Good investing is a peculiar balance between the conviction to follow your ideas and the flexibility to recognize when you have made a mistake.
I advise you to always use stops. I mean actually put them in, because that commits you to get out at a certain point. Another thing is that if a position doesn't feel right as soon as you put it on, don't be embarrassed to change your mind and get right out.
Investing is like poker. You should only play the good hands, and drop out of the poor hands, forfeiting the ante.
Fundamentals that you read about are typically useless as the market has already discounted the price. -I call them "funny-mentals." However, if you catch on early, before others believe, then you might have valuable "surprise-a-mentals"”
I used to try to will things to happen. My attitude was that I figured it out, therefore it can't be wrong. What is the ultimate rationalization of an investor in a losing position? "I’ll get out when I'm even." I became a winner when I was able to say, "To hell with my ego, making money is more important."
My Marine training helps in investing. They teach you never to freeze when you are under attack.
Generals always fight the last war. Portfolio managers always invest in the last bull market.
I have lived through or studied hundreds, possibly even thousands, of bull and bear markets. In every bull market, whether IBM or oats, the bulls always seem to come up with reasons why it must go on, and on, and on. It’s always the same cycle. My mother calls me up and says, “Buy me XYZ stock.” I ask her, “Why?” “Because the stock has tripled.” The whole process repeats itself on the downside.
The biggest public fallacy is that the market is always right. The market is nearly always wrong. I can assure you of that.
Be aware of change. Buy change. You should be willing to buy or sell anything. So many people say, “I could never buy that kind of stock.”
If you make 50% two years in a row and then lose 50% in the third year, you would actually be worse off than if you just put your money in a money market fund. Wait for something to come along that you know is right. Then take your profit, put it back in the money fund, and just wait again. You will come out way ahead of everybody else.
The biggest mistake I made was having a specific target of what I wanted out of an investment. The target should be determined by market analysis, not by the amount of money you want to make.
I don’t lose much on trades, because I wait for the exact right moment.
Your strategy has to be flexible enough to change when the environment changes. The mistake most people make is they keep the same strategy all the time. They say, “Damn, the market didn’t behave the way I thought it would.” Why should it? Life and the markets just don’t work that way.
I learned that an opinion isn’t worth that much. It is more important to listen to the market.
Most traders who fail have large egos and can’t admit that they are wrong. Even those who are willing to admit that they are wrong early in their career can’t admit it later on! Also, some traders fail because they are too worried about losing. I’m not afraid to lose. When you start being afraid to lose, you’re finished.
The psychological factor for investing has 5 areas. These include a well-rounded personal life, a positive attitude, the motivation to make money, lack of conflict [such as psychological hang ups about success], and responsibility for results.
The composite of a losing trader would be someone who is highly stressed and has little protection from stress, has a negative outlook on life and expects the worst, has a lot of conflict in her/her personality, and blames others when things go wrong. Such a person would not have a set of rules to guide their behavior and would be more likely to be a crowd follower. In addition, losing traders tend to be disorganized and impatient.
Many people actually want to lose on a subconscious level.
The realization that you are responsible for your results is the key to successful investing. Winners know they are responsible for their results; losers think they are not.
I think the leading cause of financial disablement is the belief that you can rely on the experts to help you. Investing requires an intense personal involvement.
Fundamentalists who say they are not going to pay any attention to the charts are like a doctor who says he’s not going to take a patient’s temperature.
In a bear market, you have to use sharp countertrend rallies to sell.
Place your stops at a point that, if reached, will reasonably indicate that the trade is wrong, not at a point determined primarily by the maximum dollar amount you are willing to lose.
The most important rule of investing is to play great defense, not great offense. Every day I assume every position I have is wrong. Always question yourself and your ability. Don't ever feel that you are very good. The second you do, you are dead. Always maintain your sense of confidence, but keep it in check.
You need discipline, patience, and courage. You must have a willingness to lose, but a strong desire to win.
I have a cousin who turned $5,000 into $100,000 in the option market. One day I asked him, “How did you do it?” He answered, “It is very easy. I buy an option and if it goes up, I stay in, but if it goes down, I don't get out until I am at least even.” I told him, "Look, I trade for a living, and I can tell you that strategy is just not going to work in the long run." In his next trade he put his money in Merrill Lynch options, only this time, it goes down, and down, and down. It wiped him out.
If you want to know where a market is going, all you have to do is this. (He threw his charts on the floor and jumped up on his desk.) Look at it, it will tell you!
If you diversify, control your risk, and go with the trend, it just has to work.
Pride is a great banana peel—as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions.
I tend to cut bad trades as soon as possible, forget them, and then move on to new opportunities. The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you follow these three rules, you may have a chance.