Blog: Trading Tips

Alexander Elder, M.D., was born in Leningrad and grew up in Estonia, where he entered medical school at the age of 16.

At 23, while working as a ship’s doctor, he jumped a Soviet ship in Africa and received political asylum in the US, where he worked as a psychiatrist.

This provided him with unique insight into the psychology of trading.

He is the author of “Trading for a Living”, considered a modern classic among traders.

First published in 1993, this international best-seller has been translated into more than a dozen languages and is being used to educate traders around the world.

In this post, I will share all the best trading tips and quotes from Alexander Elder, so that we can learn from his knowledge and experience.

Here are some of the best trading tips and quotes by Alexander Elder:

Successful trading depends on the 3M`s – Mind, Method and Money. Beginners focus on analysis, but professionals operate in a three dimensional space. They are aware of trading psychology their own feelings and the mass psychology of the markets. Each trader needs to have a method for choosing specific stocks, options or futures as well as firm rules for pulling the trigger – deciding when to buy and sell. Money refers to how you manage your trading capital.
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.
The markets are unforgiving, and emotional trading always results in losses.
Traders lose because the game is hard, or out of ignorance, or lack of discipline or because of both.
Markets need a fresh supply of losers just as builders of the ancient pyramids needed a fresh supply of slaves. Losers bring money into the markets, which is necessary for the prosperity of the trading industry.
The goal of a successful trader is to make the best trades. Money is secondary.
When a beginner wins he feels brilliant and invincible, then he takes wild risk and loses everything.
An astute trader aims to enter the market during quiet times and take profits during wild times.
People trade for many reasons—some rational and many irrational. Trading offers an opportunity to make a lot of money in a hurry. Money symbolizes freedom to many people, even though they often don’t know what to do with it.
To help ensure success, practice defensive money management. A good trader watches his capital as carefully as a professional scuba diver watches his air supply.
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.
Every winner needs to master three essential components of trading; a sound individual psychology, a logical trading system and good money management. These essentials are like three legs of a stool – remove one and the stool will fall, together with the person who sits on it.
The mental baggage from childhood can prevent you from succeeding in the markets. You have to identify your weaknesses and work to change. Keep a trading diary—write down your reasons for entering and exiting every trade. Look for repetitive patterns of success and failure.
There are good trading systems out there, but they have to be monitored and adjusted using individual judgment. You have to stay on the ball—you cannot abdicate responsibility for your success to a mechanical system.
The public wants gurus, and new gurus will come. As an intelligent trader, you must realize that in the long run, no guru is going to make you rich. You have to work on that yourself.
Many traders ride an emotional roller coaster and miss the essential element of winning: the management of their emotions.
If you let the market make you feel high or low, you will lose money.
Remember, your goal is to trade well, not to trade often.
The answer is to draw a line between a businessman’s risk and a loss. As traders, we always take businessman’s risks, but we may never take a loss greater than this predetermined risk.
Being simply “better than average” is not good enough. You have to be head and shoulders above the crowd to win a minus-sum game.
Why do most traders lose and wash out of the markets? Emotional and mindless trading are big reasons, but there is another. Markets are actually set up so that most traders must lose money. The trading industry slowly kills traders with commissions and slippage.
Use limit orders almost exclusively—except when placing stops. Be careful on what tools you spend money: there are no magic solutions. Success cannot be bought, only earned.
It is essential to wait for trades with a good risk / reward ratio. Patience is a virtue for a trader.
A loser’s true problem is not account size but overtrading and sloppy money management. He takes risks that are too big for his account size, however small or big. No matter how good his system may be, a streak of bad trades is sure to put him out of business.
Most private traders on a losing streak keep trying to trade their way out of a hole. A loser thinks a successful trade is just around the corner, and that his luck is about to turn. He keeps putting on more trades and increases his size, all the while digging himself a deeper hole in the ice. The sensible thing to do would be to reduce your trading size and then stop and review your system.
When the market deviates from your analysis, you have to cut losses without fuss or emotions.
It pays to write down your plan. You need to know exactly under what conditions you will enter and exit a trade. Do not make decisions on the spur of the moment, when you are vulnerable to being sucked into the crowd. Plans are created by reasoning individuals. Impulsive trades are made by sweaty group members.

Now that I have shared the best trading tips and quotes from Alexander Elder, which is your favourite trading tip?

Let me know in the comments below.

If you would like to get more trading tips and quotes from all the best traders, also check out: “Best Trading Tips & Quotes from Legendary Top Traders”

Spencer is an avid globetrotter who achieved financial freedom in his 20s, while trading & teaching across 70+ countries. As a former professional trader in private equity and proprietary funds, he has over 15 years of market experience, and has been featured on more than 20 occasions in the media.

