Market Wizards Quotes

Being wrong is acceptable, but staying wrong is totally unacceptable.

Michael Jordan didn’t become a great basketball player because he wanted to do product endorsements. Van Gogh didn’t become a great painter because he dreamed that one day his paintings would sell for $50 million.

Make the calls. Maybe they won’t talk to you, but I guarantee that if you don’t call, they won’t talk to you.

Actually, the best traders have no ego.

To compound your money, and not your mistakes, your goal is to buy on the way up—not on the way down.

there really is no intelligent reason to increase your trading size if your positions are showing losses.

Five minutes in an old book quickly reveals that most of what is being sold today as new insights into human behavior is merely the rediscovery of knowledge we have had for centuries.

You just stay focused on what you have to do. Exactly.

Wozniak would be the gentle wizard coming up with a neat invention that he would have been happy just to give away, and Jobs would figure out how to make it user-friendly, put it together in a package, market it, and make a few bucks.

Either go at it full force or don’t go at it at all. Don’t dabble.

Traders focus almost entirely on where to enter a trade. In reality, the entry size is often more important than the entry price

If instead of saying, “I’m going to do this trade,” you say, “I’m going to watch myself do this trade,” all of a sudden you find that the process is a lot easier.

If you don’t stay with your winners, you are not going to be able to pay for the losers.

hold on to your winners and cut your losers.

it’s better to lose correctly than to win incorrectly.

I fear not the man that has practiced 10,000 kicks once, but I fear the man that has practiced one kick 10,000 times. —Bruce Lee

You don’t want to have a position before a move has started. You want to wait until the move is already under way before you get into the market.

The difference between interest and commitment is the will not to give up. When you truly commit to something, you have no alternative but success.

it’s not about being right; it’s about making money.

One of my rules was to get out when the volatility and the momentum became absolutely insane.

When I see a picture like the 1861 cotton market, I ask myself, “What caused that? Why did that happen?” Then I try to figure it out. From that, you learn an enormous amount. In

It is impossible to consistently outperform the market by using any information that the market already knows.

Can you give me an example of how the lack of real world experience would hurt the researcher?

traders shouldn’t stick their heads in the sand and just hope it gets better.

If you want to be the best, you have to do things that other people are unwilling to do. —Michael Phelps, winner of 17 Olympic medals

Growth comes at the expense of comfort.

Losers average losers.

Those who succeed big at anything all have the same attitude: You keep going until it happens or you die trying. Quitting is not an option.

Specialists get paid well, while those who know a little about many things make good conversation at parties.

Everyone plays for someone, and Kris didn't play for the big dogs like Sabbath and Zep, she didn't play for the ones who made it, for the wizards who figured out how to turn their music into cars and cash and mansions and an endless party where no one ever gets old. She played for the losers. She played for the bands who never met their rainmaker, the musicians who drank too much and made all the wrong decisions. The singers who got shipped off to state hospitals because they couldn't handle living in the shadow of Black Iron Mountain. She played for the ones who recorded the wrong songs at the right times, and the right songs when it was wrong. The ones who blew it all recording an album that didn't fit the market, the ones who got dropped by their own labels, the singers who moved back home to live in their mom's basements.

She felt the English were themselves to blame for her feelings. They had spent a century relentlessly marketing their detectives and wizards and nannies, and they had to live with the results. Her

Another way to determine the direction of the general market is to focus on how the leading stocks are performing. If the stocks that have been leading the bull market start breaking down, that is a major sign the market has topped. Another important factor to watch is the Federal Reserve discount rate. Usually, after the Fed raises the rate two or three times, the market runs into trouble.

Virtually every superperformance phase in big, winning stocks occurred while the stock price was in a definite price uptrend. In almost every case, the trend was identifiable early in the superperformance advance.

I discovered that you can’t train people how to trade by just imparting knowledge. The key to trading success is emotional discipline. Making money has nothing to do with intelligence. Think of all the bright people that choose careers on Wall Street. If intelligence were the key, there would be a lot more people making money trading.

I figured out that for every dollar I made trading, 30 percent was going to the government, 30 percent was going to support my planes, and 20 percent was going to support my real estate. So I finally decided to sell everything.

