the loss limit at that point. Some people use 10% and others may limit their loss to 7% and yet others to 15%. That is your risk quotient.

You will find that if your stock or fund is sold as a result of the stop loss that in 4 to 6 months that equity will be lower than where you got out even if it went higher for a short period of time. When a stop is executed dont look back. Find another equity or keep your money in cash in a money market account. Cash is a position. Sometimes it will make you more money than owning any stock especially when the market is headed down.

People become confused by Wall Street into thinking that buying right is the way to make money. Wrong! The secret of success in the market is a well disciplined exit strategy. Know when to hold em and know when to fold em.

Al Thomas

Albert W. Thomas has spent most of his life in the field of finance. In 1965 he founded an insurance holding company, Security Dynamics Investment Corporation, after having been an agent and General Agent for several life insurance companies. In 1970 he became cofounder and president of Real Life Estate, Inc., that marketed a unique real estate and life insurance package.

After he became interested in commodities he bought a seat for his personal trading on the Chicago Open Board of Trade, which is now known as the MidAmerica Commodity Exchange. Later he became a full time trader and also acted as a commodity broker for a few select clients. By fellow floor traders Al is considered to be an excellent technical analyst much of which is outlined in his book IF IT DOESN'T GO UP, DON'T BUY IT! It became a best seller on Amazon.

In 1981 he sold his membership on the Exchange and with his wife, Carolyn, lived full time aboard their 41' ketch, the Aumakua (which means guardian angel in Hawaiian). They sailed in Florida and the Bahamas for two years.

He founded World Trading Group in 1984 that grew to the seventh largest introducing commodity brokerage firm in the U.S. with 35 offices from coast to coast, Alaska and Canada. It was sold in 1992.

Al is a graduate of Northwestern University with a B.S. degree in Commerce and is a member of MENSA. He is now president of Williamsburg Investment Company that syndicates his weekly financial column since 1999 to more than 300 newspapers and writes a financial market letter called Over My Shoulder that is quoted in Barron?s and many other publications. A 3-month trial subscription is available on his web site. He is a regular guest on several financial radio talk shows.

His favorite pastime is fishing.

Mr. Thomas is available for speaking engagements. Please call 321-453-5300 for more information.