Today, I plan to share the investment insights Benjamin Graham, Warren Buffet’s mentor, gleane...
A Common Trait of Millionaire Traders
09/16/2011 3:30 pm EST
Courtney Smith has worked with the world’s (documented) most successful trader and explains that the secret to success is actually a trait that any trader can work to replicate.
My guest today is Courtney Smith, and we’re talking about great traders that he’s worked with in the past, and maybe some common threads that they’ve all shared. So, Courtney, I’ll ask you right away: Who’s the best trader you’ve ever worked with?
You know, I think for best documented track record, somebody who can prove they were a great trader, was probably Marty Schwartz. He wrote a book called Pit Bulls, which I recommend; excellent book. And Marty had a documented track record of making over 1000% a year for seven straight years, and that was using a million dollars of his own money.
So, it was not like he started with $10,000 and went up 1000%; no, he was starting with a serious amount of money and running that up to a much larger number. So Marty Schwartz, I think, as far as I know, was documented to be the best trader of all time; documented. I worked with him for about 18 months.
So, what in Marty Schwartz can we duplicate in our own trading today?
Absolutely nothing. Now, the reason I say that: I’ve worked with several other great traders, and I would say that the characteristic that they all have is discipline. They follow their rules. They cut losses relentlessly; “When in doubt, get out.”
If they started to see any type of confusion in the marketplace, they would exit the market; they would just get out. So I think that’s what we can get.
I have to say, though, I went to work with Marty Schwartz so I could learn something from Marty. I gotta tell you: I didn’t learn a thing from him. Really weird. The other great traders I’ve worked with, I’ve learned lots of stuff, but Marty couldn’t communicate why he would enter and exit trades; he was very incommunicative.
NEXT: The Quality That Makes a Trader Great|pagebreak|
Well, that’s an interesting point you bring up, because we can go to Traders Expos and read books and attend seminars and learn all this, but there’s that last 10% that the great traders seem to have. What is that last 10% that makes them better than everybody else?
I still think it’s discipline and focus.
I think that discipline makes them more objective. Most people, once they put on a position, their minds are blown; they can’t be objective about that position at all.
I’ve run some very, very large trading operations on Wall Street and around the world. I did a study once of my traders where I required them to fill out a trading plan of what their entry and exit techniques were and why they were getting into the trade.
They would put on the trade, then two weeks later, a new piece of information comes out. Well, you would think that new, fresh information, if they were to revamp their trading plan, they would make more money.
In actual fact, 80% of the time, their original trade plan was more profitable than the new, revised trade plan, even though there was new, fresh information, and I think the reason is because traders cannot think objectively once they own a stock or a futures or a forex. They cannot do it.
I think that some of these great traders that I’ve worked with have the ability to separate their ego from the trade and think objectively about what’s going on. I think that’s really one of the key differences.
What about the mental stages? Did you see Marty Schwartz get angry when a trade didn’t go well, or euphoric when it did, or was he pretty even-keeled?
I would never use the term “even-keeled” to describe Marty Schwartz, but I never saw him get angry, I never saw him get excited. He was just totally intent on making money. He was a money-making machine.
So he was awe-inspiring to watch. He was inspiring because he was just all business. He wasn’t there to prove he was right. He wasn’t there to prove he was smart. He was there to make the maximum amount of money that he could in the shortest period of time.
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