Le trading en six points.
- Plan your trade and trade your plan.
- Cut your losses and let your winners ride.
- Don't bet the farm.
- If you don't bet, you can't win.
- Prepare, don't predict.
- Learn from your mistakes.
The financial markets may not be efficient, but they apparently are efficient enough
to prevent the sort of people who run mutual funds from beating them.
The symbol of all relationships among rational men, the moral symbol of respect for human beings,
is the trader. We, who live by values, not by loot, both in manner and in spirit.
A trader is a man who earns what he gets and does not take the undeserved.
A trader does not squander his body as fodder or his soul as alms.
Just as he does not give his work except in trade for material values,
so he does not give the values of his spirit - his love, his friendship, his esteem -
except in payment and in trade for human virtues, in payment for his own selfish pleasure,
which he receives from men he can respect.
The mystic parasites who have, throughout the ages, reviled the traders and held them in contempt,
while honoring the beggars and the looters, have known the secret motive of their sneers:
a trader in the entity they dread - a man of justice.
Money is the most important thing in the world.
It represents health, strength, honor, generosity, and beauty as conspicuously as
the want of it represents illness, weakness, disgrace, meanness, and ugliness.
All great traders are seekers of truth.
Learn from your mistakes. That is the only way to become a successful trader.
I have found that the greatest traders are the ones who are most afraid of the markets.
The best traders have no ego.
The goal of a successful trader is to make the best trades. Money is secondary.
If this surprises you, think how good professionals in any field operate.
Good teachers, doctors, lawyers, farmers and others make money - but they do not count it while they work.
If they do, the quality of their work suffers.
Combine your enthusiasm, energy, focus, devotion, and discipline to becoming the best trader you can be.
Successful traders constantly ask themselves: What am I doing right? What am I doing wrong?
How can I do what I am doing better? How can I get more information?
Courage is a quality important to excel as a trader.
It's not enough to simply have the insight to see something apart from the rest of the crowd,
you also need to have the courage to act on it and stay with it.
The single most important element to being successful in the markets is having a plan.
First, a plan forces discipline, which is an essential ingredient to successful trading.
Second, a plan gives you a benchmark against which you can measure your performance.
The traits of a successful trader are that they are rational, analytical, able to control emotions,
practical, and profit oriented.
My first advice to anyone is to look to yourself as the source of everything that happens in your life.
The traits of a successful trader: the most important is discipline - I am sure everyone says that.
Second, you have to have patience; if you have a good trade on, you have to be able to stay with it.
Third, you need courage to go into the market, and courage comes from adequate capitalization.
Fourth, you must have a willingness to lose; that is also related to adequate capitalization.
Fifth, you need a strong desire to win.
Being a successful trader also takes courage;
the courage to try, the courage to fail, the courage to succeed,
and the courage to keep going when the going gets tough.
The only methodological protective belt traders have is the dogma that he who loses money
is unconditionally wrong and the market unconditionally right rather than the opposite.
It is something we cannot question without threatening the foundations of our profession.
The implication is something called a stop loss that is executed as a way to insure survival
and force such revision of beliefs.
Whenever I enter a position, I have a predetermined stop.
That is the only way I can sleep. I know where I'm getting out before I get in.
The position size on a trade is determined by the stop, and the stop is determined on a technical basis.
I never think about other people who may be using the same stop,
because the market shouldn't go there if I am right.
I spend my day trying to make myself as happy and relaxed as I can be.
If I have positions going against me, I get right out; if they are going for me, I keep them.
I have two basic rules about winning in trading as well as in life:
1. If you don't bet, you can't win. 2. If you lose all your chips, you can't bet.
The whole secret to winning in the stock market is to lose the least amount possible when you're not right.
Never average a loss. Get out if you think you're wrong, get back in when you think you're right.
Your protective stop is like a red light. You can go through it, but doing so is not very wise!
If you go through town running every red light, you probably won't get to your destination quickly or safely.
As long as you learn something from a loss, it's not really a loss.
Stop looking at losses as problems and start viewing them as opportunities to elevate yourself
to the next plateau.
The biggest secret about success is that there isn't any big secret about it,
or if there is, then it's a secret from me, too.
