Every successful person in life has a mentor that they learn from.
Warren Buffett’s mentor is Benjamin Graham.
Mark Zuckerberg considers Steve Jobs his mentor.
And even Richard Branson has a mentor named Sir Freddie Laker.
When I first joined the prop firm, there were senior traders there to guide and mentor me.
And after a few years, I too was assigned to mentor new traders in the firm.
So if you want to succeed in any field, then getting a mentor is the fastest way to do so because they have the experience and wisdom.
In this post, I will share with you 10 powerful quotes from some of the best traders in the world that will greatly help in your trading…
And will certainly change the way you trade for good.
Trader Quote #1: William Eckhardt
“Don’t think about what the market is going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there.“
I love this quote a lot.
This is one of the quotes that has greatly helped me since my prop trading years because it means that you must be prepared for every scenario.
In other words, what William Eckhardt is essentially saying here is that there should be no scenario that should surprise you.
Many times when new traders get into a trade, they keep staring at the charts and start worrying when they see that the market is not behaving in the way they expect.
However, as William Eckhardt says, there is no point worrying.
There’s really only 2 scenarios that can happen:
- Your Take Profit is hit.
- Your Stop Loss is hit.
That’s it.
Everything else is just trade management.
For example, if there’s a piece of high-impact news that’s about to be released, will you tighten your Stop Loss?
Or will you get out of your trade just before the news is released?
Or will you reduce your trade size?
Before you get into a trade, every scenario should have been planned so that nothing can surprise you.
Then once you’re in a trade, all you have to do is manage the trade as per the scenarios that you have already planned for.
Trader Quote #2: Jesse Livermore
“No trading rules will deliver a profit 100 percent of the time.“
Jesse Livermore is one of the legendary traders that really got me into prop trading.
When I read the book Reminiscences of A Stock Operator, I got really inspired to learn price action.
But more importantly, what he is saying here is that there will be losing trades.
And losing is a part and parcel of any trading system.
You cannot avoid having losses in trading.
However, there are many new traders that get sucked into the idea of “no loss”.
And they usually employ a Martingale strategy where you keep adding on to your position to average your price as the market keeps going against you.
This is a dangerous strategy and I’ve literally seen people lose their entire account because of this.
They may win 99% of their trades, but when that 1% hits, it wipes out their account.
So instead of thinking that you have to win every trade…
Know that losing is normal.
Even the top professional traders have losing trades.
What’s important is that your total profits exceed your total losses, and you will be a profitable trader in the long run.
Trader Quote #3: Bruce Kovner
“Novice traders trade 5 – 10 times too big. They are taking 5 to 10 percent risk, on a trade they should be taking 1 to 2 percent risk on.“
Nowadays, there are so many self-proclaimed trading “gurus” on Youtube talking about how they turned $500 into millions of dollars in just a few days.
And many of them even claimed that they did that by trading on their mobile phone.
If you are just starting out and you’re serious about making trading a viable source of income for yourself, then you need to heed Bruce Kovner’s words.
Especially when you’re just starting out, you need to practice good risk management in order to stay in the game long enough to be profitable.
Don’t believe what these charlatans on Youtube are saying.
Instead, be 100% focused on strict risk management for each trade.
And that means that you should only limit your risk to 1 – 2 percent of your trading capital on any single trade.
Any more than that and you’re taking on too big a risk.
Trader Quote #4: Bill Lipschutz
“If most traders would learn to sit on their hands 50 percent of the time, they would make a lot more money.“
There are 2 extreme types of traders in the world…
The first type of trader is those who are so afraid of losing that they can’t get into a trade.
This is the type of trader who when a valid trading signal comes up, will have excuses as to why it’s not going to work out.
And thus he misses out on all his trades.
The second type of trader is the opposite.
He is what we call a “trigger-happy” trader.
He will find every reason to get into a trade, even when there is no valid signal.
And this is what Bill Lipschutz is referring to here.
The point he is trying to get across is to only pick the best setups that come your way.
If you go through your trades and analyze your losing trades, you may find a common pattern of getting into trades when you shouldn’t be.
So if you just eliminate those trades, then you will be overall more profitable.