Best Trading Tips & Quotes from Nicolas Darvas

Nicolas Darvas was a dancer, self-taught investor and author.

During his off hours as a dancer, he had read some 200 books on the market and on speculators, sometimes reading up to eight hours a day.

At the age of 39, after accumulating his fortune and also being exposed in Time magazine, Darvas documented his actions in the book, “How I Made 2,000,000 in the Stock Market”.

The book describes his “Box System”, which he used to buy and sell stocks.

In this post, I will share all the best trading tips and quotes from Nicolas Darvas, so that we can learn from his knowledge and experience.

Here are some of the best trading tips and quotes by Nicolas Darvas:

I believe in analysis and not forecasting.
All a company report and balance sheet can tell you is the past and the present. They cannot tell future.
First check whether the market as a whole is rising or falling. In other words, are you in a bull market or bear market? If the latter, stay out. The odds are against you.
I knew now that I had to keep rigidly to the system I had carved out for myself.
I was successful in taking larger profits than losses in proportion to the amounts invested.
I decided to let my stop-loss decide. (on when to exit an up trending stock)
I also learned to stay out of bear markets unless my individual stocks remain in their boxes or advance.
I became over-confident, and that is the most dangerous state of mind anyone can develop in the stock market.
I decided never again to risk more money than I could afford to lose without ruining myself.
I made up my mind to buy high and sell higher.
I accepted everything for what it was-not what I wanted it to be.
I listened eagerly to what they had to say and religiously followed their tips. Whatever I was told to buy, I bought. It took me a long time to discover that this is one method that never works.
Like human beings, stocks behave differently. Some of them are calm, slow, conservative. Others are jumpy, nervous, tense. Some of them I found easy to predict. They were consistent in their moves, logical in their behavior. They were like dependable friends.

Now that I have shared the best trading tips and quotes from Nicolas Darvas, which is your favourite trading tip?

Let me know in the comments below.

If you would like to get more trading tips and quotes from all the best traders, also check out: “Best Trading Tips & Quotes from Legendary Top Traders”

Best Trading Tips & Quotes from Richard Dennis

Richard J. Dennis, a commodities speculator once known as the “Prince of the Pit”, started off by borrowing $1,600 from his family, which after spending $1,200 on a seat at the MidAmerica Commodity Exchange left him $400 in trading capital.

In 1970, his trading increased this to $3,000, and in 1973 his capital was over $100,000.

He made a profit of $500,000 trading soybeans in 1974, and by the end of that year was a millionaire, just short of twenty-six years of age. By 1980, his capital had grown to over $200 million.

In this post, I will share all the best trading tips and quotes from Richard Dennis, so that we can learn from his knowledge and experience.

Here are some of the best trading tips and quotes by Richard Dennis:

In the real world, it is not too wise to have your stop where everyone else has their stop.
I always say that you could publish trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a list of rules that are 80 percent as good as what we taught people. What they couldn’t do is give them the confidence to stick to those rules even when things are going bad.
When things aren’t going right, don’t push, don’t press.
I could trade without knowing the name of the market.
There are lots more false breakouts, perhaps because there are more computer-based trend followers.
It is misleading to focus on short-term results.
You have to minimize your losses and try to preserve capital for those very few instances where you can make a lot in a very short period of time. What you can’t afford to do is throw away your capital on suboptimal trades.
When you have a position, you put it on for a reason, and you’ve got to keep it until the reason no longer exists.
When you are getting beat to death, get your head out of the mixer.
There is another point that I think is as important: You should expect the unexpected in this business; expect the extreme. Don’t think in terms of boundaries that limit what the market might do. If there is any lesson I have learned in the nearly twenty years that I’ve been in this business, it is that the unexpected and the impossible happen every now and then.
Trading decisions should be made as unemotionally as possible.
You should always have a worst case point. The only choice should be to get out quicker.
Trade small because that’s when you are as bad as you are ever going to be. Learn from your mistakes.
If there is any lesson I have learned in the nearly twenty years that I’ve been in this business, it is that the unexpected and the impossible happen every now and then.
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 has taught me not to take the conventional wisdom for granted. What money I made in trading is testimony to the fact that the majority is wrong a lot of the time. The vast majority is wrong even more of the time. I’ve learned that markets, which are often just mad crowds, are often irrational; when emotionally overwrought, they’re almost always wrong.
Almost anybody can make up a list of rules that are 80 percent as good as what we taught people.
I’ve learned that markets, which are often just mad crowds, are often irrational; when emotionally overwrought, they’re almost always wrong.
The market being in a trend is the main thing that eventually gets us in a trade. That is a pretty simple idea. Being consistent and making sure you do that all the time is probably more important than the particular characteristics you use to define the trend. Whatever method you use to enter trades, the most critical thing is that if there is a major trend, your approach should assure that you get in that trend.
A good trend following system will keep you in the market until there is evidence that the trend has changed.

