As I was preparing a presentation and looking for some interesting material I came across “Trader Vic – Methods Of A Wall Street Master” and this paragraph got my attention:
“I base my business philosophy on three principles, listed here in terms of importance: preservation of capital, consistent profitability, and the persuit of superior returns. These principals are basic in the sense that they underlie and guide all my market decisions. Each principle carries a different weight in my speculative strategy, and they evolve from one to another. That is, preservation of capital leads to consistent profits, which makes pursuit of superior returns possible.”
This was written in 1991 but I think its still a very valid proposition. I am also adding this line from the same book, “In my view, the way to build wealth is to preserve capital, make consistent profits, and wait patiently for the right opportunity to make extraordinary gains.”
As Jesse Livermore said: “Trading is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or for the get-rich-quick adventurer.” In other words, to excel in the stock market, you have to work hard, have emotional control, and develop confidence in your strategy. I constantly get asked to recommend books that can help with these areas of trading. There are so many good ones out there, but here are a few that I suggest.
(If you click on the titles, you can get a more detailed description from Amazon.com).
How to Make Money in Stocks (4th Edition), William O’Neil
How to Trade in Stocks, Jesse Livermore
Reminiscences of a Stock Operator, Edwin Lefevre
The Disciplined Trader, Mark Douglas
Trading in the Zone, Mark Douglas
Trader Vic-Methods of a Wall Street Master, Victor Sperandeo
Trader Vic II-Principles of Professional Speculation, Victor Sperandeo
How I Made $2,000,000 in the Stock Market, Nicolas Darvas
The Battle for Investment Survival, Gerald Loeb
Confessions of a Street Addict, James Cramer
There are 3 Market Wizards books all written by Jack Schwager:
The New Market Wizards
Stock Market Wizards
Confidence and emotional control are extremely important in order to become a successful trader. I believe the ideas taught in the following “self-help” books can help develop that “mental toughness” that’s needed. The concepts learned can also be applied to many areas of our lives:
Think and Grow Rich, Napoleon Hill
You’ll See It When You Believe It, Dr. Wayne Dyer
The Power of Positive Thinking, Norman Vincent Peale
The Magic of Thinking Big, David Schwartz
Awaken the Giant Within, Anthony Robbins
In his book Trader Vic: Methods of a Wall Street Master, Victor Sperandeo mentioned:
As an aside, I want to point out that although this period of intensive study helped me immeasurably in my ability to call the markets, it cost me substantially in my personal life. My daughter, Jennifer, was at a crucial formative age (3 to 5), and I spent almost no time with her. I would get home from the office, eat, and go straight back to work in my study. When she came into my office, I would shoo her away impatiently, totally ignoring the fact that she needed her father’s attention and love. It was a bad mistake that both of us are paying for today. If I had to do again, I would draw out the study period and give Jennifer more time.
After reading this paragraph, I have been doing a lot of thinking. I’m not sure if this is a common mistake among traders, I, sometimes, make the similar mistake. We know this business requires a lot of time, effort, attention, but our loved ones require more.
Just being a little bit emotional. Anyway, this book is really a good read. If you haven’t done so, go and get one.