The sound of an English accent distracted her and lifted her spirits. She associated English accents with singing teapots, schools for witchcraft, and the science of deduction. This wasn't, she knew, terribly sophisticated of her, but she had no real guilt about it. She felt the English were themselves to blame for her feelings. They had spent a century relentlessly marketing their detectives and wizards and nannies, and they had to live with the results.

My goal on Wall Street was never to get rich but to stay in business. There’s a big difference. If you’re out of the business, you can never get rich. That’s why you have to be especially cautious when you’re trading a larger position size.

One of my favorite patterns is the tendency for the markets to move from relative lows to relative highs and vice versa every two to four days. This pattern is a function of human behavior. It takes several days of a market rallying before it looks really good. That’s when everyone wants to buy it, and that’s the time when the professionals, like myself, are selling. Conversely, when the market has been down for a few days, and everyone is bearish, that’s the time I like to be buying.

I feel my success comes from my love of the markets. I am not a casual trader. It is my life. I have a passion for trading. It is not merely a hobby or even a career choice for me. There is no question that this is what I am supposed to do with my life.

Charting is a little like surfing. You don’t have to know a lot about the physics of tides, resonance, and fluid dynamics in order to catch a good wave. You just have to be able to sense when it’s happening and then have the drive to act at the right time.

Buffett being penalized for underperforming versus managers riding the long side of the dot-com bubble is a perfect illustration of a common investor mistake—failing to realize that often the managers with the highest returns achieve those results because they’re taking the most risk, not because they have the greatest skill.

You can use charts to give you a plus or minus toward your view, but you can never start with the chart.

If trading (or any other job or endeavor) is a source of anxiety, fear, frustration, depression, or anger, something is wrong—even if you are successful in a conventional sense,

you have enough monkeys randomly striking keyboard keys (they have recently traded in their typewriters for PCs), one of them will eventually type Hamlet

strong opinions, weakly held.

Debussy’s quote that “Music is the space between the notes,” because an analogous statement about trading—Trading is the space between trades—is so strikingly apropos.

Excessive worrying about taxes usually leads to unsound investments in the hope of achieving a tax shelter.

I am always thinking about losing money as opposed to making money.

The best ads are about the customer and how the product will change his life.

Failure Is Not Predictive

Even a poor trading system could make money with good money management.

In trading, 80 percent of your profits come from 20 percent of your ideas.

The fate of your company is in the hands of your people. Train them well.

Those who want to win and lack skill can get someone with skill to help them. I

Indeed, I have found that confidence is one of the most consistent traits exhibited by the successful traders I have interviewed.

But the fact is: The people who are really successful in trading are tremendously hard workers.

I succeeded because I didn’t know that I couldn’t.

A new idea is delicate. It can be killed by a sneer or a yawn; it can be stabbed to death by a quip and worried to death by a frown on the right man's brow.—Charles Brower.

You want to get on board when institutional money is pouring into a stock and lifting it significantly higher.

67% of all shoppers intend to return home with the item they are shopping for, but that only 24% actually do so.

The idea that trading success is tied to finding some specific ideal approach is misguided. There is no single correct methodology.

Generals always fight the last war,

Not losing big is the single most important factor for winning big. As a speculator, losing is not a choice, but how much you lose is.

If you don’t have a plan, you will surely experience paralyzing emotions and second-guess yourself at key decision-making moments.

The worst thing that can happen to you in the markets is being right and still losing money. That’s the danger in buying on rallies and selling on breaks these days.

Luck is a short-term phenomenon. In the long run, luck is for losers.

Big market price changes happen when lots of people are forced to reevaluate their prejudices, not necessarily when the world actually changes. — Colm O'Shea

Mastery requires sacrifices; therefore, something must come first. Make a list, prioritize, and pursue accordingly: Focus, achieve, and then move to the next big goal.

Trading is serious business with real money on the line. Why would you go into it without a well-thought-out plan of action? Yet, most people do.

It’s not enough to have knowledge, a dream, or passion; it’s what you do with what you know that counts. The best time to get started is now!

the CLUM principle; comfortable equals less and uncomfortable equals more.

Excellence and achievement have a structure that can be copied. By modeling successful people, we can learn from the experience of those who have already succeeded.

