STANLEY DRUCKENMILLER TRADING TIPS ■ Focus on the FED and liquidity Earnings don't move the overall market; it's the Federal Reserve Board. Focus on the central banks, and focus on the movement of liquidity. Most people in the market are looking for earnings and conventional measures. It's liquidity that moves markets. ■ Once an economy reaches a certain level of acceleration, the Fed is no longer with you The Fed, instead of trying to get the economy moving, reverts to acting like the central bankers they are and starts worrying about inflation and things getting too hot. The market is fine because you've got all the free money in the federal reserve. But that can only last so long. Eventually, the hamster can't move on the wheel anymore. ■ Currency moves tend to last two or three years The nice thing about currency moves, they tend to last two or three years. ■ Be careful when catalysts come in to change When catalysts come in to change the market’s direction… you have to realize that the decline could be very major ■ Deflation creates an asset bubble The way you create deflation is you create an asset bubble. Every serious deflation I've looked at is preceded by an asset bubble, and then it bursts. ■ The stock market predicts economic recovery Whenever I see a stock market explode, six to 12 months later you are in full-blown recovery. ■ Invest in the future, not the present Never, ever invest in the present. ■ My strength is economic forecasting My strength is economic forecasting, but that only works in free markets, when markets are smarter than people. That’s how I started. I watched the stock market, how equities reacted to change in levels of economic activity and I could understand how price signals worked and how to forecast them. Today, all these price signals are compromised ■ If something needs to be hedged, you shouldn't have a position in it I don't really like hedging. To me, if something needs to be hedged, you shouldn't have a position in it. ■ What is more disciplined than a machine? I believe that good investors are successful not because of their IQ, but because they have an investing discipline. But, what is more disciplined than a machine? A well-researched machine can make many average investors redundant, leaving behind only the really good human investors with exceptional intuition and skill. ■ Diversification is probably the most misguided concept I think diversification and all the stuff they're teaching at business school today is probably the most misguided concept everywhere. Put all your eggs in one basket and then watch the basket very carefully. ■ The way you make big money With my business, the way you make big money is you find a great management team and a good concept, and you stick to it, and you add to it over time. ■ Bitcoin is like anything else Bitcoin is like anything else: it’s worth what people are willing to pay for it. ■ Investing is one big game Investing is one big game. You need to be decisive, open-minded, flexible, and competitive. ■ Passion with integrity Passion without integrity leads to jail ■ Stay unattached, be a pig The first thing I heard when I got in the business - not from my mentor - was, 'Bulls make money, bears make money, and pigs get slaughtered.' I'm here to tell you I was a pig. And I strongly believe the only way to make long-term returns in our business that are superior is by being a pig. ■ Commodities are driven by the cost of extraction 90% of the time When I started in 1976, I was taught by my mentor that when cash flow rises equities go up. But commodities are driven by the cost of extraction 90% of the time, and over the long run, technology makes extraction cheaper, pushing the cost curve down and with it commodity prices. But that hasn’t always worked, if I’d followed that advice over the past few decades, I’d be in trouble. THE MOST IMPORTANT LESSONS FROM GEORGE SOROS ■ Preservation of capital and home runs leads to long-term success George Soros has a philosophy that I have also adopted: The way to build long-term returns is through preservation of capital and home runs. ■ It’s not whether you’re right or wrong that’s important 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. ■ When you have a conviction on a trade you have to go for the jugular Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to ride a profit with huge leverage. ■ Take the loss Soros is the best loss taker I've ever seen. He doesn't care whether he wins or loses on a trade. If a trade doesn't work, he's confident enough about his ability to win on other trades that he can easily walk away from the position. If you're extremely confident, taking a loss doesn't bother you. ■ Decide how much money to allocate on a trade based on the risk/reward and your sense of conviction I learned a lot at Soros, but not what I thought I would learn. I did not learn what makes the yen go up or down, or what makes the stock market go up or down. Soros’s great gift was how to use leverage, and how much money to have down based on the risk/reward and your sense of conviction. His view on the yen or the euro was better than random, but not much. And yet he was still one of the great money managers ever because he knew how to bet his convictions.
