Market Wizards - Interviews with Top Traders
Future And currencies
Michael Marcus-Blighting never strikes twice:
Michael Marcus was such a successful trader that his all-time profits were higher if compared to all his colleague’s earnings combined together. He had learnt from Ed Seykota, another legendary trader because Marcus wasn't such a great success initially.
During his first few trades, which he executed with a fellow colleague John, he lost money. First he bought soybean, then corn and then wheat. The outcome of his initial trades was negative.
The author firmly believes that everyone must start somewhere and be happy that they don't have huge amounts of money to start with. He also emphasises on the importance of taking your own decisions while trading. Even if you have friends who are doing great in markets, don't take their advice regarding specific stock picks because every trader has his own strengths and weaknesses.
If you keep taking advice, then you may end up picking wrong stocks from your friends list as well as yours. You also have to realise if you opt for this strategy, then you will never be able to become a good investor yourself one day.
Marcus also talks about the courage one must have to hold on to a position and accept the risks that are attached to it. If you are in a trade because of your friend, then you'll not be able to stick to it in adverse situations.
He believes that the best trades are the ones in which you have all 3 things working in favor of you:
1.The Fundamentals of the company
2.The Technicals of that company
3.The general market tone
Firstly, the fundamentals should signify that there is a demand-supply imbalance which can result in a major up or downturn.
Secondly, a chart must indicate that the market is moving in the direction that the fundamentals suggest.
Thirdly, When a news hits the market, it should be reflected in the psychological tone of the investors. When a trade meets all the criterias, one should enter a trade with 5-6 times the position size he/she was doing on his/her previous trades.
One of the rules of Michael was to close transactions when the volatility and momentum became absolutely insane. The more volatile a stock is, the more are your chances to book profits on it but at the same time, the more will be your chances of suffering losses on that trade. His advice to beginners is to always bet less than 5% of your money on any one idea.
When a stock doesn't go up in value in spite of wonderful news then you must go short on that stock.
He suggests that a person's gut feel is very important. Being a successful trader also takes courage; the courage to try, fail, succeed and also to keep on going when the going gets tough. This all comes down to experience.
All successful traders have a balanced life. A trader himself is willing to take in information that is difficult to accept emotionally but he knows is true. For fundamentals and market action, he confirms momentum from charts. He prefers trading in little stocks because they are not influenced by the big professional players. He also emphasizes the commitment to exit from every trade.