Learn from the Trader Legends!

by Tom Meier

What do the world's best Traders differently than the average investor? Can the average investor learn from the Trader Legend's success stories and their systems used? What do the most famous Traders have in common that can be applied by the average talented trader?

Before we will give some insights on those questions let's have a look at
some of the most successful Trader Legends:

- Nicolas Darvas turned an $ 36'000 account into $ 2'000'000 in 18
months!!!
- Ed Seykota, a Turtle Trader, turned $ 5'000 into $ 15'000'000 in 12
years!!!
- Jesse Livermore made several multi-million dollar fortunes in the
early 1900's
- Richard Dennis, another Turtle Trader, made between $ 100 and $ 200
million
- George Soros is believed to be one of the greatest Traders of all
time!!!


The results are quite impressive and some other amazing Traders could be
added easily to the list above. Why do these guys have such tremendous
results?

There are common factors, which can be observed through most of the
successful Trader Legends:

- They have a System which they strictly follow.
- Most of them have a trend-following trading style.
- Most of them have a mid- to long-term approach.
- They have no fear and greed mentality.
- They have absolute discipline and stick 100% to their system.
- Their trades are fully planed; they are prepared for all scenarios
in advance.
- They know that a system goes through bad times and good times. Cut
losses early and let profits run.
- Their systems fit to their personality.

Some of these points sound logical and I see people nodding their heads. But
in reality the average investor behaves completely different. Some of them
burned their fingers over the last three years and some even lost a fortune.
Here are some examples of observed behaviour patterns:

- Losses are not cut early enough.
- Investment with a short-term horizon become long-term horizon in
hope of raising prices.
- People listen to the advise of their investment Brokers and
Analysts.
- People invest in hot stocks recommended by colleagues of their
colleagues.
- People have no plan for their investments.
- Money Management is not considered at all.
- People use trading styles which do fit their personality.
- Greed and fear is omnipresent.

What can average talented investors learn from the above and how can the
mistakes listed above be avoided? The following key points can be learned
from some of the most successful Trader Legends:

- Each investor has its own personality. Some of the investor have a
very aggressive trading style and are trading very frequently. Some prefer
stocks as other are more risk oriented and invest in options. Others want
only spend a minimum of effort.
An investor need to reflect on his profile and choose a trading approach
which fits his personality.

- A trade needs to be completely planned in advance. People plan a lot
of their activities, e.g. when they go on holiday, when they move house etc.
But do they have a plan when they invest?
An investor needs to have a system that helps him to be prepared for all
scenarios of a trade. One needs to know in advance when to buy, how much to
buy, when to exit. Once a trade is executed the price of the instrument
(stock, option, bond etc.) cannot be influenced by the normal private
investor anymore.

- The most important component of a trading system is Money
Management? Surprised? Lots of investors and traders spend most of their
time developing a very sophisticated trade entry system. But the entry
strategy contributes only approximately 15% to the success of a Trading
System based on academic studies.
The most important question of a Trading System is how much to invest and
how many positions to trade at the same time.

- A 'can do' attitude is required to trade successfully. 99% of the
world's population probably has this dream of being financially free, but
only 5% have reached it. Why? Because with phrases like "...it would be
great, but I can't..." or "...one day perhaps I will win in the lottery, but
until then I must work hard..." they have already lost.

For more information and a complete Stock Trading System based on a modified
Nicolas Darvas approach, see my web site shown above.


Copyright, Tom Meier

Tom Meier is the author and publisher of the weekly "Free Darvas trading
Easy-Flash". This newsletter helps investors to understand the Darvas
trading method. The subscription is free at: http://www.easy-trader.ch

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