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Trading Wisdom: Great Reminders

Q: Don’t take this the wrong way, because I greatly admire your site, but I find it hilarious when you quote Jim Rogers who uses about 90% fundamentals.
A: Fundamentals are useless. That said, we have read Rogers’ fundamentals-based books — which are great reads. He would have been a fantastic history teacher. There is no denying that Rogers the man has done what he says he does, but the question becomes can you emulate Rogers? Can ANYONE? No is the answer. Whether or not you can you emulate trend following is the real question.

Bull Market Euphoria

Right when you think the world has changed and something new has unfolded, we are reminded of great trading wisdom.

“Never confuse brilliance with a bull market.”
Paul Rubin

Fundamental Folly

“I always laugh at people who say, I’ve never met a rich technician. I love that! It is such an arrogant, nonsensical response. I used fundamentals for nine years and got rich as a technician.”
Marty Schwartz

“One evening, while having dinner with a fundamentalist, I accidentally knocked a sharp knife off the edge of the table. He watched the knife twirl through the air, as it came to rest with the pointed end sticking into his shoe. Why didn’t you move your foot? I exclaimed. I was waiting for it to come back up, he replied.”
Ed Seykota

Don’t Avoid Exit Strategies

“It was the same with all. They would not take a small loss at first but had held on, in the hope of a recovery that would let them out even. And prices had sunk and sunk until the loss was so great that it seemed only proper to hold on, if need be a year, for sooner or later prices must come back. But the break shook them out, and prices just went so much lower because so many people had to sell, whether they would or not.”
Jesse Livermore

Hope, Fear and Greed

“The spectator’s chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you, you hope that every day will be the last day and you lose more than you should had you not listened to hope. And when the market goes your way you become fearful that the next day will take away your profit, and you get out too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit.”
Jesse Livermore

“Every decade has its characteristic folly, but the basic cause is the same: people persist in believing that what has happened in the recent past will go on happening into the indefinite future, even while the ground is shifting under their feet.”
George J. Church

“What feels good is often the wrong thing to do.”
William Eckhardt

Do You Have Patience?

“It never was my thinking that made big money for me. It was always my sitting. Got that? My sitting tight!”
Jesse Livermore

Aim for Big Gains

“One common adage…that is completely wrongheaded is: You can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits.”
William Eckhardt

“The way to build [superior] long-term returns is through preservation of capital and home runs…When you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig.”
Stanley Druckenmiller

“The basic concept that applies to both poker and trading is that the primary objects is not winning the most hands, but rather maximizing your gains.”
Jeff Yass

Winning Is the Objective

Larry Hite described his conversation with a friend who couldn’t understand his absolute adherence to a mechanical trading system. His friend asked, “Larry, how can you trade the way you do? Isn’t it boring?” Larry replied, “I don’t trade for excitement; I trade to win.”

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