The quotes listed below come from interviews Jack Schwager conducted with top Traders in his best seller Market Wizards.
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.
As I use the term, a ‘trader’ would be primarily concerned with which direction the stock market was heading, while an ‘investor’ would concentrate on selecting stocks with the best chance of outperforming the market overall.
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.
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.
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.
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.
Probably my best technique is not picking up the phone to close out a winning trade.
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.
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.
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. T
he 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.
(So you didn’t have a clear exit point) In other words, the only way you could stop trading was by losing.
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.”
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.
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.
My philosophy is that all stocks are bad. There are no good stocks unless they go up in price. If they go down instead, you have to cut your losses fast.
The secret for winning in the stock market does not include being right all the time.
I make it a rule to never lose more than 7 percent on any stock I buy. If a stock drops 7 percent below my purchase price, I will automatically sell it at the market – no second-guessing, no hesitation.
Some people say, “I can’t sell that stock because I’d be taking a loss.” If the stock is below the price you paid for it, selling doesn’t give you a loss; you already have it.
Letting losses run is the most serious mistake made by most investors.
With an individual stock, you absolutely have to have a stop-loss point, because you never know how far down the stock is going. I remember selling a $100 stock one time and it eventually went to $1. I didn’t have any idea it was going down that far, but what would have happened if I had held on to it? One mistake like that and you can’t come back.
The majority of unskilled investors stubbornly hold onto their losses when the losses are small and reasonable. They could get out cheaply, but being emotionally involved and human, they keep waiting and hoping until their loss gets much bigger and costs them dearly.
Investors cash in small, easy-to-take profits and hold their losers. This tactic is exactly the opposite of correct investment procedure. Investors will sell a stock with profit before they will sell one with a loss.
Commission costs of buying and selling stocks, especially through a discount broker, are a relatively minor factor, compared to more important aspects such as making the right decisions in the first place and taking action when needed. One of the great advantages of owning stock over real estate is the substantially lower commission and instant marketability and liquidity. This enables you to protect yourself quickly at a low cost or to take advantage of highly profitable new trends as they continually evolve.
Novice investors like to put price limits on their buy-and-sell orders. They rarely place market orders. This procedure is poor because the investor is quibbling for eighths and quarters of a point, rather than emphasizing the more important and larger overall movement. Limit orders eventually result in your completely missing the market and not getting out of stocks that should be sold to avoid substantial losses.
Some investors have trouble making decisions to buy or sell. In other words, they vacillate and can’t make up their minds. They are unsure because they really don’t know what they are doing. They do not have a plan, a set of principles, or rules to guide them and, therefore, are uncertain of what they should be doing.
The whole secret to winning in the stock market is to lose the least amount possible when you’re not right.
I like the Japanese philosophy where you ask questions rather than look for answers. The more questions you come up with the better. The answers will happen.
The more disciplined you can get, the better you are going to do in the market. The more you listen to tips and rumors, the more money you’re likely to lose.
My percentage of winners is only about 50/50, because I cut my losers very quickly. The maximum loss I allow is 7 percent, and usually I am out of a losing stock a lot quicker. I make my money on the few stocks a year that double and triple in price. The profits in those trades easily makes up for all the small losers.
If you really think the stock is going to make a big move – and that should be the only reason you are buying the stock to begin with – then there is no reason to haggle over an eighth of a point. Just buy the stock. The same thing applies to the downside; if you think the stock is going to drop, just sell it.
The single most important advice I can give anybody is: Learn from your mistakes. That is the only way to become a successful trader.
The marketplace is an arena and other traders are the adversaries.
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.
James B Rogers, Jr.
The first loss is the best loss.
The biggest mistake I made was having a specific target of what I wanted out of the trade.
I think there are a lot of people in this business who just enjoy watching others lose money.
I don’t believe anyone ever gets wiped out in the market because of bad luck; there is always some other reason for it. Either you were off when you did the trade, or you didn’t have the experience. There is always a mistake involved.
I have found that the greatest traders are the ones who are most afraid of the markets.
Don’t get too complacent once you have made profits. The toughest thing in the world is holding on to profits.
You have to learn how to lose; it is more important than learning how to win.
Limit losses quickly. Most traders hold on to their losses too long because they hope the loss will not get larger. They take profits too soon, because they fear the profit will diminish. Instead, traders should fear a larger loss and hope for a larger profit.
