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20 Lessons From Stock Market Wizards

  
  Education
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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…)

Lessons from the Wizards

  
  Education
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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 (more…)

TRADER’S TWO MOST POWERFUL WORDS

  
  Education
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Let’s face it, no matter the outcome of a trade-lose, win, draw, and even the miss-traders are rarely satisfied with the result.  This is exactly why it is so important that we utilize the two most powerful words in a stock trader’s vocabulary..and no… it does not involve four letters!  The following is a list that you can use these two words with.  You will get my point.  Of course you can add to it if you like.

I missed the trade…SO WHAT!

This trade did not work…SO WHAT!

I excited a profitable trade too early…SO WHAT!

I excited with a loss too quickly…SO WHAT!

My stock gapped against me…SO WHAT!

The stock recovered without me…SO WHAT!

A stock I was bullish on was downgraded by an ANALyst…SO WHAT!

A stock I was bearish on was upgraded by an ANALyst…SO WHAT!

The market is not trending…SO WHAT!

The market is consolidating…SO WHAT!

The market is breaking support…SO WHAT!

The market is busting out of resistance…SO WHAT!

The economy stinks but the market is going higher…SO WHAT!

Lessons From The Wizards

  
  Education
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One 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.

Sometime ago, I came across a good discussion of the lessons from the book at Simply Options Trading. What follows is my edited adaptation of those rules he derived from Stock Market Wizards:

    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.

     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; (The Stop-Loss Breakdown)

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

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

     Don’t underestimate the time it takes to succeed as a trader — it takes 10 years to become very good at anything; (There Are No Shortcuts)

     Trading is a vocation — not a hobby (more…)

    Lessons from the Wizards

      
      Education
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    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.

    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; (The Stop-Loss Breakdown)

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

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

    Don’t underestimate the time it takes to succeed as a trader — it takes 10 years to become very good at anything; (There Are No Shortcuts)

    Trading is a vocation — not a hobby

    Have a business/trading plan

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

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

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

    Other people’s opinions are meaningless to you; Make your own trading decisions
    (The Wrong Crowd)

    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

    Excessive leverage can knock you out of the game permanently

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

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

    Being wrong is acceptable — staying wrong is unforgivable

    Contain your losses (Protect Your Backside)

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

    Wall street research reports are biased

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

    To excel, you have to put in hard work

    Discipline, Discipline, Discipline !

    TRADER’S TWO MOST POWERFUL WORDS

      
      Education
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    Let’s face it, no matter the outcome of a trade-lose, win, draw, and even the miss-traders are rarely satisfied with the result.  This is exactly why it is so important that we utilize the two most powerful words in a stock trader’s vocabulary..and no… it does not involve four letters!  The following is a list that you can use these two words with.  You will get my point.  Of course you can add to it if you like.

    I missed the trade…SO WHAT!

    This trade did not work…SO WHAT!

    I excited a profitable trade too early…SO WHAT!

    I excited with a loss too quickly…SO WHAT!

    My stock gapped against me…SO WHAT!

    The stock recovered without me…SO WHAT!

    A stock I was bullish on was downgraded by an ANALyst…SO WHAT! (more…)

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