As I pass through my incarnations in every age and race, I make my proper prostrations to the Gods of the Market Place. Peering through reverent fingers I watch them flourish and fall, And the Gods of the Copybook Headings, I notice, outlast them all. We were living in trees when they met us. They showed us each in turn That Water would certainly wet us, as Fire would certainly burn: But we found them lacking in Uplift, Vision and Breadth of Mind, So we left them to teach the Gorillas while we followed the March of Mankind. We moved as the Spirit listed. They never altered their pace, Being neither cloud nor wind-borne like the Gods of the Market Place, But they always caught up with our progress, and presently word would come That a tribe had been wiped off its icefield, or the lights had gone out in Rome. With the Hopes that our World is built on they were utterly out of touch, They denied that the Moon was Stilton; they denied she was even Dutch; They denied that Wishes were Horses; they denied that a Pig had Wings; So we worshipped the Gods of the Market Who promised these beautiful things. When the Cambrian measures were forming, They promised perpetual peace. They swore, if we gave them our weapons, that the wars of the tribes would cease. But when we disarmed They sold us and delivered us bound to our foe, And the Gods of the Copybook Headings said: "Stick to the Devil you know." On the first Feminian Sandstones we were promised the Fuller Life (Which started by loving our neighbour and ended by loving his wife) Till our women had no more children and the men lost reason and faith, And the Gods of the Copybook Headings said: "The Wages of Sin is Death." In the Carboniferous Epoch we were promised abundance for all, By robbing selected Peter to pay for collective Paul; But, though we had plenty of money, there was nothing our money could buy, And the Gods of the Copybook Headings said: "If you don't work you die." Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew And the hearts of the meanest were humbled and began to believe it was true That All is not Gold that Glitters, and Two and Two make Four And the Gods of the Copybook Headings limped up to explain it once more. As it will be in the future, it was at the birth of Man There are only four things certain since Social Progress began. That the Dog returns to his Vomit and the Sow returns to her Mire, And the burnt Fool's bandaged finger goes wabbling back to the Fire; And that after this is accomplished, and the brave new world begins When all men are paid for existing and no man must pay for his sins, As surely as Water will wet us, as surely as Fire will burn, The Gods of the Copybook Headings with terror and slaughter return!

If you find yourself getting stopped out of your positions over and over, there can only be two things wrong: 1. Your stock selection criteria are flawed. 2. The general market environment is hostile.

relationships. For example, if the S&P was moving in an inverse lockstep to the bonds, and bonds were down for the day, but the S&P was not responding on the upside, it would tell me I should sell the S&P.

The perspective I have on it now is that when I was trading my own account, it was like trading monopoly money. My trading capital was just something I kept score with. I detached myself emotionally from it.

Kovner lists risk management as the key to successful trading; he always decides on an exit point before he puts on a trade. He also stresses the need for evaluating risk on a portfolio basis rather than viewing the risk of each trade independently. This is absolutely critical when one holds positions that are highly correlated, since the overall portfolio risk is likely to be much greater than the trader realizes.

Undertrade, undertrade, undertrade is my second piece of advice. Whatever you think your position ought to be, cut it at least in half. My experience with novice traders is that they trade three to five times too big.

Investing styles may differ among successful market players, but without exception, winning stock traders share certain key traits required for success. Fall short in those qualities and you will surely part ways with your money.

There is no single market secret to discover, no single correct way to trade the markets. Those seeking the one true answer to the markets haven’t even gotten as far as asking the right question, let alone getting the right answer.

If I try to teach you what I do, you will fail because you are not me. If you hang around me, you will observe what I do, and you may pick up some good habits. But there are a lot of things you will want to do differently. Colm O’Shea

What can a losing trader do to transform himself into a winning trader? A losing trader can do little to transform himself into a winning trader. A losing trader is not going to want to transform himself. That’s the kind of thing winning traders do.

When asked what he thought the average trader did wrong, Tom Baldwin, who in the days before electronic trading was the largest individual trader in the Treasury bond pit, replied, “They trade too much. They don’t pick their spots selectively enough.