The best traders have no ego. To be a great trader, you have to have a big enough ego in the sense that you have confidence in yourself. You cannot let ego get in the way of a trade that is a loser; you have to swallow your pride and get out.
I realized that this chipping away approach was what I should be doing, not putting myself at big risk, trying to collect a ton of dough.
I always define my risk, and I don’t have to worry about it.
No matter what happens, I know my worst case. My loss is always limited.
The biggest problem with some traders is that they think they are bigger than the market. They don’t fear the market place, and they lose sight of their discipline.
If I have a bad day trading or a losing position I either liquidate it or neutralize it, because then I am back afloat. When you are in a boat that springs a leak, you don’t drill another hole to let the water out.
The quotes listed below are from Van K Tharp’s best seller Trade Your Way To Financial Freedom.
Van K Tharp
In my opinion, you do not have a trading system unless you know exactly when you will get out of the market position at the time you enter it.
Your worst-case exit, which is designed to preserve your capital, should be determined ahead of time.
In addition, you should also have some idea about how you plan to take profits and a strategy for letting your profits run.
People avoid looking for good exits because exits do not give them control over the market. However, exits do control something. They control whether you make a profit or a loss, and they control just how big that profit or loss will be. Since they do so much, perhaps they are worthy of a lot more study on the part of most people.
There are a lot of problems to solve with exits. If the worst case does not happen (i.e., so you don’t get stopped out), then the job of your system is to allow you to make the most profit possible and give the least amount of it back. Only your exits do this!
There are many different classifications of exits other than your initial stop loss. These include exits that produce a loss but reduce your initial risk, exits that maximize profits, and exits that keep you from giving back too much money, and psychological exits.
In order to maximize your profits (let them run), you must be willing to give some of them back.
In fact, the ironic part of system design is if you want to maximize profits, you must be willing to give back a great deal of the profits you have already accumulated.
You can’t make money if you’re not willing to lose. It’s like breathing in, but not being willing to breathe out. Various types of exits will help you do this (i.e., breathe fully), including trailing stops and the percent retracement stop.
There are four general categories of exits: 1. Exits that make your initial loss smaller; 2. Exits that maximize your profits; 3. Exits that minimize how much profit you give back; and 4. Psychological Exits.
Psychological factors always come into play in any sort of trading.
When you enter a position it is essential to know the point at which you will get out of the position in order to preserve your capital.
If you are risking over 3 percent of your trading capital then you are a ‘gunslinger’ and had better understand the risk you are taking for the reward you seek.
My first advice to anyone is to look to yourself as the source of everything that happens in your life.
Make a list of everything that can go wrong and determine how you will respond to that situation. That will be the key to your success – knowing how to respond to the unexpected.
J P Morgan
To be a money master, you must first be a self-master.
Investors are the big gamblers. They make a bet, stay with it, and if it goes the wrong way, they lose it all.
You’ve got to know when to hold ’em; know when to fold’em; know when to walk away; and know when to run.
Your protective stop is like a red light. You can go through it, but doing so is not very wise! If you go through town running every red light, you probably won’t get to your destination quickly or safely.
Just as it was tough when we were children to look under the bed or in a dark closet for night monsters, it’s equally tough to look at a loss and acknowledge it. It was easier to hide under the covers back then and now it’s easier to adopt some defense mechanism. (The one I hear most is ‘Oh, that trading rule doesn’t work!’ as if the entry strategy caused the loss.)
The quotes listed below are from Dr Alexander Elder’s best seller Trading For A Living.
Proper money management is essential for successful trading.
A disciplined trader cuts his losses short and outperforms a loser who keeps hanging on and hoping.
As soon as you buy, place a stop-loss order.
Greed and fear destroy traders by clouding their minds. The only way to succeed in trading is to use your intellect.
The goal of a successful trader is to make the best trades. Money is secondary. If this surprises you, think how good professionals in any field operate. Good teachers, doctors, lawyers, farmers and others make money – but they do not count it while they work. If they do, the quality of their work suffers.
Serious traders place stops the moment they enter a trade.
We all like to hope that a trade will succeed – and a stop is a piece of reality that prevents traders from hanging on to empty hope.
Learning to place stops is like learning to drive defensively.
