Investment & Financial Articles
Title: Learn from the Trader Legends
Author: Tom Meier
Article:
Learn from the Trader Legends! By Tom Meier
http://www.easy-trader.ch
What do the world's best Traders differently than the average
investor? Can the average investor learn from the Trader
Legend's success stories and their systems used? What do the
most famous Traders have in common that can be applied by the
average talented trader?
Before we will give some insights on those questions let's have
a look at some of the most successful Trader Legends:
ØNicolas Darvas turned an $ 36'000 account into $ 2'000'000 in
18 months!!!
ØEd Seykota, a Turtle Trader, turned $ 5'000 into $ 15'000'000 in 12
years!!!
ØJesse Livermore made several
multi-million dollar fortunes in the early 1900's
ØRichard
Dennis, another Turtle Trader, made between $ 100 and $ 200
million
ØGeorge Soros is believed to be one of the greatest
Trader of all time!!!
The results are quite impressive and some other amazing Traders
could be added easily to the list above. Why do these guys have
such tremendous results?
There are common factors, which can be observed through most of
the successful Trader Legends:
ØThey have a System which they strictly follow. ØMost of them
have a trend-following trading style. ØMost of them have a mid-
to long-term approach. ØThey have no fear and greed mentality.
Ø
They have absolute discipline and stick 100% to their system.
Ø
Their trades are fully planed; they are prepared for all
scenarios in advance. ØThey know that a system goes through bad
times and good times. Cut losses early and let profits run.
Ø
Their systems fit to their personality.
Some of these points sound logical and I see people nodding
their heads. But in reality the average investor behaves
completely different. Some of them burned their fingers over the
last three years and some even lost a fortune. Here are some
examples of observed behaviour patterns:
ØLosses are not cut early enough.
ØInvestment with a short-term
horizon become long-term horizon in hope of raising prices.
Ø
People listen to the advise of their investment Brokers and
Analysts.
ØPeople invest in hot stocks recommended by colleagues
of their colleagues.
ØPeople have no plan for their investments.
Ø
Money Management is not considered at all.
ØPeople use trading
styles which do fit their personality.
ØGreed and fear is
omnipresent.
What can average talented investors learn from the above and how
can the mistakes listed above be avoided? The following key
points can be learned from some of the most successful Trader
Legends:
ØEach investor has its own personality. Some of the investor
have a very aggressive trading style and are trading very
frequently. Some prefer stocks as other are more risk oriented
and invest in options. Others want only spend a minimum of
effort. An investor need to reflect on his profile and choose a
trading approach which fits his personality.
ØA trade needs to be completely planned in advance. People plan
a lot of their activities, e.g. when they go on holiday, when
they move house etc. But do they have a plan when they invest?
An investor needs to have a system that helps him to be prepared
for all scenarios of a trade. One needs to know in advance when
to buy, how much to buy, when to exit. Once a trade is executed
the price of the instrument (stock, option, bond etc.) cannot be
influenced by the normal private investor anymore.
ØThe most important component of a trading system is Money
Management? Surprised? Lots of investors and traders spend most
of their time developing a very sophisticated trade entry
system. But the entry strategy contributes only approximately
15% to the success of a Trading System based on academic
studies. The most important question of a Trading System is how
much to invest and how many positions to trade at the same time.
ØA 'can do' attitude is required to trade successfully. 99% of
the world's population probably has this dream of being
financially free, but only 5% have reached it. Why? Because with
phrases like ".it would be great, but I can't." or ".one day
perhaps I will win in the lottery, but until then I must work
hard." they have already lost.
For more information and a complete Stock Trading System based
on a modified Nicolas Darvas approach, see my web site shown
above.
You may freely reprint this article on your website or in your
newsletter provided this courtesy notice and the author name and
URL remain intact.
About the author:
Tom Meier is the author and publisher of the weekly "Free Darvas
trading Easy-Flash". This newsletter helps investors to
understand the Darvas trading method. The subscription is free
at: http:/www.easy-trader.ch or mailto: flash@easy-trader.ch
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