The idea of searching for some secret for trading success misses the point.
Many people make the mistake of thinking that market behavior is truly predictable. Nonsense.
Trading in the markets is an odds game, and the object is always keep the odds in your favor.
It is impossible to predict news events - the stone hitting the water -
but by modeling the structure of the markets it is possible to predict how
the ripples will pass through the lake and cause secondary reactions.
The cold, hard reality about trading is that every trade has an uncertain outcome.
Make a list of everything that can go wrong and determine how you will respond to that situation.
That will be the key to your success - knowing how to respond to the unexpected.
Don't think about what the market's going to do; you have absolutely no control over that.
Think about what you're going to do if it gets there.
Don't worry about what the markets are going to do,
worry about what you are going to do in response to the markets.
In order for the trend in being to change direction there has to be a change in the influences
that caused the trend in the first place.
Those who can detect this change before it occurs and becomes generally evident
are gifted with powers of analysis and foresight of the very highest order.
For most of us detecting the change after it has occurred but before it has proceeded too far
is still a very profitable and to many an attainable goal.
I think on the average it is better for most of us to be late and sure than to be early and doubtful.
When popular opinion is nearly unanimous, contrary thinking tends to be most profitable.
The reason is that once the crowd takes a position, it creates a short-term, self-fulfilling prophecy.
But when a change occurs, everyone seems to change his mind at once.
There is an adage that suggests no decline is complete until the generals are taken out and shot
just like the foot soldiers. True bottoms occur when everything has been slaughtered.
Read the newspapers and the news magazines during a major move.
At first, no one gets why the move is happening. There's a lot of confusion.
Part of the move's way up, some people get it. At the end, everybody gets it.
The tension is resolved and the move ends.
Major stock market moves are not about a change in the underlying fundamentals,
they are about changes in sentiment.
Letting winners ride is every bit as important as cutting losses short.
If you don't stay with your winners, you are not going to be able to pay for the losers.
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.
If you have an approach that makes money,
then money management can make the difference between success and failure.
One adage that is completely wrongheaded is that you can't go broke taking profits.
That's precisely how many traders do go broke.
While amateurs go broke taking large losses, professionals go broke by taking small profits.
Missing an opportunity is as bad as being on the wrong side of a trade.
Some people say (after they have the opportunity to realize a profit)
"I was only playing with the market's money." That's the most ridiculous thing I ever heard.
I take the point of view that missing an important trade is a much more serious error than making a bad trade.
Don't be a hero. Don't have an ego. Always question yourself and your ability.
Don't ever feel that you are very good. The second you do, you are dead.
If you don't know who you are, the stock market is an expensive place to find out.
The biggest problem with some traders is that they think they are bigger than the market.
They don't fear the market place, and they lose sight of their discipline.
Trying to trade during a losing streak is emotionally devastating. Trying to play "catch up" is lethal.
Good trading is a peculiar balance between the conviction to follow your ideas
and the flexibility to recognize when you have made a mistake.
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 the money.
By living the philosophy that my winners are always in front of me, it is not so painful to take a loss.
If I make a mistake, so what!
Whenever you get hit, you are very upset emotionally.
Most traders try to make it back immediately; they try to play bigger.
Whenever you try to get all your losses back at once, you are most often doomed to fail.
After a devastating loss, I always play very small and try to get black ink, black ink.
It's not how much money I make, but just getting my rhythm and confidence back.
People avoid looking for good exits because exits do not give them control over the market.
However, exits do control something.
They control whether you make a profit or a loss, and they control just how big that profit or loss will be.
Since they do so much, perhaps they are worthy of a lot more study on the part of most people.
To be a money master, you must first be a self-master.
Just as it was tough when we were children to look under the bed or in a dark closet for night monsters,
it's equally tough to look at a loss and acknowledge it.
It was easier to hide under the covers back then and now it's easier to adopt some defense mechanism.
Our natural instincts will mislead us in trading.
Therefore, the first step in succeeding as a trader is reprogramming behaviour to do what is correct
rather than what feels comfortable.
It is inseparable from human nature to hope and to fear.