A stop is not a perfect tool but it is the best defensive tool we have.
The quotes listed below come from interviews Jack Schwager conducted with top Traders in his best seller The New Market Wizards.
Jack D Schwager
Don’t trade when you can’t afford to lose. In fact there are few more certain ways of guaranteeing that you will lose than by trading money you can’t afford to lose. If your trading capital is too important, you will be doomed to a number of fatal errors.
Over concern about losing may even lead to staying with losing trades as fear triggers indecisiveness, much like a deer frozen in the glare of a car’s headlights.
Our natural instincts will mislead us in trading. Therefore, the first step in succeeding as a trader is reprogramming behaviour to do what is correct rather than what feels comfortable.
Combine your enthusiasm, energy, focus, devotion, and discipline to becoming the best trader you can be, but once you have done that, there is no point in agonizing over the details.
My current goals are to make a 30 percent return each year, with no peak-to-valley draw downs greater than 10 percent.
It was the same with all. They would not take a small loss at first but had held on, in the hope of a recovery that would “let them out even.” And prices had sunk and sunk until the loss was so great that it seemed only proper to hold on, if need be a year, for sooner or later prices must come back. But the break “shook them out,” and prices just went so much lower because so many people had to sell, whether they would or not.
The spectator’s chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you, you hope that every day will be the last day — and you lose more than you should had you not listened to hope — to the same ally that is so potent a success-bringer to empire builders and pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and you get out — to soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit.
It never was my thinking that made big money for me. It was always my sitting. Got that? My sitting tight!
Missing an opportunity is as bad as being on the wrong side of a trade. Some people say (after they have the opportunity to realize a profit) “I was only playing with the market’s money.” That’s the most ridiculous thing I ever heard.
When you’re in a losing streak, your ability to properly assimilate and analyze information starts to become distorted because of the impairment of the confidence factor, which is a by-product of a losing streak. You have to work very hard to restore that confidence, and cutting back trading size helps achieve that goal.
I don’t have a problem letting my profits run, which many traders do. You have to be able to let your profits run. I don’t think you can consistently be a winner trading if you’re banking on being right more than 50 percent of the time. You have to figure out how to make money by being right only 20 to 30 percent of the time.
Successful traders constantly ask themselves: What am I doing right? What am I doing wrong? How can I do what I am doing better? How can I get more information? Courage is a quality important to excel as a trader. It’s not enough to simply have the insight to see something apart from the rest of the crowd, you also need to have the courage to act on it and stay with it.
It’s very difficult to be different from the rest of the crowd the majority of the time, which by definition is what you’re doing if you’re a successful trader.
So many people want the positive rewards of being a successful trader without being willing to go through the commitment and pain. And there’s a lot of pain.
Avoid the temptation of wanting to be completely right.
When the trade is easy, I want to be in, and when it isn’t I want to be out. In fact that is part of my general philosophy on trading: I want to catch the easy part.
I never try to buy a bottom or sell a top. Even if you manage to pick the bottom, the market can end up sitting there for years and tying up your capital. You don’t want to have a position before a move has started.
Too many traders try and put their own opinion of what will happen before the market action.
When I get hurt in the market, I get the hell out. It doesn’t matter at all where the market is trading. I just get out, because I believe that once you’re hurt in the market, your decisions are going to be far less objective than they are when you’re doing well. If you stick around when the market is severely against you, sooner or later they are going to carry you out.
I’ll keep reducing my trading size as long as I’m losing… My money management techniques are extremely conservative. I never risk anything approaching the total amount of money in my account, let alone my total funds.
You have to be more concerned about the moves you’re in than the moves you’re not in.
You must get out of your losses immediately. It’s not merely a matter of how much you can afford to risk on a given trade, but you also have to consider how many potential future winners you might miss because of the effect of the larger loss on your mental attitude and trading size.
Nowadays, the breakouts that work look similar to the breakouts that are sucker plays. In fact, the false breakouts probably outnumber the valid signals.
Every trader is going to have tons of winners and losers. You need to determine why the winners are winners and the losers are losers.
The most important advice I have for traders is to never let a loser get out of hand.
I take the point of view that missing an important trade is a much more serious error than making a bad trade.
Buying on retracement is psychologically seductive because you feel you’re getting a bargain versus the price you saw a while ago. However, I feel that approach contains more than a drop of poison.
