Archives of “market wizards” tag

rss

Avoiding Trading Mistakes

  
  Education
#  #  #  #  #  #  #  #  #
In Jack Schwager’s New Market Wizards, William Eckhardt said that one mistake traders make is putting too much importance on any single trade. His suggestion was to remember that any one trade is just a small part of the bigger picture and needs to be treated dispassionately. When the individual trade becomes too important, we tend to do things to make the trade work, for example we take profits too quickly or we let losses go in hopes of a return to profitability.

Trading Wisdoms

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

That enormous profits should have turned into still more colossal losses, that new theories should have been developed and later discredited, that unlimited optimism should have been succeeded by the deepest despair, are all in strict accord with age-old tradition.

Benjamin Graham

A trading philosophy is something that cannot just be transferred from one person to another; it’s something that you have to acquire yourself through time and effort. 

Richard Driehaus

The essential element is that the markets are ultimately based on human psychology, and by charting the markets you’re merely converting human psychology into graphic representations. I believe that the human mind is more powerful than any computer in analyzing the implications of these price graphs. 

Al Weiss

Opportunities change, strategies change, but people and psychology do not change. If trend-following systems don’t work well, something else will. There’s always money being lost, so someone out there has to win. 

Gil Blake, New Market Wizards

How independent minded are you?

  
  Education
#  #  #  #  #  #  #  #

Winning traders go their own way. They don’t follow the crowd. They are independent minded. How independent minded are you? Here’s a short 10-item quiz to help you determine your tendency to think independently.

art75img1

  1. Do you feel uneasy when you think that others don’t like you?
  2. Do you care what others think?
  3. While growing up, did you do what was expected of you?
  4. When making important decisions, do you seek out the opinions of others? (more…)

THE NEED FOR INDEPENDENCE

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #

You need to do your own thinking. Don’t get caught up in mass hyste-ria. As Ed Seykota pointed out, by the time a story is making the cover of the national periodicals, the trend is probably near an end. Independence also means making your own trading decisions. Never listen to other opinions. Even if it occasionally helps on a trade or two, listening to others invariably seems to end up costing you money-not to mention confusing your own market view. As Michael Marcus stated in Market Wizards, “You need to follow your own light. If you combine two traders, you will get the worst of each.”

A related personal anecdote concerns another trader I interviewed in Market Wizards. Although he could trade better than I if he were blindfolded and placed in a trunk at the bottom of a pool, he still was interested in my view of the markets. One day he called and asked, “What do you think of the yen?” The yen was one of the few markets about which I had a strong opinion at the time. It had formed a particular chart pattern that made me very bearish. “I think the yen is going straight down, and I’m short,” I replied. (more…)

How to Pick Your Money from Trading

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #

There is a famous saying about trading the markets;

“I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up.”

I always thought that it was first said by Jim Rodgers in Market Wizards, but someone told me the other day that it was actually Jesse Livermore who said it (or a version of it) first.

I really don’t care who said it, so for the purposes of this post let’s just say it was Joey Heatherton who said it after a two-week sold out run at The Sands. (more…)

Ed Seykota – “Everybody Gets What They Want From The Markets”

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

When Jack Schwagger interviewed legendary trend following trader Ed Seykota for his book “Market Wizards” in 1989, it’s clear he was not ready for the answers that Ed Seykota gave.  Not many people are.

But by far the greatest and most provocative answer that Ed gave was that of “Everybody gets what they want out of the market”.  Not only did it incite an almost angry response from Schwagger, it has confused and enlightened an entire generation of traders since.

The Famous Ed Seykota Interview

Jack Schwagger asks his interviewee: “Don’t all traders want to win?”

And Ed replies with: “Win or lose, everybody gets what they want out of the market.

