Market Wizards Wisdom

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.
-Michael Marcus

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.
-Bruce Kovner

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.
-Paul Tudor Jones

You need discipline, patience, and courage. You must have a willingness to lose, but a strong desire to win.
-Gary Biefeldt

Investing is like poker. You should only play the good hands, and drop out of the poor hands, forfeiting the ante.
-Gary Biefeldt

Fundamentals that you read about are typically useless as the market has already discounted the price. I call them "funny-mentals".
-Ed Seykota

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.
-Ed Seykota

If you diversify, control your risk, and go with the trend, it just has to work.
-Larry Hite

My Marine training helps in investing. They teach you never to freeze when you are under attack.
-Marty Schwartz

Be aware of change. Buy change. You should be willing to buy or sell anything.
-James B. Rogers, Jr.

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.
-Mark Weinstein

Perform Poorly?

"I have consistently heard about the 'death of trend-following' during every period of poor performance. Every one. Fortunately, I did enough research to allow me to relax and maintain a long-term perspective."

"I've been doing this for 20 years, and every time there's a change in the market, they say I should change my ways. But every time there's a period when we don't do well, it's followed by one in which we do extraordinarily well."

John W. Henry

John W. Henry's Philosophy

John W. Henry outlined many moons ago the keys of successful trading:

"It's not for me to ask why the price is going up or down but rather to pay attention to what is actually happening. And over time, that gives us a big advantage."

"I don't believe that I am the only person who cannot predict future prices. No one consistently can predict anything, especially investors. Prices, not investors, predict the future."

"...when I was designing what turned out to be a trend following system...[that] approach - a mechanical and mathematical system - has not really changed at all. Yet the system continues to be successful today, even though there has been virtually no change to it over the last 18 years."

Peter Panholzer on System Trading

Peter Panholzer, a short term systematic trader, recently painted a clear picture on system trading:

"System trading is different from technical trading...In technical trading, you're reading tea leaves - the indicators. Interpretation of technical indicators is often subjective and not programmable. But you can program a system."

How To Build A Successful Portfolio

How many of the STS stocks you will trade at a time is going to be limited by your available capital, but do not under any circumstances put all available cash into one stock position. My personal recommendation is a minimum of two. The maximum is up to you, but diversification (owning 10+ stocks) is another word for ignorance. Well, you are not ignorant anymore. You now have a system, which able to identifly the VERY BEST STOCKS. You have to put more into each position to take maximum advantage of them in order to make the big gains. The absolute MAXIMUM number of stocks I will hold at any one time is 4.

This also doesn't mean that you should invest in all four of the first stock selection you come across. You can and should add to your portfolio slowly, one by one. Once you've reached a maximum holding, only add new stocks when one you are holding either gets stopped out or indicates that it's time to take profits.

Most people gloss over position sizing/portfolio management or totally ignore it. This suff is boring. It doesn't sell for $3,000 seminars. So you will not see this area heavily marketed. Most people never seem to get it.

REALIZE THIS: It's not the system that makes money. It is correct position sizing and having the discipline to follow the system rules (Psychology of Trading).

Anyone who does this is a successful trader.