Now it’s no longer sufficient to assume that because you trade with the trend, you’ll make money. Of course, you still need to be with the trend, because it puts the percentages in your favor, but you also have to pay a lot more attention to where you’re getting in and out.

I find that major trends are now frequently preceded by a sharp price change in the opposite direction. I still make my judgments as to probable price trends based on overall market action, as I always did. However, with a few exceptions, I now buy on breaks and sell on rallies.

Investors often make the mistake of equating manager performance in a given year with manager skill. In some instances, more skilled managers will underperform because they refuse to participate in market bubbles. In fact, during market bubbles, the best performers are often the most imprudent rather than the most skilled managers.

Rescuing people from the results of their own foolishness is really what customers service is all about. Customers rarely obey the rules. They expect you to rescue them whenever they do something stupid. Will you be a “rescuer,” known far and wide for customer service, or will you steadfastly insist that your customers follow the proper procedures?

So, one of your shortcomings has been in letting your rational assessment of a situation keep you from participating in a psychologically driven trade. Yes, failing to participate in markets when the fundamentals are less important than the psychology. But how do you recognize that type of situation? Well, that’s the key question, isn’t it? [He laughs.]

I have what I call my Evel Knievel screen. These are companies that are trying to jump the Grand Canyon and probably won’t make it. There are only two conditions for the screen. First, the company is trading at more than five times book value. Second, the company is losing money. My job is to figure out which stocks won’t make it across the Grand Canyon and then go short those stocks.

She associated English accents with singing teapots, schools for witchcraft, and the science of deduction. This wasn’t, she knew, terribly sophisticated of her, but she had no real guilt about it. She felt the English were themselves to blame for her feelings. They had spent a century relentlessly marketing their detectives and wizards and nannies, and they had to live with the results.

Coming back again to the investment bank world, they have meetings and all sorts of stuff going on that suck up time. Traders would all complain about the waste of time, but what it actually meant was that it limited the amount of time they were in front of their screens staring at their positions. You don’t want to be sitting in front of your screen and staring at market prices for 12 hours a day. Staring at the price is not going to tell you very much.

About every two generations—roughly every forty-seven to sixty years—there’s a deflationary market. For example, in respect to the commodity markets, we’re currently in a deflationary phase that began in 1980. Over the past two hundred years, these deflationary phases have typically lasted between eight and twelve years. Since we’re currently in the twelfth year of commodity price deflation, I think we’re very close to a major bottom in commodity prices.

One of the jobs of a good trader is to imagine alternative scenarios. I try to form many different mental pictures of what the world should be like and wait for one of them to be confirmed. You keep trying them on one at a time. Inevitably, most of these pictures will turn out to be wrong—that is, only a few elements of the picture may prove correct. But then, all of a sudden, you will find that in one picture, nine out of ten elements click. That scenario then becomes your image of the world reality.

So Jobs and Markkula enlisted Gerry Roche, a gregarious corporate headhunter, to find someone else. They decided not to focus on technology executives; what they needed was a consumer marketer who knew advertising and had the corporate polish that would play well on Wall Street. Roche set his sights on the hottest consumer marketing wizard of the moment, John Sculley, president of the Pepsi-Cola division of PepsiCo, whose Pepsi Challenge campaign had been an advertising and publicity triumph. When Jobs gave a talk to Stanford business students, he heard good things about Sculley, who had spoken to the class earlier. So he told Roche he would be happy to meet him.

So Jobs and Markkula enlisted Gerry Roche, a gregarious corporate headhunter, to find someone else. They decided not to focus on technology executives; what they needed was a consumer marketer who knew advertising and had the corporate polish that would play well on Wall Street. Roche set his sights on the hottest consumer marketing wizard of the moment, John Sculley, president of the Pepsi- Cola division of PepsiCo, whose Pepsi Challenge campaign had been an advertising and publicity triumph. When Jobs gave a talk to Stanford business students, he heard good things about Sculley, who had spoken to the class earlier. So he told Roche he would be happy to meet him.