“I know one trader who seems to get in near the start of every substantial bull move and works his $10 thousand up to about a quarter of a million in a couple of months.  Then he changes his personality and loses it all back again.  This process repeats like clockwork.  Once I traded with him, but got out when his personality changed.  I doubled my money, while he got wiped out as usual.  I told him what I was doing, and even paid him a management fee.  He just couldn’t help himself.  I don’t think he can do it any differently.  He wouldn’t want to.

  • “He gets a lot of excitement, he gets to be a martyr, he gets sympathy from his friends, and he gets to be the centre of attention.  Also, possibly, he may be more comfortable relating to people if he is on their financial plane. 

“On some level, I think he is really getting what he wants.”

Does This Sound Like Someone You Know?  Maybe Someone You Know… Intimately?

Even back then, Ed Seykota had a fantastic grasp on the dangerous psychology pitfalls that almost every trader has to work through before they become a success in the markets. 

So you need to ask yourself: (more…)

20 Lessons From Stock Market Wizards

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

3994-1Most of you have probably heard of this book and some may have read it. For the benefit of those who have not read it or heard of it, Stock Market Wizards is basically a book that consists of interviews with 15 top stock traders in America. These top traders come from a myriad of backgrounds and have varied interests- from mathematician, historian, scientist, to those with an interest in photography and even farming. But they have quite a few things in common when it comes to trading:
DISCIPLINE
LOSS CONTROL
HARD WORK

Most of the traders interviewed were quite forthcoming, but a few were reluctant to talk about their strategies (even past strategies that worked but is now no longer used) for fear that disclosure would render its effectiveness. Of the 15 traders, only Mark Cook and John Bender are options trader. By the way, Mark Cook’s story is one of my favourite and he is also the guy that likes to farm.
I am interested to read about these traders, not simply because they are top traders, but also because many of them encountered major failures and lost tons of money before they become successful in trading. The path to success is never easy and this book really keeps me inspired. I think in future if I meet with setbacks in my trading journey, This is 4th time ,I had completed reading this book.

Here’s my 20 lessons from Stock Market Wizards (more…)

Willingness to Make Mistakes

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

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

– Bruce Kovner, Market Wizards

Bruce Kovner, now retired, is one of the all-time trading greats.

His observation is strikingly similar to the Soros observation (paraphrase): “It doesn’t matter how often you are right or wrong — what matters is how much you make when you are right, versus how much you lose when you are wrong.”

In many ways trading is remarkably different from any other profession. Imagine if doctors, lawyers, or company executives were encouraged to “make mistakes” on a regular basis. (They do make mistakes of course. They just can’t admit them, let alone be open about them.) (more…)

Willingness to Make Mistakes

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

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

– Bruce Kovner, Market Wizards

Bruce Kovner, now retired, is one of the all-time trading greats.

His observation is strikingly similar to the Soros observation (paraphrase): “It doesn’t matter how often you are right or wrong — what matters is how much you make when you are right, versus how much you lose when you are wrong.”

In many ways trading is remarkably different from any other profession. Imagine if doctors, lawyers, or company executives were encouraged to “make mistakes” on a regular basis. (They do make mistakes of course. They just can’t admit them, let alone be open about them.) (more…)

The Chart Angle Delusion

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #

“The lack of intrinsic meaning of angles on a bar chart has significance even for chart-oriented traders who do not employ angles. How sharply a trend slopes on a chart is often a psychological consideration in making a trade. If you fall prey to this influence, you’re letting the chart maker’s practical and aesthetic considerations impinge on your trading. Any trend can be made to look either gentle or steep by adjusting the price scale. ”

– William Eckhardt, New Market Wizards

If you use price action as a filter — and visually interpret charts as part of your process — how do you guard against the chart angle delusion?

One potential remedy is focusing on hard inputs that are independent of chart aesthetics. High and low point successions, moving average crosses, and volatility expansion / contraction (changes in average trading range) are three examples.

Another helpful practice is deliberately viewing more horizontally extended (flattened) charts in tandem with the main view (as such mutes the ‘exciting angle’ temptation)…

Go to top