Trading And Investment Quotes: “I Never Buy At The Bottom And I Always Sell Too Soon”

“I will tell you my secret if you wish.  It is this:  I never buy at the bottom and I always sell too soon.” – Baron Rothschild

One of the great quotes that often confuses new traders and investors is this quote by Baron Rothschild – “I never buy at the bottom and I always sell too soon.”

It doesn’t seem to make sense to people outside the market, because many new participants believe that you have to buy a stock as it is falling, or at the very bottom of its price in order to make money. 

Likewise, they will often come to you with grand tales of how they “sold their stock at the very top, just before it crashed”.  While this makes a good story, in the practice of every day trading it can be disastrous to think this way.  Why?

  • In order to buy at the very bottom or sell at the very top, one would have to be able to tell the future.
  • The problem is – no one can tell the future.  Not really (despite the many who claim to be able to do so).
  • The majority of gains, and the best quality of gains in a stock or market are made in the middle of a trend.
  • A stock or market’s movements are usually choppy at tops and bottoms, with smoother trends evolving in between.

Getting in the mindset of only buying at the top or bottom can also lead to damaging market psychology.  Whenever a trader tells me enthusiastically of their buy “at the very bottom” I always smile and nod.  I am happy for them this time, but the real market lessons will come to them eventually – and I can only hope that the market is not too harsh on them when they do.

A “Market Great” Quoting A “Market Great”

The quote originally came from the book “Reminiscences of a Stock Operator” by Edwin Lefevre, which chronicled the trading exploits of millionaire trader Jesse Livermore.

In the book, Jesse Livermore recalls an encounter with Baron Rothschild:

“Old Baron Rothschild’s recipe for wealth winning applies with greater force than ever to speculation.  Somebody asked him if making money in the Bourse was not a very difficult matter and he replied that, on the contrary, he thought that it was very easy… “I will tell you my secret if you wish.  It is this:  I never buy at the bottom and I always sell too soon.” “

And so the quote is now linked to Baron Rothschild.

What This Quote Means For Your Trading And Investing

Very simply, it means that good trends evolve over time.  If we have a trading or investment system that can recognize when a trend is changing, let it change and grab the middle of that trend and like Rothschild, we can be very successful.  If you do not have a trading or investment plan, then I strongly suggest you get or create one.  We also have tested trading and investment plans available at ASX Market Watch.

Read more on Investment Quotes: Ed Seykota: “Everybody Gets What They Want” and Four Things You Absolutely Must Have Before You Trade Or Invest (and it’s not a million dollars).

What Do You Think?  Share Your Experience Below.

Do you wait for the middle, or do you try and pick tops and bottoms?  What are your experiences in trading and investing before?  Share your experience in the comments below.

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November 12, 2011  Tags: , , , , ,   Posted in: Trading And Investment Quotes

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