Unknown Market Wizards

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The Sharpe ratio doesn’t distinguish between upside and downside volatility, making it an inadequate measure for many traders. The Sartino ratio offers a more accurate measure of volatile trading strategies.



PETER BRANDT:


Bullish or bearish mean little to nothing—it’s all about someone’s time horizon and the size of the move they’re looking for in the market.


There are two parts to trading: direction and timing. If you’re wrong about one, you’re wrong about the trade.


Liquidate any trade that’s a loser by the end of the week.


Adding to winning trades increases the chance they can turn into losers.


If you speculate with a loss, you end up with more of a loss.


As a trader, you need strong opinions weakly held.


Learn not to take a loss personally.


Don’t follow anyone else’s trades because you won’t have the conviction to stick to them during losing streaks.


Winning streaks can lead to complacency, which leads to losing streaks.



JASON SHAPIRO:


Happiness is the feeling that the future will be better than the past.


Fading bad traders and economic pundits can be just as useful as following a successful trader’s advice.


Nobody’s smarter than the market.


Never violate your stop-loss.


By definition, everybody can’t make outsized gains, so if everyone is doing something, the only way to make outsized returns is by being on the other side.


If everyone’s calling something a bubble, everyone’s probably not invested in it and it could easily continue higher.



RICHARD BARGH:


If your mental state isn’t right, you won’t succeed in trading.


What stops traders from performing well is themselves.


You have to trade your personality.


If a trade doesn’t work right away, look to tighten your risk or get out.


To be a good reader, you have to have a high degree of self-awareness. You have to be able to see your flaws and your strengths and deal effectively with both.


Opportunities are dispersed so you can’t force yourself into making profits when they tend to come in waves or during very select periods.


Missed trades can be more damaging than bad trades.


The way a trade idea is implemented is often more important than the trade idea itself.



AMRIT SALL:


90% of the time, the market won’t provide any meaningful opportunities, and 10% of the time, you’ll make 90% of your profits.


After methodology, your state of mind is the most critical aspect of your trading.


Successful traders take care of the downside and know the upside will take care of itself.


Each trade is mutually exclusive so you should always be ready to pull the trigger regardless of what your previous trades were.


Something is only a failure if you miss the opportunity to learn from it.


Successful trading is the art of doing nothing. It’s what you don’t do between the real trade opportunities that will determine your success over the long run.


Trading is like tracking and hunting an animal. Bullets are scarce and you only want to strike when you think you have clear shot.


Markets don’t provide opportunities on a consistent schedule, so you can’t expect consistent results or profits.



DALIJIT DHALIWAL:


Indicators are all derivatives of price and, therefore, can’t give you more information than price itself.


Trading isn’t about being right, it’s about making money.


Never set a monetary stop. Set your stop-loss at a point where your trade hypothesis is invalidated.


Identify your edge in markets and stick to it.


Document all your trades in a journal to ensure you can learn from your mistakes and identify your strengths.


Define exactly how you will manage a trade before you enter it.


Seek clarity over certainty.



JOHN NETTO:


Risk taking with a process leads to success. Risk taking on impulse leads to regret.


Use your emotions as contrarian indicators.


Never try to make your money back after a losing trade. When you lose money in a market, let it go.


Unexpected moves contrary to big news events are often a sign there is a strong trend starting or in place.



JEFFREY NEUMANN:


When the average person starts talking about a trade, it’s probably time to get out.


Look to take profits when liquidity or price goes vertical.


Buying downward trend breakouts of stocks with a catalyst or in a sector primed for a big move is a great way to generate outsized risk-to-reward opportunities.


Do the research on relatively unknown companies to find the gems that have significant growth potential. You’ll be earlier than the rest of the market and have the conviction to hold during its rise.



CHRIS CAMILLO:


Attempt to profit off of Wall Street’s biases that blind them from trends the average person sees well before the out-of-touch investor.


Be patient and wait for the highest conviction trades.