Louis Bacon (Macro Trader) (another great billionaire trader) Born in 1956, Louis Moore Bacon is an American global macro trader and a hedge fund manager. In 1990, he founded 'Moore Capital Management' with a $25,000 inheritance from his mother. in 2017, Forbes Magazine estimated his net worth to be US$1.81 billion. By that time, he was the 374th richest person on the Forbes 400. LUIS BACON TRADING TIPS ■ Embrace disorder and chaos As a speculator, you must embrace disorder and chaos. ■ Managing large assets is difficult The ability to manage large assets well - it's like being Michael Jordan or winning the gold in the Olympics; it's what you aspire to. ■ Reasoning alone does not make a conclusion certain Reasoning draws a conclusion but does not make the conclusion certain unless the mind discovers it by the path of experience. ■ The importance of mathematics All science requires mathematics. The knowledge of mathematical things is almost innate in us. This is the easiest of sciences, a fact which is obvious in that no one's brain rejects it; for laymen and people who are utterly illiterate know how to count and reckon. -For the things of this world cannot be made known without a knowledge of mathematics. ■ Experimental science Experimental science is the queen of sciences and the goal of all speculation. ■ Argument does not remove doubt Argument is conclusive, but it does not remove doubt, so that the mind may rest in the sure knowledge of the truth unless it finds it by the method of experiment. ■ Keep it always simple It must be a balance in everything we do, not too much of everything, keep it simple, not complicated. ■ Bacon wrote to his investors in a letter Intense competition for trading talent coupled with client pressure on fees has led to a challenging business model for multi-manager funds such as ours. ■ Recognition cannot be a cause to rest Much like the conservationists who previously have received the Audubon Medal, including Stewart Udall, Rachel Carson, and Ted Turner, I realize that this recognition cannot be a cause to rest, but a spur to continue our work.
Larry Hite Born in 1956, Lawrence D. Hite is a hedge fund manager and one of the forefathers of system trading (along with Ed Seykota). Larry Hite co-founded Mint Investments in 1981. By 1990, Mint Investments had become the largest commodity trading advisor in the world in terms of assets under management. Larry Hite Trading Tips ■ Bet, without risking all your chips I have two basic rules about winning in trading as well as in life: (1) If you don't bet, you can't win (2) If you lose all your chips, you can't bet There are really four kinds of trades or bets: Good bets, bad bets, winning bets, and losing bets. Most people think that a losing trade was a bad bet. That is absolutely wrong. You can lose money even on a good bet. ■ Thinking long-term What makes this business so fabulous is that, while you may not know what will happen tomorrow, you can have a very good idea of what will happen over the long-run. ■ Three categories of players: the trade, the floor, and the speculator In trading, you can define three categories of players: the trade, the floor, and the speculator: (1) The trade has the best product knowledge and the best ways of getting out of positions. For example, if they are caught in a bad position in the futures markets, they can offset their risk in the cash market. (2) The floor has the advantage of speed. You can never be faster than the floor. While the speculator doesn't have the product knowledge or the speed, he does have the advantage of not having to play. (3) The speculator can choose to only bet when the odds are in his favor. That is an important positional advantage. ■ I don't see markets; I see risks, rewards, and money When I get together with other traders and they start exchanging war stories about different trades, I have nothing to say. To me, all our trades are the same. ■ Diversifying trading We diversify in two ways. First, we trade more markets worldwide than any other money manager. Second, we don't just use a single best system. To provide balance, we use lots of different systems ranging from short term to long term. ■ Backtesting your system If you use sufficiently rigorous methods to avoid hindsight, you can test a system and see how it would have done in the past and get a fairly good idea of how that system will perform in the future. That is our edge. ■ Financial Markets are not efficient I have noticed that everyone who has ever told me that the markets are efficient is poor. ■ Two Empirical Indicators that matter Although I don't really trade off indicators, there are two indicators that come to mind: First, if a market doesn't respond to important news in the way that it should, it is telling you something very important. The second item is, when a market makes a historic high, it is telling you something. No matter how any people tell you why the market shouldn't be that high, or why nothing has changed, the mere fact that the price is at a new high tells you something has changed. ■ The four basic principles of trading success Applying four basic principles: Never trade counter to the market trend. There are no exceptions and always follow the system. The maximum risk on each trade is limited to 1 percent of the total equity. Diversification to an extreme Volatility is continually tracked in each market in order to generate signals to liquidate or temporarily suspend trading in those markets where the risk/reward ratio exceeds well-defined limits.
