from the Trader Legends!
by Tom Meier of Easy-Trader.ch
What do the worlds best Traders do
differently than the average investor? Can the average
investor learn from the Trader Legends success stories
and their systems used? What do the most famous Traders
have in common that can be applied by the average talented
Before we will give some insights on those
questions lets have a look at some of the most successful
Nicolas Darvas turned an $ 36000 account
into $ 2000000 in 18 months!!!
Ed Seykota, a Turtle Trader, turned $ 5'000
into $ 15'000'000 in 12 years!!!
Jesse Livermore made several multi-million
dollar fortunes in the early 1900's
Richard Dennis, another Turtle Trader, made
between $ 100 and $ 200 million
George 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:
They have a System which they strictly follow.
Most of them have a trend-following trading
Most of them have a mid- to long-term approach.
They have no fear and greed mentality.
They have absolute discipline and stick
100% to their system.
Their trades are fully planed; they are
prepared for all scenarios in advance.
They know that a system goes through bad
times and good times. Cut losses early and let profits
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:
Losses are not cut early enough.
Investment with a short-term horizon become
long-term horizon in hope of raising prices.
People listen to the advise of their investment
Brokers and Analysts.
People invest in hot stocks recommended
by colleagues of their colleagues.
People have no plan for their investments.
Money Management is not considered at all.
People use trading styles which do fit their
Greed 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:
Each 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
A 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.
The 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.
A can do attitude is required
to trade successfully. 99% of the worlds population
probably has this dream of being financially free, but only
5% have reached it. Why? Because with phrases like
would be great, but I cant
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,
visit Easy-Trader.ch. 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.