ZF Capital

It took me over a decade to figure out my natural direction. I’d suggest that you take the time to seriously ponder whether the path you are on is the one you want to be on. Perhaps your journey will then be shortened.

– Jack Schwager, The New Market Wizards

Hope is a dirty word for a trader, not only in regards to procrastinating in a losing position, hoping the market will come back, but also in terms of hoping for a reaction that will allow for a better entry in a missed trade. If such trades are good, the hoped-for reaction will not materialize until it is too late. Often the only way to enter such trades is to do so as soon as a reasonable stop-loss point can be identified.

– Jack Schwager, The New Market Wizards

It is critical to choose a method that is consistent with your own personality and comfort level. If you can’t stand to give back significant profits, then a long-term trend-following approach– even a very good one– will be a disaster, because you will never be able to follow it. If you don’t want to watch the quote screen all day (or can’t), don’t try a day-trading method. If you can’t stand the emotional strain of making trading decisions, then try to develop a mechanical system for trading the markets. The approach you use must be right for you; it must feel comfortable.

– Jack Schwager, The New Market Wizards

Participants in the market may well be gambling. If you don’t have a method (i.e., and edge), then trading is every bit as much a gamble as betting in the casinos. But with a method, trading — or for that matter, even blackjack — becomes a business rather than gambling.

Fortunately for traders, whereas the casinos can bar players because they become too proficient, the market has no way of eliminating the skillful traders (other than behaving in a manner that seems to confound the greatest number of people the greatest amount of time). Therefore, if you can devise a method to beat the market, no exchange can come to you and say, “We’ve noticed that you’re making too much money. You can’t trade here anymore.”

Once you have a method, you still need money management to prevent an adverse streak from taking you out of the game. It is critical to keep in mind that even if you have the edge, you can still lose all your money. Therefore, the bet or trade size must be small enough to keep the probability of such an event very low.

– Jack Schwager, The New Market Wizards

Is trading success dependent on innate skills? Or is hard work sufficient? There is no question in my mind that many of the supertraders have a special talent for trading. Marathon running provides an appropriate analogy. Virtually anyone can run a marathon, given sufficient commitment and hard work. Yet, regardless of the effort and desire, only a small fraction of the population will ever be able to run a 2:12 marathon.

Similarly, any one can learn to play a musical instrument. But again, regardless of work and dedication, only a handful of individuals possess the natural talent to become concert soloists. The general rule is that exceptional performance requires both natural talent and hard work to realize its potential. If the innate skill is lacking, hard work may provide proficiency, but not excellence.

In my opinion, the same principles apply to trading. Virtually anyone can become a net profitable trader, but only a few have the inborn talent to become supertraders. For this reason, it may be possible to teach trading success, but only up to a point. Be realistic in your goals.

– Jack Schwager, The New Market Wizards

Whether you win or lose, you are responsible for your own results. Even if you lost on your broker’s tip, an advisory service recommendation, or a bad signal from the system you bought, you are responsible because you made the decision to listen and act. I have never met a successful trader who blamed others for his losses.

– Jack Schwager, The New Market Wizards

Shortcuts rarely lead to trading success. Developing your own approach requires research, observation, and thought. Expect the process to take lots of time and hard work. Expect many dead ends and multiple failures before you find a successful trading approach that is right for you. Remember that you are playing against tens of thousands of professionals. Why should you be any better? If it were that easy, there would be a lot more millionaire traders.

– Jack Schwager, The New Market Wizards