At Bridgewater, criticism is encouraged, including subordinates criticizing superiors. Do any of your employees ever criticize you? All the time. Can you give me an example? I was in a client meeting with a big European pension fund that was visiting managers in Connecticut. After the meeting, the salesperson criticized me for being inarticulate, running on too long, and adversely affecting the meeting. I asked others who had been at the meeting for their opinions. I was given a grade of “F” by one of our new analysts who was just one year out of school. I loved it because I knew they were helping me improve and that they understood that was what they were supposed to be doing.

Recipe for a Perfect Wife, the Novel INGREDIENTS 3 cups editors extraordinaire: Maya Ziv, Lara Hinchberger, Helen Smith 2 cups agent-I-couldn’t-do-this-without: Carolyn Forde (and the Transatlantic Literary Agency) 1½ cup highly skilled publishing teams: Dutton US, Penguin Random House Canada (Viking) 1 cup PR and marketing wizards: Kathleen Carter (Kathleen Carter Communications), Ruta Liormonas, Elina Vaysbeyn, Maria Whelan, Claire Zaya 1 cup women of writing coven: Marissa Stapley, Jennifer Robson, Kate Hilton, Chantel Guertin, Kerry Clare, Liz Renzetti ½ cup author-friends-who-keep-me-sane: Mary Kubica, Taylor Jenkins Reid, Amy E. Reichert, Colleen Oakley, Rachel Goodman, Hannah Mary McKinnon, Rosey Lim ½ cup friends-with-talents-I-do-not-have: Dr. Kendra Newell, Claire Tansey ¼ cup original creators of the Karma Brown Fan Club: my family and friends, including my late grandmother Miriam Christie, who inspired Miriam Claussen; my mom, who is a spectacular cook and mother; and my dad, for being the wonderful feminist he is 1 tablespoon of the inner circle: Adam and Addison, the loves of my life ½ tablespoon book bloggers, bookstagrammers, authors, and readers: including Andrea Katz, Jenny O’Regan, Pamela Klinger-Horn, Melissa Amster, Susan Peterson, Kristy Barrett, Lisa Steinke, Liz Fenton 1 teaspoon vintage cookbooks: particularly the Purity Cookbook, for the spark of inspiration 1 teaspoon loyal Labradoodle: Fred Licorice Brown, furry writing companion Dash of Google: so I could visit the 1950s without a time machine METHOD: Combine all ingredients into a Scrivener file, making sure to hit Save after each addition.

Internet subscription for $59—seemed reasonable. The second option—the $125 print subscription—seemed a bit expensive, but still reasonable. But then I read the third option: a print and Internet subscription for $125. I read it twice before my eye ran back to the previous options. Who would want to buy the print option alone, I wondered, when both the Internet and the print subscriptions were offered for the same price? Now, the print-only option may have been a typographical error, but I suspect that the clever people at the Economist's London offices (and they are clever—and quite mischievous in a British sort of way) were actually manipulating me. I am pretty certain that they wanted me to skip the Internet-only option (which they assumed would be my choice, since I was reading the advertisement on the Web) and jump to the more expensive option: Internet and print. But how could they manipulate me? I suspect it's because the Economist's marketing wizards (and I could just picture them in their school ties and blazers) knew something important about human behavior: humans rarely choose things in absolute terms. We don't have an internal value meter that tells us how much things are worth. Rather, we focus on the relative advantage of one thing over another, and estimate value accordingly. (For instance, we don't know how much a six-cylinder car is worth, but we can assume it's more expensive than the four-cylinder model.) In the case of the Economist, I may not have known whether the Internet-only subscription at $59 was a better deal than the print-only option at $125. But I certainly knew that the print-and-Internet option for $125 was better than the print-only option at $125. In fact, you could reasonably deduce that in the combination package, the Internet subscription is free! “It's a bloody steal—go for it, governor!” I could almost hear them shout from the riverbanks of the Thames. And I have to admit, if I had been inclined to subscribe I probably would have taken the package deal myself. (Later, when I tested the offer on a large number of participants, the vast majority preferred the Internet-and-print deal.)

He lived in Seattle, so he was grateful that only the pavement was wet and not the air itself. His computer was still back at home, so he couldn’t simply teleport home. Instead, he walked home, eating a bad Boston Market meatloaf sandwich, thinking.

If you can’t take a small loss, sooner or later you will take the mother of all losses.” — The New Market Wizards