You shouldn’t plan to risk more than 2 percent on a trade. Although, of course, you could still lose more if the market gaps beyond your intended point of exit.
I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.
The answer to the question of whether trading can be taught has to be an unqualified yes. Anyone with average intelligence can learn to trade. This is not rocket science.
If you bring normal human habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose.
Watch idly while profit-taking opportunities arise, but in adversity run like a jackrabbit.
One adage that is completely wrongheaded is that you can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke taking large losses, professionals go broke by taking small profits.
What feels good is often the wrong thing to do.
Human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.
Two of the cardinal sins of trading – giving losses too much rope and taking profits prematurely – are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance.
Don’t think about what the market’s going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there.
It is a common notion that after you have profits from your original equity, you can start taking even greater risks because now you are playing with “their money”. We are sure you have heard this. Once you have profit, you’re playing with “their money”. It’s a comforting thought. It certainly can’t be as bad to lose “their money” as “yours”? Right? Wrong. Why should it matter whom the money used to belong to? What matters is who it belongs to now and what to do about it. And in this case it all belongs to you.
The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading… I know this will sound like a cliche, but the single most important reason that people lose money in the financial markets is that they don’t cut their losses short.”
Don’t worry about what the markets are going to do, worry about what you are going to do in response to the markets.
The single most important element to being successful in the markets is having a plan. First, a plan forces discipline, which is an essential ingredient to successful trading. Second, a plan gives you a benchmark against which you can measure your performance.
It’s important to distinguish between respect for the market and fear of the market. While it’s essential to respect the market to assure preservation of capital, you can’t win if you’re fearful of losing. Fear will keep you from making correct decisions.
There is no question about what to do because one of my risk management rules is that if we lose more than 1.5 percent of our total equity on any given trade we get out.
If we’re down 4 percent on a single day, we close out all positions and wait until the next day to get into anything.
The market is not a personal thing; it is not trying to get me. I try to keep my anger in check as much as possible because I believe that to be a good trader it’s very important to be rational and have your emotions under control.
I try to be conservative in my risk management. I want to make sure I’ll be around to play tomorrow.
We have a maximum loss point of 10 percent per month. If we ever lost that amount, we’d exit all our positions and wait until the start of the next month to begin trading again.
At the beginning of each month, I determine the maximum position size that I’m willing to take in each market, and I don’t exceed that limit, regardless of how bullish or bearish I get. This rule keeps me in check.
The traits of a successful trader are that they are rational, analytical, able to control emotions, practical, and profit oriented.
Most small speculators bet too much on their trades.
If you have an approach that makes money, then money management can make the difference between success and failure… … I try to be conservative in my risk management. I want to make sure I’ll be around to play tomorrow. Risk control is essential.
My current goals are to make a 30 percent return each year, with no peak-to-valley draw downs greater than 10 percent.
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.
A professional trader; a world class expert in technical analysis, and a practicing psychiatrist. He believes that successful trading is based on three M’s: Mind, Method, and Money. He was born in Leningrad and grew up in Estonia where he entered medical school at the age of 16. At 23, while working as a ship’s doctor, he escaped from a Soviet ship in Africa and received political asylum in the USA. He continued to work as a psychiatrist in New York City, served as book editor of The Psychiatrist Times, and taught at Columbia University. After becoming involved in financial trading, he published over 50 articles, software, and book reviews and speaks at many conferences. In 1988 he founded Financial Trading Seminars, Inc an educational firm for traders. He is best known for his modern classic ‘Trading for a Living’.
Beginning with $12,000 left to him by his grandmother, he built it up to over $250,000 in four years. For eight years he worked for Salomon Brothers and it is estimated that during this time he was responsible for in excess of one-half billion dollars.
May well be the world’s largest trader in the inter-bank currency and futures markets. In 1987 alone, he scored profits in excess of $300 million for himself and the fortunate investors in his funds. Two thousand dollars invested with Kovner in early 1978 was worth over $1,000,000 ten years later.
In 1982 he began working for William O’Neil and in 1985 achieved a degree of fame when he won the US Investing Championships held by Stanford University Professor Norm Zadeh, where he returned a phenomenal 161 percent for the year. He followed this up with a 160 percent return in 1986 and another triple digit return in 1987. For the three years as a whole his compounded return was a remarkable 1,379 percent.
