Learn From The Most Successful Traders Of All Times – This Is What They Do

I have read dozens of trading and trading related books (my recommended reading list is here) over the years and I have extracted a huge collection of trading quotes with tips and advice I use in my daily trading. Listening to what the most successful people have to say, adopting ideas that helped them overcome their greatest struggles and following their advice can be of great value. At least for me I can say that following the best traders and incorporating their ideas into my own trading made a huge difference. This is why I am going to share with you the greatest tips, help you understand their meanings and how to use it in your own trading.

Losses and risk management

It is obvious that in every trading book, dealing with losses and risk management always comes first. It doesn’t matter which trader you listen to, every top trader puts great focus on the importance of losing efficiently and having a good risk management approach in place.

• 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
• A loss never bothers me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does damage to the pocketbook and to the soul. – Jesse Livermore
• 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
• Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in. – Paul Tudor Jones
• You should always have a worst case point. The only choice should be to get out quicker. – Richard Dennis
• Place your stops at a point that, if reached, will reasonably indicate that the trade is wrong, not at a point determined primarily by the maximum dollar amount you are willing to lose. – Bruce Kovner
• The first rule of trading – there are probably many first rules – is don’t get caught in a situation in which you can lose a great deal of money for reasons you don’t understand. – Bruce Kovner

The common denominator among all those quotes is that cutting losses fast and moving on the next trade is essential.  Don’t dwell over lost trades; a single trade is absolutely meaningless for your overall career as a trader, but most traders let losers get out of hand and they allow a single losing trade to have a significant impact on their account balance. Furthermore, honor your stop and always place it at a level where it indicates that your trade idea was wrong, not just based on money-related objectives or to achieve a certain reward:risk ratio.

Emotions and mindset

Emotional stability and discipline is the foundation upon which a trader has to build his trading methodology. Without the ability to control emotions and the impulsive trading decisions emotions cause, the best trading system and the best thought-out risk management approach are useless. As we like to say, you are the weakest link in your trading system.

• I truly feel that I could give away all my secrets and it wouldn’t make any difference. Most people can’t control their emotions or follow a system.  – Linda Raschke
• Markets are never wrong – opinions often are. – Jesse Livermore
• I don’t get caught up in the moment. – Ray Dalio
• If you argue with the market, you will lose. – Larry Hite
• The psychological factor for investing has 5 areas. These include a well-rounded personal life, a positive attitude, the motivation to make money, lack of conflict [such as psychological hang-ups about success], and responsibility for results.  -Dr. Van K. Tharp
• It is hard enough to know what the market is going to do; if you don’t know what you are going to do, the game is lost. – Alexander Elder

These quote highlight the fact that, before you get into the nitty-gritty of your trading system and try to tweak your stop loss or take profit placement, you have to work on your discipline.

The reason why you are not seeing the results you want to have is not because you are using a wrong indicator or a bad setting, but most likely because you are not the master of your trading emotions.

Development and self-improvement

Trading is a performance game and only the best will make it to the top and stay there. Professional traders work very hard and are often obsessed with trading, whereas the average amateur trader reduces their trading time to flipping through time-frames to hunt trades or read through forums trying to find a better system. Professionals understand that they have put in the work and that the learning never ends.

• Successful traders constantly ask themselves: What am I doing right? What am I doing wrong? How can I do what I am doing better? How can I get more information? – Bill Lipschutz
• I really value the fact that I’ve learned to trade as a craft. Like any craft, such as piano playing, perfection may be elusive – I’ll never play a piece perfectly, and I’ll never buy the low and sell the high –  but consistency is achievable if you practice day in and day out. – Linda Raschke
• I learned that each mistake was probably a reflection of something that I was doing wrong, so if I could figure out what that was, I could learn how to be more effective. I learned that wrestling with my problems, mistakes, and weaknesses was the training that strengthened me. Also, I learned that it was the pain of this wrestling that made me and those around me appreciate our successes. – Ray Dalio
• When you think that it’s too hard, remember that in the long run, doing the things that will make you successful is a lot easier than being unsuccessful. – Ray Dalio
• If you don’t work very hard, it is extremely unlikely that you will be a good trader. – Bruce Kovner
• The realization that you are responsible for your results is the key to successful investing. Winners know they are responsible for their results; losers think they are not. – Dr. Van K. Tharp

Use this moment to look at your own trading and ask yourself:

Are you doing everything you can? Do you put in the work that you should? Do you constantly work on your trading skills and review your trades to build your edge? Or do you just play around and are one of those system-hopping traders who can’t let go of the illusion that someday they will just stumble over the Holy Grail trading system that just works all the time?

More trading tips

Here, I gathered trading quotes of different areas and also with a few practical tips.

•  I review my checklist. It’s a handwritten sheet laminated in plastic and taped to the right-hand corner of my desk where I can’t overlook it. – Marty Schwartz

Marty Schwartz who has made millions of Dollars still uses a physical trade checklist to control his trading and to avoid making mistakes. If one of the best traders in the history does not trade without a checklist, why should you?

•  Systems don’t need to be changed. The trick is for a trader to develop a system with which he is compatible. – Ed Seykota

A system is not something that you purchase from a website and then just follow the instructions. A trading system is a complex structure and it has to be tailored to your personal strength, weaknesses and your mindset.

• Having a quote machine is like having a slot machine at your desk – you end up feeding it all day long. I get my price data after the close each day. – Ed Seykota

Although Ed Seykota refers to quoting machines, it can be easily translated to today’s world. Traders constantly watch their floating account balance and P&L. They babysit their trades and watch every tick of the move. This inevitably leads to impulsive decisions and trade mismanagement. Get away from your charts and let the markets do what they want.

•  Money is made by sitting, not trading. – Jesse Livermore

Livermore highlights the importance of patience and just waiting; waiting for the right setup and the right time to enter the market, waiting for the right time to do something about your trade and being patient about trade exits. People always feel that they ‘have to do something’ and so move around stop loss and take profit orders and constantly micro-manage their trades.

• Always understand the risk/reward of the trade as it now stands, not as it existed when you put the position on.”– Bill Lipschutz

The dynamic nature of reward:risk ratio is totally misunderstood and often even completely neglected. The reward:risk ratio of your trade constantly changes which brings many questions. We talked about the dynamic reward:risk ratio in this video here.

Conclusion:  Learn from the best

You will not be able to reach out to Paul Tudor Jones or Marty Schwartz and let them teach you how to trade, but you don’t have to either. There are so many resources and great books out there, in which the most successful traders share their journeys, their struggles and how they overcame it. I urge you to take the chance and start mirroring what the professionals do. If you want to get started, I highly recommend the complete Market Wizards series to kick-start your trading!