Wednesday, October 15, 2014

Michael Marcus: A Mentor to Trading Geniuses


"You need to get comfortable with losing money, or you will never make money." - Chris Tate

Michael Marcus is a professional trader. He went to Johns Hopkins and studied Psychology at Clark University. He started speculating on the markets in the year 1972. His first trade was successful, though that might be out of pure luck. In 1973, his portfolio that was initially worth twenty-four thousand US dollars was increased to sixty-four thousand US dollars. In fact, he’s said to have turned his portfolio from thirty thousand US dollars into eighty million US dollars.

Michael has worked for many trading firms in various capacities. His investment strategies are unique and the trading instruments he chooses are well-known and traded in well-planned ways. He’s also a technical analyst. He’s featured in a book titled: “The Predictors: How a Band of Maverick Physicists Used Chaos Theory to Trade Their Way to a Fortune on Wall Street.” He was reported to have been an ardent follower of the Maharishi Mahesh Yogi.

These are some of the lessons that can be learned from Michael:

1.         Although Michael is today viewed as a legendary trader, he started as a noob who had initial challenges in the markets. You may be a noob today, but that shouldn’t prevent you from becoming a legendary trader in future.

2.         When Michael was having challenges, he was mentored by Ed Seykota (a market wizard). Ed’s help and guidance made Michael a better trader. He was also taught money management. Do you find it difficult to be a successful trader? You might want to find a mentor who’s a successful trader cum talented coach. You might be surprised. Michael himself is now a mentor to professional traders.

3.         There’s life outside trading. Don’t be a market addict – to the detriment of your spiritual, social, parental, connubial etc. health. That’s what affected Jesse Livermore; the end of his life was worse. Michael was once making this kind of mistake. He was married to his screen and checked the market actions now and then, even at night. According to him, that was a factor that contributed to the collapse of his first marriage. He says: “If trading is your life, it is a torturous kind of excitement. But if you are keeping your life in balance, then it is fun. All the successful traders I’ve seen that lasted in the business sooner or later got to that point. They have a balanced life; they have fun outside of trading. You can’t sustain it if you don’t have some other focus. Eventually, you wind up over trading or getting excessively disturbed about temporary failures.” This is a great lesson. 

4.         It’s better to trades the markets that you understand very well and which you’re comfortable with.  Stay out of equilibrium markets, volatile markets, choppy and unpredictable markets. Trade only the markets that are easy to predict; the markets that you know very well. If you’re only familiar with Forex markets, you’d have difficulty making money from trading futures. Stay out of irrational and insane markets and court sexy and trending markets. This is one way to increase the odds in your favor.

5.         As it is said before, money management is very important. This is one of Michael’ formulas for lasting survival in the markets. You can survive protracted losing streaks only when you risk a small amount per trade. When winning streaks come around, the losses are then recovered. By risking too much per trade, there’s no way you can survive long in the markets; which means you won’t be able to recover your losses and you’ll stop trading. The best trading technique has losing streaks at times. With money management, you can avoid a margin call.

6.         We become better at trading only when we embrace losses and learn lessons from them. The lessons can change us for the better and revolutionize our trading approaches. Great traders don’t think they’ll always win – that’s impossible. We don’t make progress when we blame the markets. We make progress when we learn from our mistakes.

7.         There are many ways to make money without being active on the markets. This may be through funds management accounts, social trading or signals strategy services. However, if you want to be a trader, you need to learn how to trade, including the trading approaches that fit your psychology. You need to discover the type of trader you are and what works for you.

Conclusion: A good trader would eventually recover the recent loss she/he suffered. For examples, good funds managers have made gains that more than compensate for the negativity they experienced during the recent financial crises (some even made gains during the crises). It is also important to know which markets and currency trading instruments are favorable to your trading style. You need to begin to acquire the skills necessary to make you a victorious speculator. Should you fail to do this, you’d discover that you’re still a novice in several years to come, just as you’re now.

This article is ended with a quote from Michael:

“Perhaps the most important rule is to hold on to your winners and cut your losers. Both are equally important. If you don’t stay with your winners, you are not going to be able to pay for the losers.”

Learn from the Generals of the Markets: Market Generals 

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