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"A reporter once asked me what were my most important
attributes as a speculator. I replied, 'Nerve...it takes nerve to speculate
in futures...and being stubborn, refusing to be satisfied with small profits.
But it does not matter if they are paper profits when you lose them..when you
lose you sweat blood. Confidence in yourself is something you must have if
you are going to be a successful speculator.
To be able to stick in a risky position without shattering your nerves, you
must have a continuing confidence in the judgment that caused you to
take that position in the first place.' I knew that I would never get rich by
scalping the markets for small swings, so I was constantly striving to
sense the broad swings of the markets and to understand the reasons for them.
The way to make money is to be slow in taking profits. Let your profits pile
up as high as they would go. This is the way to reduce the odds against you
--- by consistently holding on when a market is running favorably for you.
My main strength was in my ability to take a position and stick with it.
I was never an in-and-out trader. (A friend said, 'He got in at the beginning
of a long bull market, and he stuck, and stuck, and stuck.') I have
overstayed markets at times, but this is not, for me, really a failing. Because
most of my success has been due to my hanging on while my profits mounted.
There is the big secret. Do with it what you will."
Arthur W.
Cutten, the commodities trader from the 1920's.
Of course all great traders will tell you the same thing essentially. Find
your bull market and then hang on to it, never losing your positions
completely. If you have a mind to it you can buy weakness and sell some on
strength to improve your cost basis and for tax purposes, but only if you
hold the position while the bull market is intact.
Jesse Livermore said the same thing. "The market does not beat them.
They beat themselves, because though they have brains they cannot sit
tight."
Jim Sinclair, who I consider to be a great, classic trader of our day, says
the same thing as well.
As you may recall, Arthur W. Cutten eventually went into a decline, because
he did not follow his own advice. Also, most traders develop 'difficult'
personalities and occasional medical problems because of the continuing
stress of the markets, and eventually fall into some personal decline and
habits that have a negative effect on their trading. Jesse Livermore was one
of these. Some start thinking they are bigger than the markets, and lose
their edge and take the big hit and never recover, as in the case of 'tech
bull' William C. Durant.
The best gains I have ever made have been in positions held for a long bull
market, some of which I still hold.
The greatest quick gains I have made were by being short in an obviously
declining market. The profits are fabulous. They are too good. Being short
the market is an occasional thing, less than 20% of the time is a short
position appropriate. But the gains are so intoxicating that the bearish
trader can never sit tight and wait, and fritters away those big gains in the
long drifting markets through small losses and transaction fees.
People who have lost their positions in a bull market completely will try to
shake you out of yours; misery loves company, and there is nothing more
miserable than to have been right, but then to have outsmarted yourself and
lost your place, and not profited from what you had known is right. And the
agony of the decision of when to buy back can be quite stressful.
Find your bull market, understand why it is valid, a genuine article, and
then stick with it until it is no longer valid, even through corrections
which all bull markets must experience. This requires you to develop some
basic knowledge of trends and charts. Would your drive if you did not know
how to read a map?
Most people, about 95% or so, cannot trade actively even on weakness and
strength, and should stick to the long trends in markets only, sitting out in
cash when appropriate. Emotions are powerful things, and can cause the mind
to rationalize almost anything, any data. Nevery try to be the first in or
the last out of a trend.
The market makers and insiders can see what you are holding and have better
access to capital and information than you can have. Trying to beat them in
the short term is foolishness, even though you might get lucky for short
periods of time, you will give it all back and more.
Most people's opinions on the markets are worthless, even damaging, because
they run with the herd, or may be jealous of your success and wish to drag
you down into their own perceived personal failures. If a person cannot show
data that you understand to justify their position, even after you query them
and they explain it, then ignore them, because they do not know anything
useful, even though they may claim great results, and show the occasional
'hit' in their calls.
Making incessant market calls are a way for failed traders to try and get
back some of their broken ego. They will write their successes in marble, and
their failures in sand. Making a bad market call and then repeatedly revising
it, and revising it, to eventually be correct is the worst sort of
self-deception.
There is no greater waste of time than trying to find the perfect system, a
mechanical means of predicting the future. Look for the big trends, and then
learn to patiently trade them with sound money management and a willingness
to learn from the market and new information.
This is what I consider to be the 'secret' of being a successful trader.
And nine tenths of it is not in the knowing, but in the discipline of doing
it, day in and day out. Mastering your self, your ego and emotions, even
boredom, is the greatest challenge to successful trading, and it never ends.
Jesse
Please visit Jesse’s Café Américain
for refreshing news on the markets
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