Here is his advice.
This week, in our series of insights from Jack Schwager’s original Market Wizards, we look at how Michael Marcus turned a $30K trading account into more than $80 million.
- Always use stops. You are going to be the most objective about a trade at the point of entry – so that’s when you need to put stops in. Know where your trade’s point of failure is. (That’s where the market proves your thesis – whether long or short – wrong.) Then, reassess if your stop is hit.
- Don’t stay in a position that doesn’t feel right. Maybe Marcus’ instincts are better than most traders – but as traders gain experience, they find that their intuition about the market grows. If you are less confident about a trade after putting it on, don’t stick with it – get out. Marcus says, “you can always get back in.” In fact, Marcus said that he’ll often reenter a trade the next day after getting out since he was able to think clearly about it.
- Follow your own trading style. Your trading style has to match what you see with your personality. Each style has drawbacks, but different traders can make them successful at different points in time. Marcus observed that he knows many talented traders, but that he would be unsuccessful if he tried to trade like them.
- Don’t be rigid. Marcus also observed that some of the best traders he knew were objective and open to any opportunity – even when in a position. Marcus calls objectivity the “raw ingredient” of a good trader, and it’s not hard to see why: it directly relates to his point that traders should get out of positions quickly – when the market proves them wrong or they don’t feel right.
- Be courageous. “Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep going when the going gets tough,” Marcus added.
Michael Marcus is probably the exception that proves the rule – you are not likely going to multiply a $50K trading account into $80 million. But $50K is certainly enough buying power to learn to trade, earn extra income and see if you have the chops to become a professional trader.
