Trading Lessons from Michael Marcus
(Michael Marcus began trading by losing most of his money and he turned around after he put his life savings of 30,000$ to end up with 80,000,000$. He has been featured in the book 'Market Wizards' book, by Jake Schwager)
His advice to traders :
• Lesson #1: Each Trader has A Distinct Style.
• I often have to remind myself that if I try to trade on other’s ideas, I will lose.
• Some traders are good holders of winners, but may hold their losers a little too long. Others may cut their winners a little short, but are quick to take their losses. As long as you stick to your own style, you get the good and the bad in your own approach. When you try to incorporate someone else's style, you often wind up with the worst of both styles.
• You have to find out your strength and weaknesses and develop a trading style that suits your personality best.
• If you are good at holding winners - trade trend-following systems. If you are comfortable with several consecutive small losses and several big wins - trade chart patterns. If you are highly disciplined and not too aggressive - focus only on high-quality trades which come rarely. Let your personality choose your trading style.
• Lesson #2: Always Use Stops
• Always use stops. Enter the SL in the system, because that commits you to get out.
• Putting stop loss is crucial for your trading success and performance.
• Lesson #3: Trade Less
• I think the secret is cutting down the number of trades you make.
• The best trades are the ones in which you have all three things going for you: fundamentals, technicals, and market tone.
• First, the fundamentals should suggest that there is an imbalance of supply and demand, which could result in a major move. Second, the chart must show that the market is moving in the direction that the fundamentals suggest. Third, when news comes out, the market should act in a way that reflects the right psychological tone.
• Do not overtrade. Take only highest-quality trades that has many confirmations from several timeframes and indicators.
• Lesson #4: Trade Markets You Know
• Restrict yourself to trade in market you are comfortable with - markets with less volatility that are more predictable and technical-oriented.
• Try to trade at markets and market envionments you know best, and disregard 'uncharted territory'.
• Lesson #5: Strict Money Management
• Always bet less than 5 percent of your money on any one idea. That way you can be wrong more than twenty times; it will take you a long time to lose your money.
• I would emphasize that the 5 percent applies to one idea. If you take a long position in two different related markets, that is still one idea."
• Risking more than 5% per trade opens up a possibility of losing your entire account.
• Remember, each trade is probability and even excellent trading systems can perform badly in some occasions.
• The goal of Money Management is to avoid wiping your account in the tough times.
,