Jesse Livermore (Equity Trader) Jesse Livermore (1877-1940) was also known as the ‘Boy Plunger’ and the ‘Great Bear of Wall Street’ because he had made a fortune by short-selling the market during the American stock market crashes of 1907 and 1929. Jesse Livermore's Trading Tips These are the trading rules by Jesse Livermore written back in 1940. (1) Markets are never wrong – opinions often are. Don’t trust your own opinion and back your judgment until the action of the market itself confirms your opinion. The human side of every person is the greatest enemy of the average investor or speculator. Wishful thinking must be banished. (2) Do not become completely bearish or bullish on the whole market because one asset in some particular group has plainly reversed its course from the general trend. (3) Nothing new ever occurs in the business of speculating or investing in securities and commodities. Whatever happens in the market today has happened before and will happen again. (4) The real money made in speculating has been in commitments showing in profit right from the start. (5) Money cannot consistently be made trading every day or every week during the year. Big movements take time to develop. Money is made by sitting, not trading. It was never my thinking that made the big money for me; it always was sitting. There is a time for all things, but I didn't know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. Not many can always have adequate reasons for buying and selling stocks daily — or sufficient knowledge to make his play an intelligent play. (6) Never buy an asset because it has had a big decline from its previous high. Never sell an asset because it seems high-priced. As long as an asset is acting right, and the market is right, do not be in a hurry to take profits. (7) I become a buyer as soon as an asset makes a new high on its movement after having had a normal reaction. (8) Never average losses. (9) Few people ever make money on tips. Beware of inside information. If there was easy money lying around, no one would be forcing it into your pocket. (10) Buy right, sit tight. Men who can both be right and sit tight are uncommon. Don't give me timing; give me time.
William Delbert Gann (Equity Trader) William Delbert Gann (1878 – 1955) introduced innovative technical analysis tools such as the Gann angles. William Delbert Gann is said to gain 50 million USD during the Great Depression. Only in 1933, is said to have gained 4,000% on his capital (422 winner trades in a total of 479 trades). William Delbert Gann Trading Rules 1.Only trade active markets Gann recommends trading exclusively high-volume markets where your entries are always easy and you pay a tight trading spread. An active market means a liquid market and lower transaction costs. 2. Avoid getting in and out of the market too often A great number of trades means you pay too much to your broker. Avoiding frequent trading leads to the reduction of transaction costs. 3. Be willing to make money from both sides of the market Trade any kind of market bullish or bearish without getting emotionally attached to a particular bias. 4. Do not try to guess tops or bottoms Tops and bottoms are the outcomes of random events. It is impossible to predict the exact levels where the market will stop and reverse. 5. Never buy or sell just because the price is low or high Focusing on the real value, and not the market price. Phillip Fisher once said: "The stock market is filled with individuals who know the price of everything, but the value of nothing". 6. Never risk more than 10% of your trading capital in a single trade Portfolio Diversification is a essential for long-term success. Most professional traders never allocate more than 2% of their capital in any trade. 7. Never let a profit run into a loss Capitalizing profits before they become a loss. Moving your stop-loss is the perfect way to ensure a great portion of your profits. 8. Never average a loss Cut your losses short and do not increase a losing bet. 9. Always use stop-loss orders and never cancel a stop-loss after you have placed the trade Reduce your risk by applying a stop-loss and follow your strategy with discipline. 10. Do not enter a trade if you are unsure of the trend. Never buck the trend In other words, trade only if you are able to ensure that you can understand the trend. 11. Distribute your risk equally among different markets Always applying Portfolio Diversification (in terms of different assets, markets, currencies, economic zones, etc). 12. Never get out of the market because you have lost patience or get in because you are anxious from waiting Balancing your trading decisions with discipline and logic by eliminating your emotions. 13. Never change your position without a good reason Stay loyal to the reasons that made you open a position. 14. Reduce trading after the first loss; Never hedge a losing position By hedging a losing position you enlarge the potential for a loss. A bad trade usually affects your morale and the effectiveness of your decision-making, cut it short