In speculation when the market goes against you, you hope that every day will be the last day --
and you lose more than you should had you not listened to hope --
to the same ally that is so potent a success-bringer to empire builders and pioneers, big and little.
And when the market goes your way you become fearful that the next day will take away your profit,
and you get out -- to soon. Fear keeps you from making as much money as you ought to.
The successful trader has to fight these two deep-seated instincts.
He has to reverse what you might call his natural impulses.
Instead of hoping he must fear; instead of fearing he must hope.
He must fear that his loss may develop into a much bigger loss,
and hope that his profit may become a big profit.
When you're in a losing streak, your ability to properly assimilate and analyze information starts
to become distorted because of the impairment of the confidence factor,
which is a by-product of a losing streak. You have to work very hard to restore that confidence,
and cutting back trading size helps achieve that goal.
Too many traders try and put their own opinion of what will happen before the market action.
It's very difficult to be different from the rest of the crowd the majority of the time,
which by definition is what you're doing if you're a successful trader.
If you bring normal human habits and tendencies to trading,
you'll gravitate toward the majority and inevitably lose.
Michael Marcus taught me one thing that is absolutely critical:
you have to be willing to make mistakes regularly; there is nothing wrong with it.
Michael 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.
What feels good is often the wrong thing to do.
The key to trading success is emotional discipline.
If intelligence were the key, there would be a lot more people making money trading...
Whether it's trading, losing weight, or pursuing any other goal, the most difficult part isn't in knowing
what to do or how; it is in making the decision to do it and stick to it.
It's important to distinguish between respect for the market and fear of the market.
While it's essential to respect the market to assure preservation of capital,
you can't win if you're fearful of losing.
Fear will keep you from making correct decisions.
Develop the concept of never taking a trade that would jeopardize your ability to continue trading.
I manage to stay composed because I know that the risk and volatility in my portfolio is exactly
the same as it was yesterday, last week, and last month.
So why should I let my emotions go up and down if I'm in exactly the same exposure all the time?
Think of each trade as one of the next one thousand trades you are going to make.
If you start thinking in terms of the next one thousand trades, all of a sudden you've made any single
trade seem very inconsequential. Who cares if a particular trade is a winner or a loser ?
It's just another trade.
I think investment psychology is by far the more important element,
followed by risk control, with the least important consideration being the question of where you buy and sell.
One of the best rules anybody can learn about investing is to do nothing,
absolutely nothing, unless there is something to do.
Most people always have to be playing; they always have to be doing something.
They can't just sit there and wait for something new to develop.
I wait until there is money lying in the corner, and all I have to do is go over there and pick it up.
I do nothing in the meantime. Even people who lose money in the market say, 'I just lost my money,
now I have to do something to make it back.' No, you don't. You should sit there until you find something.
Never forget that markets are made up of people.
Think constantly about what others are doing, what they might do in the current circumstances,
or what they might do when those circumstances change.
Remember that whenever you buy and hope to sell higher,
the person you sell to will have to see some opportunity at that higher price in order to be induced to buy.
In this business, you never stop learning.
Let me put it another way. If you stop learning, you're on your way to going out of business.
Wall Street is a tough teacher but also a good teacher.
If you have any weakness -- arrogance, laziness, stinginess, cowardice, procrastination --
the market will zero in on that weakness and make you pay dearly.
To achieve a state of objectivity you need to operate out of beliefs that allow for anything to happen,
as opposed to beliefs that allow only for the market to express itself in a limited fashion.
If you operate out of a belief that anything can happen,
then whatever does happen won't be threatening to you in any way,
thereby causing you to avoid or distort certain categories of market information.
Any limits you place on the market's behavior will be a compensating factor for your lack of trust
and confidence to act appropriately in any given situation.
This will be evidenced by the fear, stress, and anxiety that you will feel when the market
expresses itself beyond your mental limits and you can't do anything to control the situation.
However, you do have to have some belief or expectation about the future or you wouldn't ever put
on a trade in the first place. To be objective, you will need to release yourself from
"demand-backed expectations" and make what I call "uncommitted assessments of the probabilities,"
. . . which simply means that you have no commitment to any particular outcome.
You just observe what is happening in each moment as an indication of what will probably happen next.
