Quotes from the Good & the Great of Trading

I was rummaging around my trading stuff and found a selection of quotes from the Good & the Great of Trading. I probably got it from here in the first place, I really can’t remember, but as the shelf-life of any post is rather short I thought it might be useful to post (re-post?) some of these quotes for the benefit of newer members who may not have seen them before. I wouldn’t normally have bothered taking up mine or anyone else’s time with this, but, with the exception of a very, very few threads, it’s all a bit Summer Doldrums at the moment on t2w and quite lacklustre so I’m guessing bods may have a little extra ‘t2w-capacity’ available.

Rather than just dump the lot which will probably just get a quick skim and then be forgotten, I’ll drop them into this thread as and when I remember and when I get time. That method will also fit with the other tendency of this site and perhaps all sites such as this (see shelf-life above) for shorter posts to get more of a review than longer ones. If sound-bite are the way to go…

If any of these promote debate & discussion – great. But for the most part they will be self-evident to those that already trade consistently successfully, and commonsense to those yet to achieve that happy condition. But as has been said many times, commonsense is far from common and even I at my elevated level of wondrousness found many of their points fresh and worth a deeper ponder. I don’t know whether it’s the restatement by those who are known to have done the hard yards of that which I’ve found myself to be the case or my deepening Alzheimer condition that causes this surprise at stuff I’m pretty sure I’ve read before (maybe I just skimmed it the first time too…), but in any event, hope you find some of them useful.

Joseph Marshall Wade

If I wanted to become a tramp, I would seek information and advice from the most successful tramp I could find. If I wanted to become a failure, I would seek advice from men who had never succeeded. If I wanted to succeed in all things, I would look around me for those who are succeeding and do as they have done.

Jack D Schwager

Trading provides one of the last great frontiers of opportunity in our economy. It is one of the very few ways in which an individual can start with a relatively small bankroll and actually become a multimillionaire. Of course, only a handful of individuals succeed in turning this feat, but at least the opportunity exists. A rigid stop-loss rule is an essential ingredient to the trading approach of many successful traders. Winning streaks lead to complacency, and complacency leads to sloppy trading.

Michael Marcus

Taking advantage of potential major winning trades is not only important to the mental health of the trader but is also critical to winning. Letting winners ride is every bit as important as cutting losses short. If you don't stay with your winners, you are not going to be able to pay for the losers. In addition to not overtrading, it is important to commit to an exit point on every trade. Protective stops are very important because they force this commitment on the trader.

Justin Mamis, "The Nature of Risk"

The anxiety-ridden don't quite believe what they already know; the wrenching conflict between avoidance and the need to know more stems from fear

how wide across is the chasm I've got to leap?

The stock market itself makes matters worse. "I wouldn't believe a hot tip if God himself told me, unless I saw it on the tape."

What becomes known to you and me can almost automatically be assumed to be late information. Who's going to call us first?

Because of that, even "true" information may already have been acted on by insiders so that the market usefulness of that information is nil, despite the validity.

Justin Mamis, "The Nature of Risk"

Justin Mamis, "When to Sell"

There is no rule that says you always have to have action; yet that is perhaps the most disastrous of all the common errors we noticed.

Rather than continually confronting the market on its own often inscrutable terms, stop and ask yourself what you know, whether what you know is enough to act upon, and how you are relating to it. Maybe it is a period when the market's personality conflicts with yours, or something in your extra-market life is hampering your ability to view stock action objectively, or, simply, perhaps it's a time when the markets course isn't clear to anyone.

Then it is best to step aside. You owe it to yourself to find out exactly how ready and able you are to play, because it's yourself you end up playing against.

Justin Mamis, "When to Sell"

Bruce Kovner

Michael Marcus taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael 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.

Richard Dennis

When things go bad, traders shouldn't stick their head in the sand and just hope it gets better. You should always have a worst-case point. The only choice should be to get out quicker. The worst mistake a trader can make is to miss a major profit opportunity. 95 percent of profits come from only 5 percent of the trades.

Jerry Parker

Probably my best technique is not picking up the phone to close out a winning trade.


{TheBrambles Comment: OK, we not necessarily 'the phone' these days, but you get the guy's drift)

Bernard Baruch

Show me the charts, and I'll tell you the news. Have an opinion on what the market should do but don't decide what the market will do. Be happy with a percentage of the move.

I, Nicholas Leeson, have just lost 50 million quid, in one day!

Donald Sliter S&P futures trader

"It's a matter of understanding strength and weakness." To elaborate, he said "I scalp to the long side if we're (S&P) trading strong to the Dow. I scalp to the short side if we're trading weak to the Dow."

