The Truth About Market Wizards

Sir/Madam:

My interest in market wizards has lead to a simple conclusion - a great trader isn’t necessarily smarter than we do, he just has an access to a colossal fund. Great traders also lose. Though they survive losing streaks, the only difference is the hug
eness of their accounts.

I heard of a rogue trader in Europe who lost close to 50 billion Euros, while I know a humble trader who manages $5000 successfully. Someone isn’t a wizard simply because he has access to a huge fund.

If someone makes 20% per annum on $1000, who would call him a great trader? But if he makes the same 20% on $10 billion per annum, why wouldn’t you call him a great trader? $2 billion is a great amount of money. If I had $1 million to play the markets, I could be very much comfortable if I’m making only 1% per month. But if I funded my account with $10, no-one would even take me serious
If I boasted of 50% per annum, unless it was 50% of $50 billion.


You see, great traders don’t necessarily double accounts to be called ‘’successful.’’ Although some of them risk too much of the funds they manage, and you know the possible consequences of that. For them, only a small percentage profit will make a big difference. But most traders don’t have a great amount of money. You might want to fund your account with $100 and make 10% - 20% on daily basis (if you’d been trained to be a suicide trader). So this is where frustration comes in; we want to trade with a small amount of money and live a big life. You wouldn’t appreciate 10% profit in 3 months if your account is small. Please let’s have a rethink!

Van K. Tharp declares: ‘’From my market research and other sources, I know how a number of ‘market wizard’ caliber traders function. They have good systems with positive expectancy. But those systems are not much different than the kind of systems the average person can get. The difference between making a fortune in the markets, as most of them have done, and average performance is simply one of position sizing. Great traders apply great position sizing to good systems and have the discipline to carry it out.’’

A hugely successful trader was reported as using mathematical models in making trading decisions. One would first think the models are his secret, but when I delved further, I saw that he usually uses 1:2 or 1:3 risk-to-reward on swing trades. Honestly, the good RRR is also part of his secret.

You can be great with any entry criteria you use – whether technical or fundamental or a combination of both. But all systems have losing streaks, whether temporary or protracted. So you need a good RRR

To conclude, we need to continue working and developing to have the real LUCK, (Labor Under Constant Knowledge).