As I’ve written before, I’m a big fan of quotes.
A good quote — once you really “get” it — can summarize a lifetime of wisdom in a few words. That’s also why I include a new quote in each issue of The Alpha Investor Letter.
I recently took time to re-read several of the first books on trading that I studied while I was still slaving away as a lawyer at a Wall Street law firm in the early 1990s. I still have the journals in which I wrote down many of those quotes.
Reviewing them after so many years, I was again struck by their wisdom — and how they apply as much to today’s overly news-driven and Twitter-fueled investment markets.
I’ll go even further. With trading as accessible, easy and cheap as it is, applying genuine market wisdom today is even more important than in the pre-Internet era.
While $7 trades at the click of a mouse sound like a blessing, for most amateur traders, it just offers an opportunity to screw up more often.
After all, the financial markets are remarkably democratic.
But remember that when you place a trade, it’s like you are allowed to step on the golf course and play against Tiger Woods.
However, just because they let you on the golf course, that does not mean that you have a prayer of beating Tiger at his own game.
The same logic applies to trading and investing.
So, take time to reflect on each quote below and think about the lesson it contains.
Understanding these lessons they contain could make — or save — you millions of dollars over your investment lifetime.
I. Trading is Hard Work
“No profession requires more hard work, intelligence, patience, and mental discipline than successful speculation.”
“A peak performance trader is totally committed to being the best and doing whatever it takes to be the best. He feels totally responsible for whatever happens and thus can learn from mistakes. These people typically have a working business plan for trading because they treat trading as a business.”
- Van K Tharp
“Superlative performance is really a confluence of dozens of small skills or activities, each one learned or stumbled upon, which have been carefully drilled into habit and then are fitted together in a synthesized whole. There is nothing extraordinary or superhuman in any one of those actions; only the fact that they are done consistently and correctly, and all together, produce excellence.”
-Daniel F. Chambliss
“I think to be in the upper echelon of successful traders requires an innate skill, a gift. It’s just like being a great violinist. But to be a competent trader and make money is a skill you can learn.”
II. Mistakes Are Part of the Trading Game
“You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael Marcus 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.”
”The game taught me the game. And it didn’t spare me the rod while teaching.”
- Jesse Livermore
III. Successful Trading is 100% Psychology
“The most important organ in the body as far as the stock market is concerned is the guts, not the head. Anyone can acquire the know-how for analyzing stocks
“Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.”
- Ed Seykota
IV. It’s Not the Market. It’s You.
“The markets are the same now as they were five or ten years ago because they keep changing — just like they did then.”
- Ed Seykota
“I have been trading for decades and I am still standing. I have seen a lot of traders come and go. They have a system or a program that works in some specific environments and fails in others. In contrast, my strategy is dynamic and ever evolving. I constantly learn and change.”
- Thomas Busby
V. Don’t Trade Just For the Money
“Money doesn’t make you happy. I now have $50 million but I was just as happy when I had $48 million.”
“Give a man $100 million, and you create a frustrated billionaire.”
To read my e-letter from last week, please click here. I also invite you to comment about my column in the space provided below.