Being observant and attuned to new behavioral trends—both in your everyday life and on social media—can be an excellent source for uncovering trading opportunities.


A losing trade is not a bad trade if it follows a methodology that works in the long run.


Confidence in your strategy is a major driver of its success.



MARSTEN PARKER:


If you’re trading multiple systems that are well differentiated and diversified, you can yield better results because the strategies act as hedges to the others.


It’s more effective to build a diverse collection of simple systems than to keep adding rules and optimizing a single system.


Regardless of the system, you need a rule for when to exit a losing trade, even if it leads to losing money in the long term. Managing your risk and staying alive is far more important.


Trading systems don’t keep an edge forever. You need to how to evolve with the market and know when to abandon certain trading systems.


Any trading system can be made into a profitable one through optimization, but optimization can only help marginally, it won’t transform it.



MICHAEL KEAN:


Cut your position size after every losing trade.


You can hedge a long-equities portfolio to achieve greater returns by supplementing it with a thoughtful short-dominate trading strategy.


Don’t let a period of strong performance go to your head.


Important fundamental news that moves price in the opposite direction of expected price action can often represent a critical signal.



PAVEL KREJCI:


Only take the highest conviction trades, even if that means sitting on your hands 95% of the time.


A more profitable strategy isn’t always the best strategy. You need to know what level of drawdown you are mentally capable of withstanding regardless of a strategy’s ultimate return.


Winning traders embrace their mistakes to learn from them; losing traders find any reason they can to not take ownership of their losing trades.


Find a trading methodology that works with your personality. 



CONCLUSION:


  1. There is no single true path to trading.
  2. Find a trading strategy consistent with your personality.
  3. Be open to changing your strategy to find the right one.
  4. Keep a trading journal.
  5. Categorize your trades.
  6. Know your edge in the market.
  7. Learn from your mistakes.
  8. Strive for asymmetric trades and profits.
  9. Develop a system to manage your risk.
  10. Choose meaningful stop-losses.
  11. You don’t have to wait for a stop-loss to trigger.
  12. Don’t hold a losing trade over the weekend.
  13. Don’t speculate with a loss.
  14. Winning traders have a precise methodology.
  15. Only take trades consistent with your methodology.
  16. Be prepared to change your methodology.
  17. If you’re uncomfortable with something in your strategy, change it.
  18. How a trade idea is implemented is critical.
  19. Take larger positions on higher conviction trades.
  20. Don’t trade so much that fear guides your decisions.
  21. If you find yourself hoping a trade works, you are gambling, not trading.
  22. Don’t trade somebody else’s ideas.
  23. Distinguish between trade outcomes and trade decisions.
  24. Risk and return for trades should be dynamic and adjust to each trade.
  25. Human emotions are detrimental to trading.
  26. Guard against impulsive trades.
  27. Trades motivated by greed usually end badly.
  28. Don’t try to make your money back after bad trades.
  29. Don’t let a bad trade prevent you from taking a good one.
  30. Let your winning trades ride.
  31. If you are on the right side of euphoria or panic, liquidate or take profits.
  32. Guard against complacency after winning streaks.
  33. Have the flexibility to change your mind.
  34. Missed trades can be more painful and expensive than losing ones.
  35. Take a break when you’re out of sync with the markets.
  36. Counter than expected price action is an important signal.
  37. Trade to be profitable rather than right.
  38. Don’t expect consistency from the market or your returns.
  39. Be attuned to new behavioral trends.
  40. Trading systems sometimes stop working.
  41. Trading for a living is hard.
  42. Traders have to be committed to their work.
  43. Take responsibility for your own results.
  44. You need the patience to wait for the right trades and the patience to hold your winners.
  45. Mental capital is the most critical aspect of trading.
  46. Successful traders love what they do.


The efficient market hypothesis may be wrong, meaning it’s possible to make money through trading, but most people should act as if markets are efficient and simply invest in index funds.