Post feedA Tribute To Market Wizards
I have always been under the assumption that if you are trying to learn a new skill, or really want to accel in a subject, that you surround yourself with individuals who have mastered this skill. Since we are all trying to learn how to become better traders, each week I read a quote from someone who is considered to be a master of this skill. Jack Schwager is the author of a series of books (Market Wizards, New Market Wizards, Stock Market Wizards, etc.) in which he conducts interviews with these "Market Wizards." Here is a running list of the quotes I have used in my "Master Talk" presentations every Wednesday night and their respective authors.
5.24.06
“You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael Marcus taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.”
“Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I'm getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis. I never think about other people who may be using the same stop, because the market shouldn't go there if I am right.”
“Place your stops at a point that, if reached, will reasonably indicate that the trade is wrong, not at a point determined primarily by the maximum dollar amount you are willing to lose.”
“If you personalize losses, you can't trade.”
~ Bruce Kovner
6.14.06
“The word 'trading' is not the way I think of things. I may be a trader in the sense that my frequency of transactions is relatively high, but the word 'investing' would apply just as much, if not more. In my mind, trading implies an anticipation of a sale at the time of purchase. Good trading is a peculiar balance between the conviction to follow your ideas and the flexibility to recognize when you have made a mistake. The balance between confidence and humility is best learned through extensive experience and mistakes. There should always be respect for the person on the other side of the trade. Always ask yourself: Why does he want to sell? What does he know that I don't? All great traders are seekers of truth. The markets are always changing, and the successful trader needs to adapt to these changes.”
~Michael Steinhardt
6.15.06 (AIT)
“If you can't take a small loss, sooner or later you will take the mother of all losses. There are old traders and there are bold traders, but there are very few old, bold traders. Dramatic and emotional trading experiences tend to be negative. Pride is a great banana peel, as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions. I prefer not to dwell on past situations. I tend to cut bad trades as soon as possible, forget them, and then move on to new opportunities. The elements of good trading are: 1. Cutting losses, 2. Cutting losses, and 3. Cutting losses. If you can follow these three rules, you may have a chance. Trying to trade during a losing streak is emotionally devastating. Trying to play "catch up" is lethal. I set protective stops at the same time I enter a trade. I normally move these stops in to lock in a profit as the trend continues. One evening, while having dinner with a fundamentalist, I accidentally knocked a sharp knife off the edge of the table. He watched the knife twirl through the air, as it came to rest with the pointed end sticking into his shoe. "Why didn't you move your foot?" I exclaimed. "I was waiting for it to come back up," he replied. Losing a position is aggravating, whereas losing your nerve is devastating.”
~Ed Seykota
6.21.06
“Throughout my financial career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don't take a hard look at risk, it will take you. If you argue with the market, you will lose. It is incredible how rich you can get by not being perfect. Never risk more than 1% of your total equity in any one trade. By risking 1%, I am indifferent to any individual trade. Keeping your risk small and constant is absolutely critical. I have two basic rules about winning in trading as well as in life: 1. If you don't bet, you can't win. 2. If you lose all your chips, you can't bet. Frankly, I don't see markets. I see risks, rewards, and money.”
~ Larry Hite
7.5.06
“I realized that every time I had a loss, I needed to learn something from the experience and view the loss as tuition at the College of Trading. As long as you learn something from a loss, it's not really a loss. Stop looking at losses as problems and start viewing them as opportunities to elevate yourself to the next plateau. Develop the concept of never taking a trade that would jeopardize your ability to continue trading. I manage to stay composed because I know that the risk and volatility in my portfolio is exactly the same as it was yesterday, last week, and last month. So why should I let my emotions go up and down if I'm in exactly the same exposure all the time? Think of each trade as one of the next one thousand trades you are going to make. If you start thinking in terms of the next one thousand trades, all of a sudden you've made any single trade seem very inconsequential. Who cares if a particular trade is a winner or a loser? It's just another trade. I think investment psychology is by far the more important element, followed by risk control, with the least important consideration being the question of where you buy and sell.”
~Tom Basso
7.12.06
“I turned from a loser to a winner when I was able to separate my ego needs from making money. When I was able to accept being wrong. Before that, admitting I was wrong was more upsetting than losing the money. When I became a winner I went from 'I figured it out, therefore it can't be wrong' to 'I figured it out, but if I'm wrong, I'm getting the hell out, because I want to save my money and go on to the next trade.' By living the philosophy that my winners are always in front of me, it is not so painful to take a loss. If I make a mistake, so what! My attitude is: Never risk your family's security. Whenever you get hit, you are very upset emotionally. Most traders try to make it back immediately; they try to play bigger. Whenever you try to get all your losses back at once, you are most often doomed to fail. After a devastating loss, I always play very small and try to get black ink, black ink. It's not how much money I make, but just getting my rhythm and confidence back. Before taking a position always know the amount you are willing to lose. The most important thing is money management, money management, money management. Anybody who is successful will tell you the same thing. I always take my losses quickly. That is probably the key to my success. The best advice I can give to the ordinary guy trying to become a better trader is learn to take losses. The most important thing in making money is not letting your losses get out of hand.”
