marketref

The upcoming Market Wizards book is approaching completion. As such, @jackschwager and I have decided to release the names of the traders included in the book and their associated X handles. Here they are: Kristjan Kullamägi @Qullamaggie Lance Breitstein @TheOneLanceB Simon Russo @simonrusso__ Lukas Fröhlich @TheShortBear Phil Goedeker @Tradestl Kelvin Chiu @KC_SilverCape Jason Berry @Positive_Equity Kenny Sharkness of @smbcapital (Kenny has no public X account) Rick Bandazian Jr. @Off_The_Tape Looking forward to sharing the book with the world! If you'd like to pre-order the book, you can do so here: lnk.to/marketwizardsnextgene… For discounted bulk orders (US only) go here: bulkbooks.com/products/marke…

Someone alerted me to this screenshot post which dunks on me (without notifying me thus giving me a chance to defend myself) so I decided to share my response to the response to my OP here: A fair point deserving a thoughtful response. First, the book was mostly about Livermore but not entirely – it is a fictionalized account of several traders. Regardless, Reminiscences is the most often mentioned “best” book on trading by modern great traders. But, as you point out, JL killed himself and we hardly want to emulate a trader with Livermore’s end. So, why is the book so popular 100+ years later? I believe there are two reasons: 1. It covers many many market/trading truths. 2. It is told in narrative form (versus a boring textbook). 3. Livermore’s life was movie worthy in terms of booms, busts, wives, showgirls, drama, etc. And while this isn’t entirely reflected in Reminiscences, I think that knowledge (which comes from newspapers and biographies) attracts people to “his” story. Livermore was way more exciting than his sleepy nemesis Arthur Cutten (who went home to his wife on a farm outside Chicago and was in bed by 10PM). I post quotes from this book because I find them educational and I try to align these quotes with what is happening in markets to show people what I see in line with what I imagine Livermore saw (or might see today). However, I follow long term prices trends in my market endeavors and thus am not calling a top – I have no idea what comes next and long term trends remain decidedly up so I’m sitting here, long, losing money. FWIW, when I posted this yesterday, I equally considered another post from the book: “Go ahead! Do! Sell it short and invite me to your funeral.”

Decided to share my Sunday morning thoughts on what I think are trading truths. There are a lot of ways to play offense. You can find successful traders trading fast and slow, quant and qual, systematic and discretionary. But there are very few ways to play defense, and the most common method is to cut losses. Some strategies require you to live in front of a screen while some don’t. Neither is necessarily right or wrong; which type of trader do you want to be? If you’re 24 and say you want to live in front of a screen, go talk to some ~50 year old traders to get their opinion on the matter. Also ask them if being 24 years old feels like a long time ago (hint, most will say it feels like yesterday). Always consider factors that may have caused a mostly (outside of ideal windows) permanent degradation of a method or strategy. For example, as data has proliferated and the cost of computing power has experienced massive price deflation, the number of outlier robust quant traders producing exceptional risk adjusted results has declined. Try to avoid methods that aren’t going to work very well going forward. Beware traders who, via their prior success and passion, motivate you to trade strategies that have likely lost effectiveness or otherwise don’t adhere to good principles. For more on this, read about Jesse Livermore and cotton trader Teddy Price. There may be exceptions to this rule but, in general, I’ve found that incredible risk adjusted result strategies with very tight risk management rarely scale in any meaningful way. At the same time, producing jaw dropping account balances mostly necessitates a willingness to experience somewhat routine drawdowns of at least 30%. Most exceptional traders are, to some degree, self-taught. Indeed they study successful traders who came before them (an incredibly valuable exercise imo) but they also spend a lot of time studying markets – specifically prices be it via quantitative analysis or looking at charts. Hint, they’re looking for patterns of one sort of another. An increasingly persistent phenomenon I notice, which goes back 100+ years, involves traders wanting something to be making money pretty much from the getgo. I wonder how much results would improve if every trader decided to quickly exit trades that didn’t work almost immediately (subject to their timeframe – someone trading daily charts probably doesn’t want to use tick charts to cut losses…or maybe they do?). In studying successful traders over time, certain patterns come up again and again. For example, most traders migrate to longer term holding periods (swing trading over day trading) and advise you to avoid things like penny stocks. Yet sometimes the things you aren’t “supposed” to do work amazingly well. Decide how you want to contend with this reality. Most traders say that you have to be disciplined and consistent to achieve success as a trader. But, in their next breath, they tell you that it is necessary to adapt creating somewhat of a contradiction. In theory, the solution to this problem lies in identifying things that don’t change (i.e. cutting losses) and marrying these with things that do (a trade identification method that, by its design, inherently adapts). I must admit that I haven’t solved this riddle in a way that I feel is beyond criticism and I wonder if doing so is possible. Anything you would add?

I have an idea involving CEOs of small or micro cap companies. If you are a small or micro cap CEO or are close with one and are willing to chat, please send me a direct message. And please feel free to repost this to expand the reach.

As a quick point of clarification, in this post I am talking about discretionary trading (as opposed to systematic trading). The following quote comes from Jesse Livermore: "It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. Because the market does not beat them. They beat themselves, because though they have the brains...they cannot sit tight." At first glance people think this means they need to stick with a winning position and, to a degree, this is what Livermore means. However, as I pointed out in a post referencing one Richard Smitten’s books on Livermore, the quote is also about waiting for a good trade setup: A famous misunderstood quote of Livermore was: "It was the sittin' and the waitin' that made me the money." He did not mean the sitting and waiting after the stock was purchased-he meant before he pulled the trigger-that's when the trader must have the patience to sit and wait for all factors to come together to merge into the perfect trade, or as perfect as possible. I slightly disagree with Smitten’s take since other material on and from Livermore indicates Livermore did think it was important to patiently sit with a winning position. For clarity, I think Livermore believed it was necessary to be patient in waiting for his setups (aka, “…to sit and wait for all factors to come together…”) but that it was also necessary to be patient in holding a winning position. So, what are trade setups? Trade setups are essentially patterns that motivate a trader to enter a trade. Setups are typically identified looking at chart patterns. For example, Darvas was very successful using his boxes. Alternatively, O’Neil did very well using his cup with handle approach. And Livermore had his pivot points (which typically don’t hold up well to detailed analysis). There are arguably as many potential setups as there are traders. Is there a best setup? Through years of research, trial, and error, I have found that, without the benefit of hindsight and a clear definition of what makes something the best, no - there is no best setup in a right-for-everyone sense. However, there are best setups for each and every trader (who embrace the setup method) and these are determined by a combination of trading goals and temperament. Let me digress. After sinking like a stone, the stock market is shaking like a paint shaker today. Intraday ranges on some single stocks are massive. I personally have no trade setups that thrive on extreme volatility. That isn’t to say that my method of extreme volatility avoidance is correct (there is no “right” in trade setups), but it is to say that I have no business trying to trade right now. Despite knowing this, it is difficult to follow the “rules”. I log on to X and see all kinds of traders talking about all kinds of setups that sound pretty terrific. And, factual or not, they are making a mint off of the volatility. But, by virtue of lots of personal study and experience, I know that giving in to my emotional desire for market action is the path away from the advice of Livermore and other greats like him. In fact, the “right” move for me is to sit patiently on the sidelines saving my capital for when my setups return while managing my FOMO the best I can. I find the wisdom of greats like Livermore to be rather helpful in keeping me on the right path which is probably why I read and write so much about trading. Food for thought in your own trading. If you want all of the links that live in this post or want to receive my posts like this going forward, sign up for my Substack triinv (dot) Substack (dot) com