Lessons from the Wizards

3994One of the first books I read in this business oh-so many years ago was Stock Market Wizards. It had a profound impact on my thinking about trading, psychology, risk, capital preservation, etc.

  1. All successful traders use methods that suit their personality; You are neither Waren Buffett nor George Soros nor Jesse Livermore; Don’t assume you can trade like them.  
  2. What the market does is beyond your control; Your reaction to the market, however, is not beyond your control. Indeed, its the ONLY thing you can control.

    To be a winner, you have to be willing to take a loss

  3.  HOPE is not a word in the winning Trader’s vocabulary;

  4.  When you are on a losing streak — and you will eventually find yourself on one — reduce your position size;

  5.  Don’t underestimate the time it takes to succeed as a trader — it takes 10 years to become very good at anything

  6.  Trading is a vocation — not a hobby

  7.  Have a business/trading plan

  8.  Identify your greatest weakness, Be honest — and DEAL with it

  9.  There are times when the best thing to do is nothing; Learn to recognize these times (Nothing Doing)

  10.  Being a great trader is a process. It’s a race with no finish line.

  11.  Other people’s opinions are meaningless to you; Make your own trading decisions 

  12.  Analyze your past trades. Study what happened to the stocks after you closed the position. Consider your P&L game tapes and go over them the way Vince Lombardi Bill Parcells reviewed past Superbowls

  13.  Excessive leverage can knock you out of the game permanently

  14.  The Best traders continue to learn — and adapt to changing conditions

  15.  Don’t just stand there and let the truck roll over you

  16.  Being wrong is acceptable — staying wrong is unforgivable (I liked this one! – BMB)

  17.  Contain your losses 

  18.  Good traders manage the downside; They don’t worry about the upside

  19.  Wall street research reports are biased

  20.  Knowing when to get out of a position is as important as when to get in

  21.  To excel, you have to put in hard work

  22.  Discipline, Discipline, Discipline !