The effects of fear on one's behavior are obvious, limiting one to the point of complete immobility.
If you can't execute your trades properly, even when you perceive the most perfect opportunity,
it is because you have not released yourself from the pain contained in the memories of
past trading experiences and because you still don't trust yourself to act appropriately
in any given set of conditions. If you did, there would be no fear or immobility.
The typical trader will do most anything to avoid creating definition and rules
because he does not want to take responsibility for the results of his trading.
If he knows exactly what he is going to do and under what conditions,
then he would have something by which to measure his performance,
thus making himself accountable to himself.
This is exactly what most traders don't want to do,
preferring instead to keep their relationship with the market somewhat mysterious.
This creates a real psychological paradox for traders,
because the only way to learn how to trade effectively is to make oneself accountable by creating structure:
but, with accountability comes responsibility.
More money is lost by players who know what the right thing to do is, but don't do it,
than for any other reason. Having a strategy, a game plan and the discipline to stick to it are,
along with a sufficient bankroll, the four most important things that a player needs to be a winner.
In a certain sense, reading charts is like reading music,
in which you endeavor to interpret correctly the composer's ideas and the expression of his art.
Just so a chart of the averages, or of a single stock, reflects the ideas, hopes, ambitions and purposes
of the mass mind operating in the market, or of a manipulator handling a single stock.
The study of charts is not as some people claim,
the mere identification of certain labeled patterns made by the actions of stocks.
That sort of thing borders on the mechanical and does little to aid in the development of one's judgment.
But when a student undertakes to read from his charts the purposes and objective of
those who are responsible for a stock's action in the market, he is beginning to see, in a true light,
the meaning of scientific stock speculation.
Les économistes sont des chirurgiens qui ont un excellent scalpel et un bistouri ébréché,
opérant à merveille sur le mort et martyrisant le vif.
Le désir est le grand ressort providentiel de l'activité ;
tout désir est une illusion, mais les choses sont ainsi disposées qu'on ne voit
l'inanité du désir qu'après qu'il est assouvi.
If the American people ever allow the banks to control the issuance of their currency,
first by inflation, and then by deflation, the banks and corporations that will grow up
around them will deprive the people of all property, until their children wake up homeless
on the continent their fathers conquered. The issuing power of money should be taken from
banks and restored to Congress and the people to whom it belongs. I sincerely believe the
banking institutions having the issuing power of money, are more dangerous to liberty than
The only function of economic forecasting is to make astrology look respectable.
All models are wrong, some are useful.
Fundamentals is a word invented by sellers to find buyers.
Ceux qui abandonnent un peu de leurs libertés essentielles
en échange d'un peu plus de sécurité ne méritent ni la liberté
ni la sécurité et perdront les deux.
Sometimes a kind of glory lights up the mind
of a man. It happens to nearly everyone.
You can feel it growing or preparing like a fuse burning toward dynamite.
It is a feeling in the stomach, a delight of the nerves, of the forearms. (...)
What do I believe in ? What must I fight for and what must I fight against ?
Our species is the only creative species, and it has only one creative instrument,
the individual mind and spirit of a man. Nothing was ever created by two men.
There are no good collaborations, whether in music, in art, in poetry, in mathematics, in philosophy.
Once the miracle of creation has taken place, the group can build and extend it,
but the group never invents anything. The preciousness lies in the lonely mind of a man.
And now the forces marshaled around the concept of the group have declared a war of extermination,
on that preciousness, the mind of man. By disparagement, by starvation, by repressions,
forced direction, and the stunning hammerblows of conditionning, the free roving mind is being pursued,
roped, blunted, drugged. It is a sad suicidal course our species seems to have taken.
And this I believe : that the free, exploring mind of the individual human is the most valuable thing
in the world. And this I would fight for : the freedom of the mind to take any direction it wishes,
undirected. And this I must fight against : any idea, religion, or government which limits or destroys
the individual. This is what I am and what I am about. I can understand why a system built on a pattern
must try to destroy the free mind, for that is one thing which can by inspection destroy such a system.
Surely I can understand this, and I hate it and I will fight against it to preserve the one thing
that separates us from the uncreative beasts. If the glory can be killed, we are lost.