Now that I have shared the best trading tips and quotes from Richard Dennis, which is your favourite trading tip?

Let me know in the comments below.

If you would like to get more trading tips and quotes from all the best traders, also check out: “Best Trading Tips & Quotes from Legendary Top Traders”

1 Comment/by Spencer Li

Best Trading Tips & Quotes from Paul Tudor Jones

Paul Tudor Jones II (born September 28, 1954) is an American hedge fund manager, conservationist and philanthropist. In 1980, he founded his hedge fund, Tudor Investment Corporation, an asset management firm which currently manages $7.8 billion (as of June 30, 2019).

As of November 2019, Forbes Magazine estimated his net worth to be US$5.3 billion, making him the 343rd richest person on the Forbes 400 and the 7th highest-earning hedge fund manager.

In this post, I will share all the best trading tips and quotes from Paul Tudor Jones, so that we can learn from his knowledge and experience.

Here are some of the best trading tips and quotes by Paul Tudor Jones:

Where you want to be is always in control, never wishing, always trading, and always first and foremost protecting your ass. That’s why most people lose money as individual investors or traders because they’re not focusing on losing money. They need to focus on the money that they have at risk and how much capital is at risk in any single investment they have. If everyone spent 90 percent of their time on that, not 90 percent of the time on pie-in-the-sky ideas on how much money they’re going to make, then they will be incredibly successful investors.
I’m always thinking about losing money as opposed to making money. Don’t focus on making money, focus on protecting what you have.
The most important rule is to play great defense, not great offense. Everyday I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum drawdown. Hopefully, I spend the rest of the day enjoying positions that are going in my direction. If they are going against me, then I have a game plan for getting out.
I believe the very best money is made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all your money by playing the trend in the middle. Well for twelve years I have been missing the meat in the middle but I have made a lot of money at tops and bottoms.
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.
Don’t be a hero. Don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.
I always believe that prices move first and fundamentals come second.
And then at the end of the day, the most important thing is how good are you at risk control. Ninety-percent of any great trader is going to be the risk control.
Fundamentals might be good for the first third or first 50 or 60 percent of a move, but the last third of a great bull market is typically a blow-off, whereas the mania runs wild and prices go parabolic… There is no training, classroom or otherwise, that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market.
The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.
Don’t ever average losers. Decrease your trading volume when you are trading poorly; increase your volume when you are trading well. Never trade in situations where you don’t have control. For example, I don’t risk significant amounts of money in front of key reports, since that is gambling, not trading.
I am more scared now that I was at any point since I began trading, because I recognize how ephemeral success can be in this business. I know that to be successful, I have to be frightened. My biggest hits have always come after I have had a great period and I started to think that I knew something.
Sometimes failure is merely chasing you off the wrong road and onto the right one.
First of all, never play macho man with the market. Second, never overtrade.
When you get a range expansion, the market is sending you a very loud, clear signal that the market is getting ready to move in the direction of that expansion.
It is not that we had any unfair knowledge that other people didn’t have, it is just that we did our homework. People just don’t want to believe that anyone can break away from the crowd and rise above mediocrity.
You learn more from your losses, than from your gains.
Failure was a key element to my life’s journey.
I spend my day trying to make myself as happy and relaxed as I can be. If I have positions going against me, I get right out; if they are going for me, I keep them.
The concept of paying one-hundred-and-something times earnings for any company for me is just anathema. Having said that, at the end of theday, your job is to buy what goes up and to sell what goes down so really who gives a damn about PE’s?
Trading gives you an incredibly intense feeling of what life is all about.
You adapt, evolve, compete or die.
You cannot have significance in this life if it is all about you. You get your significance, you find your joy in life through service and sacrifice – it’s pure and simple.
After awhile size means nothing. It gets back to whether you’re making 100% rate of return on 10k or 100 million dollars. It doesn’t make any difference.
Intellectual capital will always trump financial capital.

Now that I have shared the best trading tips and quotes from Paul Tudor Jones, which is your favourite trading tip?

Let me know in the comments below.

If you would like to get more trading tips and quotes from all the best traders, also check out: “Best Trading Tips & Quotes from Legendary Top Traders”

Best Trading Tips & Quotes from Ed Seykota

Edward Arthur Seykota (born August 7, 1946) is a commodities trader, who pioneered a computerized trading system for the futures market for the brokerage house he were working for.

Trading as a trend follower, Ed Seykota turned $5,000 into $15,000,000 over a 12 year time period.

Later, he decided to venture out on his own and manage a few of his client’s accounts, and the brokerage house he had been working for adopted his system for their trades.

In this post, I will share all the best trading tips and quotes from Ed Seykota, so that we can learn from his knowledge and experience.

