I will open this blog with a recommendation to all people serious about trading or financial markets to read the book Market Wizards by Jack D Schwager. This is surely a must-read or as I refer to it as the Bible of trading.
The whole book is just a series of interviews with the most successful traders of the 1980’s and is very easy and entertaining to read. It was interesting to read that all traders was very successful using totally different strategies. However, looking back at the book, I found one common trait they all shared while making their millions or billions. They were all risk avert. That might be something to think about before you double your position during your next unsuccessful trade.
I will most certainly get back to this book later on, but today I will share some thoughtful advise given by these Market Wizards. Enjoy!
The most important rule of investing is to play great defense, not great offense. Every day I assume every position I have is wrong. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead. Always maintain your sense of confidence, but keep it in check.
-Paul Tudor Jones
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.
Many people actually want to lose on a subconscious level.
-Dr. Van K. Tharp
The realization that you are responsible for your results is the key to successful investing. Winners know they are responsible for their results; losers think they are not.
-Dr. Van K. Tharp
My Marine training helps in investing. They teach you never to freeze when you are under attack.
Investing is like poker. You should only play the good hands, and drop out of the poor hands, forfeiting the ante.
Fundamentals that you read about are typically useless as the market has already discounted the price. I call them funny-mentals. However, if you catch on early, before others believe, then you might have valuable surprise-a-mentals.
If you make 50% two years in a row and then lose 50% in the third year, you would actually be worse off than if you just put your money in a money market fund. Wait for something to come along that you know is right. Then take your profit, put it back in the money fund, and just wait again. You will come out way ahead of everybody else.
-James B. Rogers, Jr.
Most traders who fail have large egos and can’t admit that they are wrong. Even those who are willing to admit that they are wrong early in their career can’t admit it later on! Also, some traders fail because they are too worried about losing. I’m not afraid to lose. When you start being afraid to lose, you’re finished.
I hope you enjoyed some of these quotes from the book. Even if you learn only one thing from these masters, it may make the difference whether you will become a winner or loser in the end.
If you have not checked out “Are You a New Reader?” please do that and send me some feedback. Thanks!