~Marty Schwartz
5.24.06
“You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael Marcus taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.”
“Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I'm getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis. I never think about other people who may be using the same stop, because the market shouldn't go there if I am right.”
“Place your stops at a point that, if reached, will reasonably indicate that the trade is wrong, not at a point determined primarily by the maximum dollar amount you are willing to lose.”
“If you personalize losses, you can't trade.”
~ Bruce Kovner
6.14.06
“The word 'trading' is not the way I think of things. I may be a trader in the sense that my frequency of transactions is relatively high, but the word 'investing' would apply just as much, if not more. In my mind, trading implies an anticipation of a sale at the time of purchase. Good trading is a peculiar balance between the conviction to follow your ideas and the flexibility to recognize when you have made a mistake. The balance between confidence and humility is best learned through extensive experience and mistakes. There should always be respect for the person on the other side of the trade. Always ask yourself: Why does he want to sell? What does he know that I don't? All great traders are seekers of truth. The markets are always changing, and the successful trader needs to adapt to these changes.”
~Michael Steinhardt
6.15.06 (AIT)
“If you can't take a small loss, sooner or later you will take the mother of all losses. There are old traders and there are bold traders, but there are very few old, bold traders. Dramatic and emotional trading experiences tend to be negative. Pride is a great banana peel, as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions. I prefer not to dwell on past situations. I tend to cut bad trades as soon as possible, forget them, and then move on to new opportunities. The elements of good trading are: 1. Cutting losses, 2. Cutting losses, and 3. Cutting losses. If you can follow these three rules, you may have a chance. Trying to trade during a losing streak is emotionally devastating. Trying to play "catch up" is lethal. I set protective stops at the same time I enter a trade. I normally move these stops in to lock in a profit as the trend continues. One evening, while having dinner with a fundamentalist, I accidentally knocked a sharp knife off the edge of the table. He watched the knife twirl through the air, as it came to rest with the pointed end sticking into his shoe. "Why didn't you move your foot?" I exclaimed. "I was waiting for it to come back up," he replied. Losing a position is aggravating, whereas losing your nerve is devastating.”
~Ed Seykota
6.21.06
“Throughout my financial career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don't take a hard look at risk, it will take you. If you argue with the market, you will lose. It is incredible how rich you can get by not being perfect. Never risk more than 1% of your total equity in any one trade. By risking 1%, I am indifferent to any individual trade. Keeping your risk small and constant is absolutely critical. I have two basic rules about winning in trading as well as in life: 1. If you don't bet, you can't win. 2. If you lose all your chips, you can't bet. Frankly, I don't see markets. I see risks, rewards, and money.”
~ Larry Hite
7.5.06
“I realized that every time I had a loss, I needed to learn something from the experience and view the loss as tuition at the College of Trading. As long as you learn something from a loss, it's not really a loss. Stop looking at losses as problems and start viewing them as opportunities to elevate yourself to the next plateau. Develop the concept of never taking a trade that would jeopardize your ability to continue trading. I manage to stay composed because I know that the risk and volatility in my portfolio is exactly the same as it was yesterday, last week, and last month. So why should I let my emotions go up and down if I'm in exactly the same exposure all the time? Think of each trade as one of the next one thousand trades you are going to make. If you start thinking in terms of the next one thousand trades, all of a sudden you've made any single trade seem very inconsequential. Who cares if a particular trade is a winner or a loser? It's just another trade. I think investment psychology is by far the more important element, followed by risk control, with the least important consideration being the question of where you buy and sell.”
~Tom Basso
7.12.06
“I turned from a loser to a winner when I was able to separate my ego needs from making money. When I was able to accept being wrong. Before that, admitting I was wrong was more upsetting than losing the money. When I became a winner I went from 'I figured it out, therefore it can't be wrong' to 'I figured it out, but if I'm wrong, I'm getting the hell out, because I want to save my money and go on to the next trade.' By living the philosophy that my winners are always in front of me, it is not so painful to take a loss. If I make a mistake, so what! My attitude is: Never risk your family's security. Whenever you get hit, you are very upset emotionally. Most traders try to make it back immediately; they try to play bigger. Whenever you try to get all your losses back at once, you are most often doomed to fail. After a devastating loss, I always play very small and try to get black ink, black ink. It's not how much money I make, but just getting my rhythm and confidence back. Before taking a position always know the amount you are willing to lose. The most important thing is money management, money management, money management. Anybody who is successful will tell you the same thing. I always take my losses quickly. That is probably the key to my success. The best advice I can give to the ordinary guy trying to become a better trader is learn to take losses. The most important thing in making money is not letting your losses get out of hand.”
~Marty Schwartz
Hello Jeff Kohler, Long time reader, first time poster. Can you please tell me, do you teach personal training sessions. And do you know what is heating up on the big chart?
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7/25/2006 02:14:00 PM