A “must reads” for all traders Jack Schwager’s Market Wizards and today we will take a look at one of the Market Wizards Richard Dennis, a commodities speculator once known as the “Prince of the Pit.”
By the early 1980s, Dennis was an overwhelming success turning less than $5,000 into more than $100 million. He and his partner, Eckhardt, had frequent discussions about their success and Dennis believed anyone could be taught to trade the futures markets while Eckhardt countered that Dennis had a special gift that allowed him to profit from trading. (Trading in the Zone refers to as the intuitive stage)
An experiment was set up by Richard Dennis to finally settle this debate.
Dennis would find a group of people he could teach then let them trade with real money. Dennis believed so strongly in his ideas that he would actually give the traders his own money to trade. The training would last for two weeks and could be repeated over and over. He called his students “turtles” after recalling turtle farms he had visited in Singapore and decided that he could grow traders as quickly and efficiently as farm-grown turtles.
- Trading has taught me not to take the conventional wisdom for granted. What money I made in trading is a testimony to the fact that the majority is wrong a lot of the time. The vast majority is wrong even more of the time. I’ve learned that markets, which are often just mad crowds, are often irrational; when emotionally overwrought, they’re almost always wrong.
- I don’t think trading strategies are as vulnerable to not working if people know about them, as most traders believe. If what you are doing is right, it will work even if people have a general idea about it. I always say you could publish rules in a newspaper and no one would follow them. The key is consistency and discipline.
- Almost anybody can make up a list of rules that are 80% as good as what we taught our people. What they couldn’t do is give them the confidence to stick to those rules even when things are going bad.
- You have to have mentally gone through the process of failure. I had a day during which I made every mistake known to modern man. I took too big risks. I panicked and sold at the bottom of every break. I had built my net worth up to about $4,000 coming into that day and I lost about $1,000 in two hours. It took me about three days to work through that experience emotionally, and I think it was the best thing that ever happened to me.
- For many traders, it doesn’t matter so much whether their first big trade is successful or not, but whether their first big profit is on the long or short side. Those people tend to perennial bulls or bears, and that is very bad. Both sides have to be equally OK.
- Don’t be misled by the day-to-day fluctuations in your equity. Focus on whether what you are doing is right, not on the random nature of any single trade’s or day’s outcome.
We’re the Plan in “Plan your Trade and Trade your Plan” – TraderJanie
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