The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.
If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong.
I learned early that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. I’ve never forgotten that.
Markets can remain irrational longer than you can remain solvent.
When the public is most frightened, only the strong are left, and that’s when the market is in the best possible hands.”
The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.
Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.
You learn in this business… if you want a friend, get a dog.
The four most dangerous words in investing are: ‘this time it’s different.’
The most important three words in investing is: “I don’t know.” If someone doesn’t say that to you then they are lying.
I always define my risk, and I don’t have to worry about it. I walk into the pit every day with a clean slate, so that I can take advantage of what is going on.
A risk-reward ratio is important, but so is an aggravation-satisfaction ratio.
Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.
People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.
The whole secret to winning big in the stock market is not to be right all the time, but to lose the least amount possible when you’re wrong.
I think to be in the upper echelon of successful traders requires an innate skill, a gift. It`s just like being a great violinist. But to be a competent trader and make money is a skill you can learn.
Michael Marcus taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.
Price lies all the time. Facebook can be valued at $40 billion and then $20 billion and then $200 billion inside of a four-year period of time. Which of these prices is the truth? None of them. But all of them were momentarily true, until they were rendered a lie, and a new truth was forged in the fires of the marketplace. Sunrise, sunset. Prices change and, with them, the truth itself.
In trading you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep money.
A peak performance trader is totally committed to being the best and doing whatever it takes to be the best. He feels totally responsible for whatever happens and thus can learn from mistakes. These people typically have a working business plan for trading because they treat trading as a business.
There is no single market secret to discover, no single correct way to trade the markets. Those seeking the one true answer to the markets haven’t even gotten as far as asking the right question, let alone getting the right answer.
People believe earnings, but they can be manipulated, which we are seeing with Enron . Dividends are real money. That’s the hallmark of a blue chip stock. If a company doesn’t pay a dividend, it’s a speculation.
Your success in investing will depend in part on your character and guts, and in part on your ability to realize at the height of ebullience and the depth of despair alike that this too shall pass.
To be a super-trader, you’ll need an edge to overcome the laws of probability and the uncertainty of the marketplace. That edge comes from information flow, the ability to correct your habits in terms of the market’s characteristics, and being able to take risks, cut losses, expand your information network, ferret out ideas, and take recommendations.
I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.
The most important thing about an investment philosophy is that you have one.
Predicting the stock market is really predicting how other investors will change estimates they are now making with all their best efforts. This means that, for a market forecaster to be right, the consensus of all others must be wrong and the forecaster must determine in which direction-up or down-the market will be moved by changes in the consensus of those same active investors.”
As long as you enjoy investing, you’ll be willing to do the homework and stay in the game.
The price of a commodity will never go to zero. When you invest in commodities futures, you’re not buying a piece of paper that says you own an intangible piece of company that can go bankrupt.
No profession requires more hard work, intelligence, patience, and mental discipline than successful speculation.
Other people snap up the riskless profits pretty fast and bid the price of calculable risk opportunities to near their fair values. Things get a lot less crowded if you go for the incalculable risks, leaps of faith that cannot be inspected carefully before takeoff. So that is where you find extraordinary opportunities.
There are old traders and there are bold traders, but there are very few old, bold traders.
Panics do not destroy capital – they merely reveal the extent to which it has previously been destroyed by its betrayal in hopelessly unproductive works.
I tend to generate a plentiful supply of ideas, the vast majority of which turn out to be bad ones. In some cases, they involve transplanting computational techniques from one application to another, and there’s usually a good reason why the destination field isn’t already using that technique. I also have a remarkable capacity to delude myself into thinking that each idea has a higher probability of working than it really does, which provides me with the motivation I need to keep working on it. And, every once in a while, I stumble on an idea that actually works.
History repeats because of the weakness of human nature. The greed for quick fortunes has cost the public countless millions of dollars. Every experienced stock trader knows that overtrading is his greatest weakness, but he continues to allow this weakness to be his ruin. There must be a cure for this greatest weakness in trading, and that cure is STOP LOSS ORDERS. The weakest point must be overcome and the stop loss order is the cure for overtrading.
The only true test of whether a stock is “cheap” or “high” is not its current price in relation to some former price, no matter how accustomed we may have become to that former price, but whether the company’s fundamentals are significantly more or less favorable than the current financial-community appraisal of that stock.”
Trading is a waiting game. You sit, you wait, and you make a lot of money all at once. Profits come in bunches. The trick when going sideways between home runs is not to lose too much in between.
The goal of a successful trader is to make the best trades. Money is secondary.
I learned to avoid trying to catch up or double up to recoup losses. I also learned that a certain amount of loss will affect your judgment, so you have to put some time between that loss and the next trade.
Trading is a psychological game. Most people think they are playing against the market, but the market doesn´t care. You’re really playing against yourself.