Trader Quote #5: Tom Basso
“I think investment psychology is by far the more important element, followed by risk control, with the least important consideration being the question of where you buy and sell.“
Many new traders spend most of their time finding the “Holy Grail” trading system.
They want to find a trading system that is guaranteed to make them money.
But what they fail to realize is that most of the time, it’s not the trading system that makes the trader profitable…
Rather, it’s the trader that makes the trading system profitable.
For example, in the 1980s, two legendary traders by the name of Richard Dennis and William Eckhardt recruited a bunch of people, now known as the turtle traders, to teach their trading system.
This is the same trading system that made both them millions of dollars.
However, despite teaching everyone the same thing, not all were profitable.
So why is that?
And that comes down to what Tom Basso said – that investment psychology is by far the most important element in trade, and the least important is where to buy and sell.
But most new traders focus 100% on where to buy and sell.
So if you want to become a better trader, focus more on your psychology.
Because once you’ve got the right trading psychology, the trading system then becomes easier to get right.
Trader Quote #6: Paul Tudor Jones
“If I have positions going against me, I get right out. If they are going for me, I keep them. Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.“
What Paul Tudor Jones is saying here is a common theme among all the top traders in the world, and that is that you must manage your risk well.
In this quote here, he has revealed his trading style…
He cuts his losers and keeps his winners.
And what that means is that his average profit is always more than his average loss.
Take a look at your trading records and analyze your profits versus your losses.
Is your average profit per trade more than your average loss per trade?
If so, then all you need is just to win 50% of the time and you will be profitable.
For example, if each time you lose you only lose 1R, and each time you win you win 2R…
Then just a 50% win rate is more than enough to be profitable in the long term.
The other thing that Paul Tudor Jones is saying here is about the size of your risk.
He said, “If you have a losing position that is making you uncomfortable the solution is very simple: Get out”
But I want to go one step further…
And that is that if you have any losing position that is making you uncomfortable, then you shouldn’t even be getting into the trade in the first place.
Because it either means that you haven’t accepted your risk, or that your risk is too big for you.
So if you do feel this way, then all you have to do is simply reduce your risk by half.
If you still feel uncomfortable, then reduce that by another half again.
Remember, if you don’t feel comfortable with the maximum loss you can incur per trade, then you should reduce your trading size to the point you’re able to accept the maximum risk.
Trader Quote #7: Martin Zweig
“It’s okay to be wrong. It’s unforgivable to stay wrong.“
This is such a short and sweet quote by Martin Zweig.
Many times we traders have an ego.
We sometimes get so carried away by our over-confidence on a trade that we can’t believe when the position is losing.
I remember years ago I was talking to a friend who was trading his family funds.
His family had passed him a sizeable amount to trade the stock market and he was always so confident that he would always win.
When I had talked to him earlier, he had been winning 20 trades in a row and was telling me how he mastered the stock market.
Then being curious, I asked him about his strategy.
After talking to him, I realized that his so-called “strategy” was a ticking time bomb.
While he had entry rules, he had no exit rules.
When the market went up a little, he would sell it off each time taking small winners.
But if the market went against him, he would just hold on to the position until it came back.
So I asked him, “What if the one day the market never comes back?”
He said, “That’s not possible. It always comes back.”
He was so confident that he did not plan for the inevitability that the market could just keep doing down.
Then about a couple of months later, I caught up with him again to see how he was doing.
He told me he was no longer trading because his account got wiped out.
He was holding on to a few trades that just went never came back, and those few trades wiped out his account.
As Martin Zweig says, it is okay to be wrong…
And that means it’s okay to take losses.
But it’s unforgivable to stay wrong, and that means to not hold on to a losing trade in hopes that it will come back.
You must have a Stop Loss, and you must manage your risk well for every single trade.
Trader Quote #8: Stanley Druckenmiller
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.“
What Stanley Druckenmiller is saying here is that your win-loss ratio is not as important as your profits versus your losses.
Trend-following systems are known for their low win rate.
For example, a typical trend-following system should have a win rate of about 30 percent.
That means out of 10 trades, only 3 on average will be winners.
But that does not mean that trend-following systems are not profitable.