Here are some of the best trading tips and quotes by Ed Seykota:

If I am bullish, I neither buy on a reaction, nor wait for strength; I am already in. I turn bullish at the instant my buy stop is hit, and stay bullish until my sell stop is hit. Being bullish and not being long is illogical.
Fundamentalists figure things out and anticipate change. Trend followers join the trend of the moment. Fundamentalists try to solve their feelings. Trend followers join their feelings and observe them evolve and dis-solve.
The feelings we accept and enjoy rarely interfere with trading.
Systems don’t need to be changed. The trick is for a trader to develop a system with which he is compatible.
It can be very expensive to try to convince the markets you are right.
There are old traders and there are bold traders, but there are very few old, bold traders.
I would add that I consider myself and how I do things as a kind of system which, by definition, I always follow.
Systems trading is ultimately discretionary. The manager still has to decide how much risk to accept, which markets to play, and how aggressively to increase and decrease the trading base as a function of equity change.
Trying to trade during a losing streak is emotionally devastating. Trying to play “catch up” is lethal.
The elements of good trading are: 1, cutting losses. 2, cutting losses. And 3, cutting losses. If you can follow these three rules, you may have a chance.
Losing a position is aggravating, whereas losing your nerve is devastating.
The markets are the same now as they were five to ten years ago because they keep changing – just like they did then.
Luck plays an enormous role in trading success. Some people were lucky enough to be born smart, while others were even smarter and got born lucky.
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.
A losing trader can do little to transform himself into a winning trader. A losing trader is not going to want to transform himself. That’s the kind of thing winning traders do.
If you can’t take a small loss, sooner or later you will take the mother of all losses.
It is a happy circumstance that when nature gives us true burning desires, she also gives us the means to satisfy them. Those who want to win and lack skill can get someone with skill to help them.
Risk no more that you can afford to lose, and also risk enough so that a win is meaningful.
Dramatic and emotional trading experiences tend to be negative. Pride is a great banana peel, as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions.
Be sensitive to subtle differences between ‘intuition’ and ‘into wishing’.
The trading rules I live by are: 1. Cut losses. 2. Ride winners. 3. Keep bets small. 4. Follow the rules without question. 5. Know when to break the rules.
I usually ignore advice from other traders, especially the ones who believe they are on to a “sure thing”. The old timers, who talk about “maybe there is a chance of so and so,” are often right and early.
I set protective stops at the same time I enter a trade. I normally move these stops in to lock in a profit as the trend continues. Sometimes, I take profits when a market gets wild. This usually doesn’t get me out any better than waiting for my stops to close in, but it does cut down on the volatility of the portfolio, which helps calm my nerves. Losing a position is aggravating, whereas losing your nerve is devastating.
I intend to risk below 5 percent on a trade, allowing for poor executions.
I don’t judge success, I celebrate it. I think success has to do with finding and following one’s calling regardless of financial gain.
(On losing streaks and over-trading) “Acting out this drama could be exciting. However, it also seems terribly expensive. One alternative is to keep bets small and then to systematically keep reducing risk during equity drawdowns. That way you have a gentle financial and emotional touchdown.
In order of importance to me are: 1) the long term trend, 2) the current chart pattern, and 3) picking a good spot to buy or sell.
Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.
Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them “funny-mentals”. However, if you catch on early, before others believe, you might have valuable “surprise-a-mentals”.
If you can’t measure it, you probably can’t manage it… Things you measure tend to improve.
The key to long-term survival and prosperity has a lot to do with the money management techniques incorporated into the technical system.
If you want to know everything about the market, go to the beach. Push and pull your hands with the waves. Some are bigger waves, some are smaller. But if you try to push the wave out when it’s coming in, it’ll never happen. The market is always right.
To avoid whipsaw losses, stop trading.
Pyramiding instructions appear on dollar bills. Add smaller and smaller amounts on the way up. Keep your eye open at the top.
Markets are fundamentally volatile. No way around it. Your problem is not in the math. There is no math to get you out of having to experience uncertainty.
Our work is not so much to treat or to cure feelings, as to accept and celebrate them. This is a critical difference.
Before I enter a trade, I set stops at a point at which the chart sours.
Trading requires skill at reading the markets and at managing your own anxieties.
The positive intention of fear is risk control.
Speculate with less than 10% of your liquid net worth. Risk less than 1% of your speculative account on a trade. This tends to keep the fluctuations in the trading account small, relative to net worth. This is essential as large fluctuations can engage {emotions} and lead to feeling-justifying drama.

Now that I have shared the best trading tips and quotes from Ed Seykota, which is your favourite trading tip?

Let me know in the comments below.

If you would like to get more trading tips and quotes from all the best traders, also check out: “Best Trading Tips & Quotes from Legendary Top Traders”