4 Trading Tips from Millionaire Traders
Each trader forges their own path, usually by absorbing the knowledge of successful traders that came before them. While no quote or trading tip will make you a successful trader on its own, insights from successful traders can tell you where you should be focusing your attention, and what you should be working on.
Here are four tips from millionaire and successful traders. Most of these quotes come from the Market Wizards book series by Jack D. Schwager. These books look at the diverse trading methods of successful traders and offer a wealth of wisdom for anyone looking to start trading.
Don't Be Afraid to Cut Losses
"If I have positions going against me, I get right out; if they are going for me, I keep them... 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
Loss aversion—an unwillingness to cut a loss—is one of the most common trading problems and can deplete an account quickly. On the flip side, not giving winning trades enough room to run can also be a problem. If you win less than 50% of the time, winners have to be bigger than losers on average. Even if you win more often, strive to keep your average loss smaller than your average win.
Learn Controlled Losing
"You have to learn how to lose; it is more important than learning how to win." —Mark Weinstein
Winning is as much about controlling losses as it is about racking up winning trades. If you make $1,000 one trade, but lose it (or more) the next, you're no better off. But if you can make $1,000, then only lose $700, then make $1,100, then lose $500, you are making progress. Trading is always two steps forward, one step back. Make sure the steps back don't erase everything you have done before.