How I Trade and Invest in Stocks and Bonds

“How I Trade and Invest in Stocks and Bonds” was originally published in 1924 and is a crystallisation of Richard Wyckoff’s thirty-three years Wall Street experience. The quote on the book cover highlights the key of Richard’s approach: “We succeed in proportion to the amount of energy and enterprise we use in going after results.”

Followings are Richard Wyckoff’s conclusions with regard to the business of trading and investing:

1. Both my primary and my ultimate object is the safe and profitable investment of my funds. It is best to use only a small part of the total available capital for trading. Trading profits should be used to increase the principal sum which is invested in income-bearing securities, preferably those which will grow in market value. Income from such investments should be made to compound itself by re-investing it as received.
2. If one is not adapted to trading he should prove it to his own satisfaction and then abandon the business. He should then attempt to become an intelligent and successful investor.
3. One’s capital should be made to do the greatest service in the shortest length of time. The question which one should ask himself with relation to all of the securities which he holds, is this: Are there any other issues which will work for me more profitably and in a shorter time than these?
4. The cultivation of foresight is most essential. It is the man with the greatest amount of foresight who is most successful in the security market. Foresight is the very essence of speculation. Without the use of it a person is not speculating at all – he is merely taking chances – gambling.
5. It is better to depend on your own judgment than on that of any other person. The kind of money which does you the most good is that which you make through your own efforts.
6. The longer your experience, the better background you have for comparison, and the greater your ability to judge and forecast correctly. You cannot go into any phase of endeavor and make money or become prominent “just like that”- you must serve your apprenticeship.

Richard Wyckoff also summarised his trading principles as follows:

1. The main factor is the trend.
2. Risk should almost invariably be limited.
3. Anticipated profits should be at least three or four times the amount of the risk.
4. One should be able to deal freely on both sides of the market.
5. Dealings should be in the active stocks.
6. You should either make a business of trading or else not try to be a trader.