Value investing requires a great deal of hard work, unusually strict discipline, and a long-term investment horizon. Few are willing and able to devote sufficient time and effort to become value investors, and only a fraction of those have the proper mind-set to succeed.
Successful investing is anticipating the anticipations of others.
For better or worse we’re a herd leader. We’re at the front of the pack, we are one of the first movers. First movers are interesting; you get to the good grass first, or sometimes the lion eats you.
Many investors make the mistake of buying high and selling low while the exact opposite is the right strategy to outperform over the long term.
When a falling stock becomes a screaming buy because it cannot conceivably drop further, try to buy it thirty percent lower.
Money doesn’t make you happy. I now have $50 million but I was just as happy when I had $48 million.
Insider trading tells everybody at precisely the wrong time that everything is rigged, and only people who have a billion dollars and have access to and are best friends with people who are on boards of directors of major companies – they’re the only ones who can make a true buck.
Patterns of price movement are not random. However, they’re close enough to random.
I have been trading for decades and I am still standing. I have seen a lot of traders come and go. They have a system or a program that works in some specific environments and fails in others. In contrast, my strategy is dynamic and ever evolving. I constantly learn and change.
It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.
The right time for a company to finance its growth is not when it needs capital, but rather when the market is most receptive to providing capital.
The policy of being too cautious is the greatest risk of all.
There are just four kinds of bets. There are good bets, bad bets, bets that you win, and bets that you lose. Winning a bad bet can be the most dangerous outcome of all, because a success of that kind can encourage you to take more bad bets in the future, when the odds will be running against you. You can also lose a good bet no matter how sound the underlying proposition, but if you keep placing good bets, over time, the law of averages will be working for you.
And finally, no matter how good the science gets, there are problems that inevitably depend on judgement, on art, on a feel for financial markets.
In investing, what is comfortable is rarely profitable.
The individual investor should act consistently as an investor and not as a speculator.
Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.
You can’t be a good value investor without being an independent thinker – you’re seeing valuations that the market is not appreciating. But it’s critical that you understand why the market isn’t seeing the value you do. The back and forth that goes on in the investment process helps you get at that.
When it comes to macro events, you can either predict or react. I’ve proven time and again that my crystal ball is horrible, so my focus has to be on reacting to extremes in individual securities by selling at high valuations and buying at low valuations.
One of my greatest complaints about forecasters is that they seem to ignore their own records. The amazing thing to me is that these people will go on making predictions with a straight face, and the media will continue to carry them.
It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.
I made a killing in the stock market. My broker lost all my money, so I killed him.
If there was a single lesson I took away from Salomon Brothers, it is that rarely do all parties win. The nature of the game is zero sum. A dollar out of my customer’s pocket was a dollar in ours, and vice versa.
Greed is all right, by the way. I think greed is healthy. You can be greedy and still feel good about yourself.
Billionaire thinking means resisting the temptation to micro-monitor every tick in the market index. You’ll have a better chance of making a billion, and you might live a lot longer, too.
I believe in analysis and not forecasting.
When I get hurt in the market, I get the hell out. It doesn’t matter at all where the market is trading. I just get out, because I believe that once you’re hurt in the market, your decisions are going to be far less objective than they are when you’re doing well If you stick around when the market is severely against you, sooner or later they are going to carry you out.
The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading.
Blaming speculators as a response to financial crisis goes back at least to the Greeks. It’s almost always the wrong response.
If all the economists were laid end to end, they’d never reach a conclusion.
Remember, cash is a fact, profit is an opinion.
Stock price movements actually begin to reflect new developments before it is generally recognized that they have taken place.
It amazes me how people are often more willing to act based on little or no data than to use data that is a challenge to assemble.
Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little.
How many millionaires do you know who have become wealthy by investing in savings accounts?
If it’s obvious, it’s obviously wrong.
There is nothing riskier than the widespread perception that there is no risk.
The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.
The older I get, the more I see a straight path where I want to go. If you’re going to hunt elephants, don’t get off the trail for a rabbit.
“I get real, real concerned when I see trading strategies with too many rules… you should too.”
One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.
I think investment psychology is by far the more important element, followed by risk control, with the least important consideration being the question of where you buy and sell.
The fundamental law of investing is the uncertainty of the future.
Anyone who is not investing now is missing a tremendous opportunity.
I talk about macro themes a lot because they are fun to talk about, but it is the risk management that is the most important thing. The risk control is all bottom-up. I structured the business right from the get-go so that we would have lots of diversification.
Stocks Don’t Move. They Are Moved
As a speculator you must embrace disorder and chaos.
No price is too low for a bear or too high for a bull.
In today’s regulatory environment, it’s virtually impossible to violate rules.
In today’s regulatory environment, it’s virtually impossible to violate rules.