Jesse Livermore:

"Always sell what shows you a loss and keep what shows you a profit.

You cannot try to force the market into giving you something it does not have to give.

The courage in a speculator is merely the confidence to act on the decision of his mind

A loss never bothers me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does the damage to the pocketbook and to the soul.

The trend is evident to a man who has an open mind and reasonably clear sight. It is never wise for a speculator to fit his facts to his theories.

In a narrow market when price moves within a narrow range, the thing to do is to watch the market, read the tape to determine the limits of prices, and make up your mind that you will not take an interest until the price breaks through the limit in either direction.

You watch the market with one objective: to determine the direction of price tendency.
Prices, like everything else, move along the line of least resistance.

In the long run, commodity prices are governed but by one law – the economic law of supply and demand.

Have a profit – forget it! Have a loss forget it even quicker!

It was never my thinking that made the big money for me. It was my sitting, my sitting tight.

There is only one side to the stock market and it is not the bull side or the bear side, but the right side."

BSD said:

Jesse Livermore:
A loss never bothers me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does the damage to the pocketbook and to the soul.

Click to expand...

Learn that - save a fortune!

"The time to buy is when there's blood in the streets."

n rothschild

Paul Tudor Jones

That cotton trade was almost the deal breaker for me. It was at that point that I said, "Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?" I had to learn discipline and money management. I decided that I was going to become very disciplined and businesslike about my trading. I spend my day trying to make myself as happy and relaxed as I can be. If I have positions going against me, I get right out; if they are going for me, I keep them. I am always thinking about losing money as opposed to making money. Risk control is the most important thing in trading. I keep cutting my position size down as I have losing trades. When I am trading poorly, I keep reducing my position size. That way, I will be trading my smallest position size when my trading is worst. If I have positions going against me, I get right out; if they are going for me, I keep them... Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in. There is nothing better than a fresh start. The most important rule of trading is to play great defense, not great offense. Every day I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum possible draw down. Hopefully, I spend the rest of the day enjoying positions that are going in my direction. If they are going against me, then I have a game plan for getting out. Don't be a hero. Don't have an ego. Always question yourself and your ability. Don't ever feel that you are very good. The second you do, you are dead. I know that to be successful, I have to be frightened. Don't focus on making money; focus on protecting what you have.

Gary Bielfeldt

The most important thing is to have a method for staying with your winners and getting rid of your losers. By having thought out your objective and having a strategy for getting out in case the market trend changes, you greatly increase the potential for staying in your winning positions. The traits of a successful trader: The most important is discipline - I am sure everyone says that. Second, you have to have patience; if you have a good trade on, you have to be able to stay with it. Third, you need courage to go into the market, and courage comes from adequate capitalization. Fourth, you must have a willingness to lose; that is also related to adequate capitalization. Fifth, you need a strong desire to win. You have to have the attitude that if a trade losses, you can handle it without any problem and come back to do the next trade. You can't let a losing trade get to you emotionally. If a trade doesn't look right, I get out and take a small loss.

Ed Seykota

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. I intend to risk below 5 percent on a trade, allowing for poor executions. The trading rules I live by are: 1. Cut losses. 2. Ride winners. 3. Keep bets small. 4. Follow the rules without question. 5. Know when to break the rules. Be sensitive to subtle differences between 'intuition' and 'into wishing'. Everybody gets what they want out of the market. "The "aha!" process lies at the heart of price change. For instance, consider the series: OTTFFSSE. What is the next letter? This puzzle creates tension - until you see the first letters of the ordinal numbers - one, two. "Aha!" you say. A lot happens during an "aha." The puzzle dies and the tension dissipates. A societal "aha!" drives price. Read the newspapers and the news magazines during a major move. At first, no one gets why the move is happening. There's a lot of confusion. Part of the move's way up, some people get it. At the end, everybody gets it. The tension is resolved and the move ends."

Burton G. Malkiel

Curiously, however, the broken technician is never apologetic about his method. If anything, he is more enthusiastic than ever. If you commit the social error of asking him why he is broke , he will tell you quite ingeniously that he made the all-too-human erroe of not believing his own charts. To my great embarassement, I once choked conspicuously at the dinner table of a chartist fiend of mine when he made such a comment. I have since made it a rule o never eat with a chartist. It`s bad for digestion.

TheBramble

Go back to basics. Look at the charts, with whatever indicators you want to be using and just LOOK. Simple stuff like lower lows, lower highs or higher lows, higher highs. If you can’t see them – they’re not there. If you can see them –what is that telling you? They’re giving you direction, entry, S&R and exit points. How much more could you ask for?