One of the best traders of our time. Realized an astounding 250,000 % return on his accounts over 16 years. (normalized for withdrawals, the account theoretically was up several million percent)
Starting with $1,000 and only able to trade one contract, his success (trading size) became so great that he had grown to the point that government established speculative limits became an impediment to his trading.
One of the original Turtles he has averaged 34 percent since he began trading in 1984.
Jack D Schwager
After earning an MA in economics at Brown University, Schwager began working as a commodity research analyst and has spent his entire career as a market analyst. He is the author of the critically acclaimed ‘A Complete Guide to the Futures Markets’ and has written widely for many publications. He is also a frequent seminar speaker where he lectures on a range of analytical topics. He is best known for his two publications ‘Market Wizards’ and ‘The New Market Wizards’, in which he gets financial wizards to share their insights. It has been said that Market Wizards is one of the most fascinating books ever written about Wall Street.
James B Rogers, Jr.
Began trading in 1968 with $600. In 1973, he formed the Quantum Fund with partner George Soros, which proved to be one of the best-performing hedge funds, an din 1980 having amassed a small fortune he retired.
Wrote an all time classic ‘How to Trade in Stocks’ One of the old breed who became a legend in his own time.
Has written two great books – ‘Campaign Trading: Tactics and Strategies to Exploit the Markets’ and ‘Maximum Adverse Excursion’
Joseph Marshall Wade
The famous Country and Western singer.
Began with $2 million equity under management and 8 years later had turned this into $800 million.
Beginning with a considerable string of losses he claims that his win ratio is now in the vicinity of 99 percent.
Has scored enormous percentage gains in every year since he turned full time trader in 1979, but he has done so without ever losing more than 3 percent of his equity on a month-end to month-end basis. In the US Investing Championships held by Stanford University Professor Norm Zadeh his performance was nothing short of astounding. In nine of the ten four-month trading championships he entered, he made more money than all the other traders combined. His average return in these nine contests was 210 percent – non annualized! In his single entry in a one-year contest, he scored a 781 percent return.
One of the original Turtles he averaged 57 percent annually. Was a member of the creative management team of TSR, the game company of Dungeons and Dragons fame.
Over a ten year period, he multiplied his company account by an incredible 2,500 fold. He turned a $30,000 account into $80 million.
One thousand dollars invested with him in 1967 grew to over $93,000 by 1988. To put it in perspective the same $1,000 invested in a basket of S&P stocks would have only grown to $6,400.
Over a five year period he has averaged a return of 67 percent, astoundingly his lowest drawdown during this period was just over 8 percent, with profitability being registered for 87 percent of all months.
Paul Tudor Jones
Has accomplished what many though impossible: combined five consecutive, triple-digit return years with very low equity retracement. Took a $1.5 million account in 1984 to $330 million account in 1988.
Conservative estimates have placed his cumulative earnings in the tens of millions.
Began with $400 and turned it into a fortune estimated to approach $200 million. Perhaps the best-known futures speculator of our time.
Left a managerial job at a meatpacking plant with $25,000 in hand and now trades up to $2 billion worth of T-bond futures in a day!
A successful trader in the sense that he is a very profitable trader while maintaining complete peace of mind and experiencing great joy.
Strung together seventy consecutive months of profits exceeding $100,000. Only the rare trader can boast both occasional dramatic gains and consistent trading profits.
Van K Tharp
A coach for traders and investors since 1982 and the founder and president of International Institute of Trading Mastery. It is goal to help people become the best traders and investors possible – overcoming problems in everything from system development to self-sabotage to success related issues. He has a PhD in psychology and is a Master Practitioner in Neuro Linguistic Programming (NLP). He has collected over 5000 successful trading profiles by studying and researching individual traders and investors, including many of the top traders and developers in the world. He is the only trading coach featured in ‘The Market Wizards: Interviews with Great Traders.’ He has also written many books and articles with ‘Trade Your Way To Financial Freedom’ being recognized as a modern classic.
Partner of perhaps the best-known futures speculator of our time, Richard Dennis. Created the famous trading group known as the Turtles. Has averaged over 62 percent return.
In 1962 he pyramided profits in three exceptional back-to-back trades and parlayed an initial $5,000 investment into $200,000.