How do you feel when your trading position goes against you? Do you react instinctively or do you follow a specific plan of action? Here’s what Richard Dennis has to say about this issue: “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.” Ignoring issues will usually carry negative consequences in the future. Have a well-researched plan and execute it with focus!
Archives of “richard dennis” tag
rssThe Ten Cardinal Rules for Traders
| 1. Learn to function in a tense, unstructured, and unpredictable environment. 2. Be an independent thinker versus a conventional thinker. 3. Work out a way to handle your emotions and maintain objectivity. 4. Don’t rely on hope and fear in the conventional sense. 5. Work continuously to improve yourself, giving importance to self-examination and recognizing that your personality and way of responding to events are a critical part of the game. This requires continuous coaching. 6. Modify your normal responses to certain events. 7. Be willing to face problems, understand them, and recognize that they are in some way related to your behavior. 8. Know when problems can be resolved and then apply methods to solve them. That may mean giving up some control in order to gain a different control. It may mean changes in your personality, learning self-reliance, or giving up independence and ego to become part of a trading team. 9. Understand the larger framework in which trading occurs—how the complexity of the marketplace and your personality both must be taken into account in order to develop the mastery of trading. 10. Develop the right mind-set for trading—a willingness to commit to the kinds of changes in personal habits and beliefs that will drastically alter your life. To do this requires a willingness to surrender to the forces of the game. In order to be able to play at a maximum level, you have to let go of your ego and your need to have things your way.Do the hard thing. – Richard Dennis |
5 Trading Wisdom
“Never let the fear of striking out get in your way” – Babe Ruth
“If you can’t take a small loss, sooner or later you will have to take the mother of all losses” – Ed Seykota
“Don’t think about what the market is going to do. You have absosutely no control over that. Think about what you are going to do if it gets there.” – William Eckhardt
“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 money” – Marty Schwartz
“The worst mistake a trader can make is to miss a major profit opportunity. 95% of the profits come from only 5% of the trades” – Richard Dennis
So – you want to be a trader?
• In 1973 Larry Williams published a book titled “How I Made One Million Dollars Last Year Trading Commodities” detailing his trading success that year. The next year he lost the million dollars.
• Michael Marcus started with $30,000, borrowed another $20,000 from his mother and then proceeded to lose 84% of their combined capital (imagine trying explain that to your Mom) before becoming a successful trader.
• In 1987 several commodity funds managed by Richard Dennis lost 50% of their capital and were forced to stop trading.
It is the most competitive field out there, not only we have to fight each other (yes – this is what we do), but we have to oppose enormous computing power of heartless machines turning trades in nanoseconds.
Here is a simple test if you cut to be a trader – if you can stay emotions free when you finish it – try stock betting…just don’t bet your house on it – that was a job of banksters. (Just remember – 99% of you will be better of sticking with just a test and not moving to real trading)
Step 1. Go to your bank on a windy day.
Step 2. Withdraw a minimum of Rs10,0000 in cash.
Step 3. Walk outside and with both hands starting throwing your money up into the air.
Step 4. After all of the money has blown away, go home and sit down in your favorite chair and calmly say, “Gosh that was foolish. I wish I hadn’t done that.”
Step 5. Get on with your life.
The TurtleTrader Want Ad
Back in the early 80s Richard Dennis ran this famous ad looking for trader trainees:
Trading Wisdom – Tom Willis and Bob Jenkins
Years back Tom Willis (a friend of Richard Dennis’) and Bob Jenkins, running a hedge fund, offered answers about “price” during an interview. An excerpt:
Bob Jenkins: “Everything known is reflected in the price. It makes inherent sense. I could never hope to compete with Cargill that has soybean agents scouring the globe knowing everything there is to know about soybeans and funneling the information up to Lake Minnetonka, their trading headquarters. Unless I have a friend at Cargill, I can only get this information one way: I can infer it technically. We have friends who have made millions trading fundamentally, but their problems are (a) they can rarely know as much as the commercials [i.e. Cargill]; and (b) they are limited to trading their [one market] specialty. They don’t know anything about bonds; they don’t know anything about the currencies. I don’t either, but I’ve made a lot of money trading them. Every picture’s worth a thousand words.”
Tom Willis: “They’re just numbers. Corn is a little different than bonds, but not different enough that I’d have to trade them differently-not different enough that I would have to have a different system.”
Bob Jenkins: “Some of these guys I read about have a different system for each [market]. That’s absurd. We’re trading mob psychology. We’re trading numbers. We’re not trading corn, soybeans or S&Ps.”
I hope everyone catches the nuance of Bob Jenkins’ last statement? Some great succinct language about what “it” takes. Taken from an interview 20 years ago…
Four Multi-Millionaire Traders Share Their Thoughts On Trading
“The key is consistency and discipline,” says Richard Dennis who grew $400 into $200,000,000.
“The key is consistency and discipline. I don’t think anybody winds up making money in this business because they started out lucky.”
For legendary trader Richard Dennis, the importance of being consistent isn’t just theory. In 1984, on a bet, Dennis trained 23 individuals off the street to religiously follow a set of trading rules. His point was to provide that discipline was the key to trading success. All but 3 of those beginner traders made over 100% return their very first year of trading and Dennis won his $1,000,000 bet. Consistent discipline is also what is taught in the “Futures in Motion” advisory service.
“It’s perseverance” declares Tom Baldwin who started with $25,000 and made untold millions trading upwards of $2 billion dollars a day in T-Bond futures.
“It’s perseverance. You don’t need any education at all to do it … because it is like any job. If you stand there long enough, you have to pick it up.” (more…)
Quotes From Legendary Traders
“I absolutely believe that price movement patterns are being repeated; they are recurring patterns that appear over and over. This is because the stocks were being driven by humans- and human nature never changes”.
-Jesse Livermore (Considered by many to be the greatest stock market operator ever. Made 100 million dollars in 1929 stock market crash. Made several other multi-million dollar fortunes in his trading career).
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“You have to cut your losses fast. The secret for winning in the stock market does not include being right all the time. The key is to lose the least amount possible when you are wrong”.
-William J. O’Neil (In my opinion, the best stock market operator in the world today. Has made an incredible fortune trading the stock market. O’Neil is the founder of Investors Business Daily. Much of my stock market education and training has been from William J. O’Neil).
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“Whatever method you use to enter a trade, the most critical thing is that if there is a major trend, your approach should assure that you get in that trend”.
-Richard Dennis (Turned 400 dollars into a fortune of at least 200 million dollars by using his remarkable trading skills).
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“I am primarily a trend trader. In order of importance to me are: (1) the long-term trend, (2) the current chart pattern, and (3) picking a good spot to buy or sell”.
-Ed Seykota (One of the greatest traders of all time. Turned 5000 dollars into an incredible 15 million dollars or more).
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“The most important rule of trading is to play great defense”.
-Paul Tudor Jones (An amazingly consistent and successful trader. In 2006, earned a whopping 750 million dollars).
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“Being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong”.
-Bernard Baruch (Fantastic trader who earned ten’s of millions of dollars in the first part of the 20th century).
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“The greatest safety lies in putting all your eggs in one basket and watching that basket”.
-Gerald M. Loeb (Amassed many millions in the stock market during his long career).
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