Stock Market Wizards
Stuart Walton: Back From The Abyss
Stuart Walton was not keen to be a trader. From being a cartoonist to a journalist, he finally landed on the equity desk.
He believed in giving 100% energy and enthusiasm to the market. After losing money because of tips and opinions, he decided to work all alone. He realized the importance of trading without any influence.
Walton believed that trading was the best way of business to acquire the comforts of life.
On several occasions, he lost nearly all his money due to emotional trading decisions.
All trading that he does now involves gut feeling. He believes that luck does play a part but one has to work to put himself in the position to be lucky.
He finds good companies that have an advantage in the market. The advantage could be because of good expected earnings or any other reason. These stocks can be identified by their behaviour. For some reason, the market blesses some stocks, while it doesn't go to other stocks, no matter how cheap they are.
He insists that finding the hardest thing is the right thing to do. For e.g. buying a high-flying stock or selling a stock that went down considerably.
To evaluate stocks, he follows only 25% of fundamentals and 25% of technicals to check linearity in its trend. Another 25% is evaluating how a stock responds to different information: macroeconomic events, news flows, etc. He also pays attention to a stock’s reaction when it reaches the round numbers like $20, $30, etc. He also checks how much positivity the stock has and how much ground it gives to negative news.
For e.g., if a stock responds poorly to negative news, then it hasn't been favoured by the market.
The last 25% is his gut feeling for the direction of the market as a whole.
His average holding position of a stock is that of a few weeks. He might trade in and out of the stock twice in the same day or maybe multiple times in a week just to ensure he is in the right trade. If he is not comfortable about it, he squares off the position.
He defines a trade to be successful if he has been able to catch a major part of the move, even if it is in several parts.
He feels that a sound strategy will work as long as you stick to it.
He strongly recommends keeping your egos aside, no matter how successful you are because it can put you out of business. Making mistakes is fine because it makes you realize that they can recur and helps you become more careful. Getting involved in illiquid stocks is another mistake people tend to make according to Walton.
He believes that traits of a successful trader include being unemotional, hardworking, and extremely disciplined.
The key elements for being successful are persistence, self-awareness, flexibility, and creating your own methodology.
He advises novice traders to either go for it seriously and with full dedication or not go for it at all.
Stuart Walton's story demonstrates that early failure doesn't prevent later success. It also shows the importance of developing your methodology and shutting out all other opinions.