Jim Cramers Real Money Sane Investing In An Insane World
Where greed and hope abound, fear is close by. It is faced daily in the markets. Fear of losing money, fear of making a stupid error, fear of looking foolish in the eyes of peers. Probably the most effective way of controlling fear is by sacrificing a portion of profit. The old adage—bears win, bulls win, hogs lose—comes into play. You can limit some market fear by not trying to pick tops or bottoms. If you are riding a bull market to seventh heaven, get off at the sixth cloud. Take your profits and bank them. Or you can hedge your position. If you are into a large position on the long side, consider buying some puts that are near in-the-money as protection. This is not a sign of weakness. It is a sound business decision. Another suggestion is to continually take excess profits out of your account. Then, when you do have a drawdown, it is not as crushing. You still have profits to show. You don't feel as threatened, and fear doesn't overwhelm you.
Futures trading is a very personal challenge. To check your preparedness, complete the Financial-Psychological Worksheet in Figure 1.1.
Financial Psychological Worksheet
1. Never invest more than you can afford to lose in highly speculative investments such as futures and options trading. Don't invest more than 10 percent of net liquid assets (those that are cash or can be converted to cash within 24 hours) in the futures market. And don't put more than 10 percent of this 10 percent amount in any one position.