Tuesday, June 18, 2013

Some quick nuggets to chew on

There are a whole bunch of well known quotes that have been repeatedly written, blogged or tweeted, that relate to successful trading (some of these below I have referred to myself in previous posts). And there is a good reason for this - because what these famous traders say forms the cornerstone of how they approach the markets, in particular their mindset and approach to risk.

There can be a temptation among inexperienced traders to shrug off these words of wisdom, and simply look for some thermo-nuclear power indicator, or some other holy grail. But they simply don't exist.

However, if you can incorporate these nuggets into your own approach and thought processes, then you will have learned from the best, and given yourself the best chance of succeeding.

"A trader should have no opinion. The stronger your opinion, the harder it is to get out of a losing position." - Paul Rotter

"It’s OK to be wrong; it’s unforgiving to stay wrong." - Martin Zweig

"Experienced traders control risk, inexperienced traders chase gains." - Alan Farley

"The less I cared about whether or not I was wrong, the clearer things became, making it much easier to move in and out of positions, cutting my losses short to make myself mentally available to take the next opportunity." - Mark Douglas

"The most important rule of trading is to play good 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." - Paul Tudor Jones

"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." - Victor ‘Trader Vic’ Sperandeo

"Taking small losses is part of the game. Taking large losses can take you out of the game." - Doug Kass

"Losers live in the past. Winners live for the future." - Jason Leavitt

"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 follow these three rules you may have a chance." - Ed Seykota

"To anticipate the market is to gamble. To be patient and react only when the market gives the signal is to speculate." - Jesse Livermore

"Markets can remain irrational longer than you can remain solvent." - John Maynard Keynes

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