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In today’s episode, you’ll discover market wizards’ 5 secrets to trading success (you don’t want to miss this out).
So tune in now…
Resources
Ed Seykota: 19 Trading Lessons from a Market Wizard
Paul Tudor Jones — 21 Trading Rules That Have Stood the Test of Time
Transcript
Hey, hey, what’s up my friend? In today’s episode, I want to share with you market wizards’ 5 secrets to trading success.
Here’s the deal, Market Wizards is one of the first few books that I’ve read when I got started in trading. I read the entire series, the Original Market Wizards, the New Market Wizards, the Stock Market Wizards, the Hedge Fund Market Wizards.
I’ve even read some of those books a couple of times. What I realized is that after studying many different types of successful traders, 5 common things are appearing over and over again, no matter what type of trader they are.
And I’m gonna share with you what these 5 secrets are.
Secret #1: Find a trading strategy that suits you
Here’s the thing, traders often think there’s a best trading strategy out there and that there’s only a certain way to make money from the markets, or only certain markets that can be traded and some markets that cannot be traded, etc.
But it’s not true. If you look and study this group of Market Wizards, you’ll realize that their trading strategies really vary from trader to trader.
For example, you’ve got Paul Tudor Jones who’s a macro-economic trader. He looks at the macro factors in the world and then makes trading decisions out of them.
Then you have Marty Schwartz. He is a day trader, he trades very short term just relying on technical analysis and nothing else.
Then you have Ed Seykota. He’s a trend follower, he rides trends for weeks or even months across the different futures market.
There’re many different types of trading styles from these traders, and they found success with them. That tells you that there are many ways to make money from the market and you got to find a way that suits you best.
My recommendation is if you have not read Market Wizards, then go and read it, study these traders, study their trading methodologies and ask yourself which of this trading methodologies suit you.
Then you can go down to maybe Amazon or Google to find books about them, read those books and dive in deeper to those trading strategies and techniques, and see if they’re something that will work for you.
So that’s a good way to get started.
Secret #2: Manage your risk
All of the market wizards manage their risk. I have not come across any who takes risk management as a joke. All of them treated it seriously. In fact, that’s the most consistent denominator across these group of market wizards.
They have an exit plan, they always plan the downside and they have different ways of doing it. Some use stop loss, some use time stop, some rebalance their portfolio and stuff like that.
But whatever the case is they always plan their downside. They always plan how much they can potentially lose.
So number two, manage your downside and manage your risk.
Secret #3: Give yourself ample time
If you read Market Wizards, you’ll know that it takes time for them to find success.
Often, traders or retail traders think that a weekend course can instantly allow them to start making money, or they can instantly make money maybe through selling options, to have recurring passive income, etc.
Goodness! The best of the best market wizards out there spend years honing their craft, spend years trying to become a profitable trader.
For example, Marty Schwartz, he mentioned something along these lines (which I could be wrong), but he said:
“I spent nine long years as a fundamental analyst. And I didn’t make a single thing. On my 10th year, I adopted technical analysis and I became a profitable trader ever since.”
This tells you that the learning curve is steep. I’m not trying to bash fundamental analysis and claim that it’s useless. But for a market wizard like Marty Schwartz, that didn’t work for him.
And it took him 9 long years to grind, to hustle, and put in the hard work before he found trading success. If you are looking at trading only for the next 1, 2 or 3 years, then maybe this is not for you.
You’ve got to look at it for the next 5, 10, 20 years because this is where the big money is made, where you compound your returns. (I’ll talk about big money later on.)
But really, give yourself ample time in trading. If you want to be a doctor, you will spend at least 6 years in medical school and definitely a few more years being a resident before you can finally be a qualified doctor.
Similarly, for trading, you can’t expect a miracle within a few weeks or a few months, or after a weekend course.
Next…
Secret #4: Be 100% committed
A number of these market wizards are the go-all-in type. I’ve read a few cases where they actually borrow money from family and friends to fund their trading account and they just went all-in. I’m happy for them because they found success eventually.
But I don’t recommend you borrowing money from people to go all-in into trading because you might not end up successful like them. So don’t do that.
But the mindset that I want you to have, is to go all-in and give it everything that you have.
Study the markets to learn how to become a better trader. Be a responsible trader and take accountability, record your trades, your journal your trades, you improve your edge, that’s what I want you to go 100% in.
Not borrowing money from people, but the mindset to go all-in to do the hard work. That’s important. No matter what you do, whether it’s trading, whether it’s starting a business, whether it’s trying to win the Olympics, you have to go all-in.
That’s how a professional trader would think about trading.
And finally…
Secret #5: Big money is made by managing other people’s money
I’ve studied all these market wizards and the big money is made not by trading their own account. It’s made by managing other people’s money.
Paul Tudor Jones, Ray Dalio, George Soros, all own their own hedge funds. They all manage other people’s money and they’re all billionaires. That’s the secret if you want to really want to make big money out.
There are market wizards out there who sell courses, and it’s not wrong. But if you really want to make big money, then it’s through managing other people’s money.
That’s a route that’s not for everyone. Some people don’t want to go down the route of managing people’s money because there are a lot of regulations, red tapes and hurdles to overcome.
Some might simply be happy with trading for himself, some might be happy with just having an online following or a tribe where they offer courses to help other traders.
There is no right or wrong way, it’s all up to you, which kind of ties back to point number one, where you’ve got to find a trading strategy that suits you and the trading outcome that you want.
Do you want to be someone who manages billions of dollars? Or do you want to be someone who is happy just trading for himself? Or do you want to be someone who is looking to inspire the next generation of traders, etc.?
Here’s a quick recap…
Recap
- Find a trading strategy that suits you
- Always manage your downside
- Give yourself ample time because trading is not a get-rich-quick scheme
- Be 100% committed
- Manage other people’s money if you really want to make big money
With that said, I wish you good luck and good trading. I’ll talk to you soon.
