ZF Capital

We must be cynics when reading the tape. I do not mean that we should be pessimists, because we must have open minds always, without preconceived opinions. An inveterate bull, or bear, cannot hope to trade successfully. The long-pull investor may never be anything but a bull, and, if he hangs on long enough, will probably come out all right. But a trader should be a cynic. Doubt all before you believe anything. Realize that you are playing the coldest, bitterest game in the world.

– Humphrey Neill, Tape Reading & Market Tactics

Charts do not say anything; rather, on them are traced the results of human opinions. Charts do not cause movements in stock prices, but are aids by which trained minds may judge what will be the effect of previous moves.

– Humphrey Neill, Tape Reading and Market Tactics

This counsel may be the most important I can suggest: trade alone. Close your mind to the opinions of others; pay no attention to outside influences. Disregard reports, rumors, and idle board-room chatter. If you are going to trade actively, and are going to employ your own judgment, then, for heaven’s sake, stand or fall by your own opinions.

If you wish to follow someone else, that is all right; in that case, follow him and do not interject your own ideas. He must be free to act as he thinks best; just so must you when trading on your own initiative.

– Humphrey Neill, Tape Reading & Market Tactics

Do not plunge or become overextended. This is worn-out advice, I know, but margin and capital worries warp your judgment and hamper your trading skill. When you think you have become familiar with technical action and can interpret market movements– and can take losses quickly!– not until then should you speculate with larger lines of stocks. There is no disgrace in being a small trader, and the market will remain open for business for a good many years to come.

– Humphrey Neill, Tape Reading and Market Tactics

Perhaps desire to squeeze the last point out of a trade is the most difficult to fight against. It is also the most dangerous. How often has it happened in your own case that you have entered a commitment with a conservatively set goal which your judgment has told you was reasonable, only to throw over your resolutions when your stock has reached that point, because you thought, “there were four more points in the move?” The irony of it is that seemingly nine times out of ten (I know, for it has happened with me) the stock does not reach your hoped-for objective; then– to add humiliation to lost profits– it goes against you for another number of points; and, like as not, you end up with no profit at all, or a loss.

– Humphrey Neill, Tape Reading and Market Tactics

In the last analysis, it may be stated that charts are aids, to be used by the intelligent trader or investor, along with many other important means, as guides to market sentiment.

On the other hand, charts are full of dynamite and can cause crushing losses, if blindly followed by the inexperienced who do not realize that, inasmuch as human nature is not constant, there can be no system which is infallible.

Mechanical forecasting will never take the place of intelligent judgment.

– Humphrey Neill, The Art of Contrary Thinking

Have no public opinions of your own, when asked; and ask for none. If you get into the habit of giving opinions you are inviting an argument at once. You may talk yourself out of a decision which was correct; you will become wishy-washy in your conclusions, because you will be afraid of giving an opinion which may turn out wrong. Soon you will be straddling the fence in your own mind; and you cannot make money in trading unless you can come to a decision.

– Humphrey Neill, Tape Reading & Market Tactics