We really can distinguish three different kinds of knowledge.
The most important one, the one without which there would not be any other, is third-person knowledge;
that is, the knowledge of what is in other minds. The implication is that we have to communicate
with somebody else, which means knowing what they are thinking in order to have a concept of objectivity
- that is, a concept of objects in a public space and time. Of course, if we have knowledge
of other minds, we must at the same time already have a concept of the shared world.
Knowledge of the external, in the sense of shared, world, is the second kind of knowledge,
from which follows a third: the knowledge of what happens inside ourselves.
C'est le propre du privilège
et de toute position privilégiée que de tuer l'esprit et le coeur des hommes.
L'homme privilégié soit politiquement, soit économiquement, est un homme intellectuellement
et moralement dépravé. Voilà une loi sociale qui n'admet aucune exception, et qui s'applique
aussi bien à des nations tout entière qu'aux classes, aux compagnies et aux individus.
C'est la loi de l'égalité, condition suprême de la liberté et de l'humanité. (...)
Un corps scientifique auquel on aurait confié le gouvernement de la société finirait bientôt
par ne plus s'occuper du tout de science, mais d'une tout autre affaire ;
et cette affaire, l'affaire de tous les pouvoirs établis, serait de s'éterniser en rendant
la société confiée à ses soins toujours plus stupide et par conséquent plus nécessiteuse
de son gouvernement et de sa direction.
Mais ce qui est vrai pour les académies scientifiques l'est également pour toutes les
assemblées constituantes et législatives, lors même qu'elles sont issues du suffrage universel.
Ce dernier peut en renouveler la composition, il est vrai, ce qui n'empêche pas
qu'il ne se forme en quelques années un corps de politiciens, privilégiés de fait,
non de droit, qui, en se vouant exclusivement à la direction des affaires publiques d'un pays,
finissent par former une sorte d'aristocratie ou d'oligarchie politique.
In theory, practice and theory are the same, but in practice they are different.
Chaque révolution s'évapore en laissant seulement derrière elle le dépôt d'une nouvelle bureaucratie.
An executive board of one hundred of the ablest men in the world could not possibly determine the direction which production
should take without the index afforded by prices in the merchandise and stock markets.
But through the stock market it is determined almost automatically, with as much nicety as anything can be determined which depends upon human judgment,
where further production is needed. Upon that market is concentrated, in a sense,
the judgment of every human being in the world having any interest in production either as consumer or producer --
not only of those who deal in stocks and securities, but those also who are directly concerned in the industries and interests which these securities represent.
That delicate register of values, that sensitive governor of production, that accurate barometer of the people's needs,
could not be replaced by any process that any State socialist has devised or suggested.
Le progrès est impossible sans changement, et ceux qui ne peuvent
jamais changer d'avis ne peuvent ni changer le monde ni se changer
Un Etat totalitaire vraiment efficient serait celui dans lequel le tout-puissant comité exécutif
des chefs politiques et leur armée de directeurs auraient la haute main sur une population d'esclaves
qu'il serait inutile de contraindre, parce qu'ils auraient l'amour de leur servitude.
La leur faire aimer - telle est la tâche assignée dans les pays totalitaires d'aujourd'hui,
aux ministères de la propagande, aux rédacteurs en chef de journaux, et aux maîtres d'école.
Il y a deux sortes de gens sur terre : ceux qui trouvent
les moyens de réussir et ceux qui trouvent des excuses à leur échec.
Tout semble impossible à ceux qui n'ont jamais rien essayé.
Why do so many fail ... because hardly anybody treats [...] as if it were a rational manageable
activity ... in which knowledge coupled with skill and application can lead to success.
Instead, almost everybody approaches the phases of the [...] process ...
by trusting exclusively to luck, to merit, to formulas, or to somebody else.
This is the way an opinion gains acceptance in France.
Fifty ignoramuses repeat in chorus some absurd libel that has been thought up by an even bigger ignoramus;
and, if only it happens to coincide to some slight degree with prevailing attitudes and passions,
it becomes a self evident truth.
If one really wishes to be a master of an art, technical knowledge of it is not enough.
One has to transcend technique so that the act becomes an artless art growing out of the unconscious.