What You Can Learn From These Millionaire Traders

Trading lessons from millionaire traders

jesse livermore, millionaire trader
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If you want to do something well, learn from people who are succeeding at what you want to do. If you're a trader, or want to be, study the lessons offered by people who are successful in the markets. Trading is difficult, as almost anyone who has ever tried it can attest. Making one or two winning trades is relatively easy, but consistently winning over many trades is much harder. Making money in the markets requires a strategic and methodical approach.

Here are some simple tips from millionaire traders to keep you on track. One comment or tip isn't a trading strategy though; you need to take that advice and incorporate it into your trading plan in a way that works for you and your trading style. 

I did exactly the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. Of all the speculative blunders there are few greater than trying to average a losing game. Always sell what shows you a loss and keep what shows you a profit. - Jesse Livermore

This is a common problem for most traders. They hang on to losses hoping that they will rebound, often to only get out flat (no profit) in a best case scenario. But in a worst scenario they lose a lot of money. On the contrary, they are quick to take a profit, not letting the trades that are actually working play out. Big losses and small winners are a sure way to never succeed in the markets.

 

To be a good trader, you need to trade with your eyes open, recognize real trends and turns, and not waste time or energy on regrets and wishful thinking. - Alexander Elder

Most new traders don't put in the work it really takes to be able to see market dynamics unfold second-by-second. And they also don't put in the time to learn a strategy that will tell them exactly what do when certain conditions materialize.

Additionally, they don't prepare themselves mentally for the price oscillations that will occur once in the trade--which can lead to hanging onto losses or dumping winners early, as discussed above. Therefore, without adequate preparation new traders trade on wishful thinking and fear, constantly sea-sawed into and out of the market at the wrong times. Stay in the moment. Focus on what the market is doing, and don't get caught up in your fantasies about the future, or regrets of the past. Both will distract your attention from the only thing that matters right now--monitoring market dynamics and planning your trades based on those dynamics.

Risk comes from not knowing what you're doing. - Warren Buffett

Is blackjack risky for the casino? On any single hand they could lose money, but over thousands of hands they will come out ahead. There is very little risk for the casino of losing money at blackjack over the long-term, and yet blackjack is a gambling game. Many people consider the financial markets a gamble, but it is only risky if you don't have an edge (like the casino has). If you have an edge, which is created through hard work and a solid trading strategy (and implementing that strategy consistently), then there is actually little risk in trading.

Risk comes from not having the edge--you are gambler at the table instead of the dealer. 

The game taught me the game. And it didn’t spare the rod while teaching. - Jesse Livermore

Notice a theme in the commentary so far? It's that trading takes work, and a methodical, structured approach. Unfortunately, ideas will only take you so far. The market is slightly different from one day to the next--changes in trend, volatility and volume all affect how profitable you will be from one day to the next. Traders need to adapt to changing conditions. This is another required skill set, in additional to having a methodical approach.

As discussed above you need to let go of emotion and trade what the market provides, not what you want it to provide. The market is neither inherently cruel nor generous, yet it will seem unrelentingly harsh if you aren't adequately prepared.

It can decimate your account in seconds if you fail to use proper risk management, and the only person to blame for it is ourselves. The market is simply the market; it doesn't care if you make or lose money. If you are losing money consistently, the market is trying to teach you a lesson. Learn from it, or continue to get beaten till you learn your lessons or lose your capital. 

Final Word on Millionaire Traders

Winning traders pay attention to what is happening in the market now, and don't have fanciful notions about what will happen, or regret about what has happened in the past. This allows them to stay in the moment, controlling risk on losers and capitalizing on trades that progress as expected. Millionaire traders are masters of their particular craft. There is single way to trade, but developing a strategic approach--like a casino--that gives you a consistent edge takes time and work. The market has no problem taking your money. If it does, it's trying to tell you something. If you listen, and learn to adapt, the market also has no problem rewarding you for your diligence. It's an even playing field--anyone can make money. The question you have to ask is, will it be you?