On the contrary, they are very profitable.
And that’s because when they win, they win much more than when they lose.
That’s what Stanley Druckenmiller here is saying.
In the book Trade Your Way to Financial Freedom by Dr. Van K. Tharp, he talks about a trading system’s Expectancy.
The way you calculate a trading system’s Expectancy is using this formula:
(Win Percentage x Average Profit) – (Lose Percentage x Average Loss)
If you noticed, these are the same elements that Stanley Druckenmiller is saying in this quote.
Using this formula, you’d be able to know how much your trading system expects to make or lose on average for each trade.
One of the things that many new traders focus on is on a high win percentage.
But that does not mean you will be profitable.
Let’s assume your trading system has the following traits:
- Win-Loss Ratio of 70-30
- Average Profit $100
- Average Loss $300
By using the Expectancy formula, we get:
(70% x $100) – (30% x $300) = -$20
What this means is that on average, you will lose $20 per trade.
Despite having a high win rate, this trading system is unprofitable.
So a high win rate does not necessarily mean you will be profitable.
And a low win rate does not necessarily mean you will be unprofitable.
It all comes down to what Stanley Druckenmiller here is saying…
And that is “how much money you make when you’re right and how much you lose when you’re wrong.”
Trader Quote #9: Richard Dennis
“I always say you could publish rules in a newspaper and no one would follow them. The key is consistency and discipline.“
What Richard Dennis is essentially saying here is that even if you hand a profitable trading system on a silver platter to anyone, they may not necessarily make money from it.
In fact, that’s what happened with the turtle traders.
While the turtle traders was a successful experiment, not all of them were profitable.
And the reason is that not all of the traders were disciplined or consistent enough to follow the rules all the time.
The issue with many new traders is that they don’t recognize a profitable trading system even if it’s presented to them.
For example, if the trading system’s rules are simple, the trader will doubt it saying that it’s too simple.
And they start to add more of their own rules thinking that it will make the trading system “better”.
That’s like adding more ingredients to an already perfect dish.
And that’s what Richard Dennis is saying here.
If you want to be successful, then a profitable trading system isn’t enough…
You need to have the discipline to follow the trading rules and have the consistency to execute those rules every single time.
When you’re able to do that, then it’s all a matter of letting your Positive Edge play out in the long run.
Trader Quote #10: Richard Wycoff
“Listen to what the market is saying about others, not what others are saying about the market.“
Richard Wycoff was a stock market authority in the early 1900s and came up with the Wycoff Method that states that there are 4 stages in every market – Accumulation, Markup, Distribution, and Markdown.
His method is still widely used by many traders today because he believes that everything you need to know about the market is being displayed on the charts.
And that’s reflected in this quote.
You see, one of the biggest mistakes that new traders make is always listening to other people.
If they hear from other traders that there is a buy signal, they will jump in without doing their own analysis.
But this is the worst thing to do as a new trader.
If you have no idea why you should be in a trade, then you have no business getting into a trade just because someone else has a trade signal.
Every professional trader makes their own decisions in the market.
If you want to be successful, then you need to make your own decisions as well.
And there are only 3 decisions you have to make:
- When to enter into a trade.
- The size of your trade.
- When to exit your trade.
The rest comes down to what Richard Dennis said – to have the consistency and discipline to execute according to your trading rules.
Conclusion
If you have noticed, none of the quotes above talks about how to enter or exit a trade.
In fact, the common theme among all the quotes is risk management and trading psychology.
Many people when they just get into trading, the first thing they want to learn is where to enter and exit a trade.
And they totally neglect risk management and trading psychology.
That’s why more than 95% of traders aren’t profitable.
Because like Richard Dennis said, “I always say you could publish rules in a newspaper and no one would follow them.”
So instead of solely focusing on trade entries and exits, you want to spend your time on learning risk management and trading psychology.
Because if you have a profitable trading system, but don’t have proper risk management or the right psychology for trading, then you’re not going to be profitable in the long run.
But if you’re able to manage your risk well and have the right trading psychology, then it’s only a matter of time before you create your own profitable trading system.
One more thing…
Which of these quotes did you like the best?
Let me know in the comments below!
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