Victor Sperandeo (Derivatives Trader) Born in 1945, Victor Sperandeo is an American commodity and derivatives trader, known as “Trader Vic”. Sperandeo traded, particularly in the energy and metals sectors. He is the CEO of Alpha Financial Technologies, LLC (AFT). It is said that until 1990, he had 18 profitable years in a row with an average return of 72%. Victor Sperandeo takes a trade only when the odds are in his favor. For example, he believes that a typical bullish swing on the Dow Jones Industrial is 20%. After the Dow has performed 20% the odds for further continuation are diminishing. VICTOR SPERANDEO TRADING TIPS ■ Knowing the stage of the market matters the most Trading the market without knowing what stage it is in is like selling life insurance to twenty-year-olds and eighty-year-olds at the same premium. ■ You have to know when the odds are in your favor Gambling involves taking a risk when the odds are against you. For example, betting on a lottery or playing a slot machine are forms of gambling. I think successful trading, or poker playing for that matter, involves speculating rather than gambling. Successful speculation implies taking risks when the odds are in your favor. Just like in poker, where you have to know which hands to bet on, in trading, you have to know when the odds are in your favor. ■ The two-hundred-day moving average (200 MA) In the stock market, the one indicator I give the greatest weight is the two-hundred-day moving average (200 MA). ■ The key to building wealth The key to building wealth is to preserve capital and wait patiently for the right opportunity to make the extraordinary gains. ■ Cutting losses short The single most important reason that people lose money in the financial markets is that they don't cut their losses short. It is a curiosity of human nature that no matter how many books talk about this rule, and no matter how many experts offer this advice, people still keep making the same mistake. ■ Admitting your mistakes and having the emotional discipline The key to trading success is emotional discipline. Making money has nothing to do with intelligence. To be a successful trader, you have to be able to admit mistakes. People who are very bright don’t make very many mistakes. Besides trading, there is probably no other profession where you have to admit when you’re wrong. In trading, you can’t hide your failures. ■ The median extent for an intermediate Dow Jones bullish swing is 20% The median extent for an intermediate swing in the Dow during a bull market is 20 percent. This doesn't mean that when the market is up 20 percent, it's going to top; sometimes it will top earlier, sometimes later. However, what it does mean is that when the market is up more than 20 percent, the odds for further appreciation begin to decline significantly. Thus, if the market has been up more than 20 percent and you begin to see other evidence of a possible top, it's important to pay close attention to that information. I define "intermediate" as a price move lasting a minimum of three weeks to a maximum of six months. Once a price move exceeds its median historical age, any method you use to analyze the market, whether it be fundamental or technical, is likely to be far more accurate. ■ Analyzing risk by measuring the extent and duration of price swings I analyze risk by measuring the extent and duration of price swings. For example, if the market has risen 20 percent in roughly 107 days, even if I'm still extremely bullish I'll have a maximum position size of 50 percent because statistically, we've reached the median historical magnitude and duration of an up move. ■ Systematic knowledge is only one way to understand all the risks If there is one fatal flaw in this business, it is allowing isolated information to drive trading or investing decisions-committing money without understanding all the risks. And there is only one way to understand all the risks: through systematic knowledge. Good decisions require the development ■ The way to build wealth is to preserve capital The last stage of a bear market.. is caused by distress selling of sound securities, regardless of their value, by those who must find a cash market for at least a portion of their assets... The market player who avoids being invested near the top of bull markets-where he can really get hurt in a panic crash-and plays the short side in bear markets can be in the position to take advantage of such distress selling. You might miss the last 10 or even 20% of the gains to be made near bull market tops but you'll definitely still have your capital when the time comes to buy value with tremendous upside potential and almost no downside risk. In my view, the way to build wealth is to preserve capital, make consistent profits, and wait patiently for the right opportunity to make extraordinary gains.
James Simons (Systematic Trader & Hedge Fund Manager) Born in 1938, James Harris Simons is an American mathematician and a billionaire hedge fund manager. He specializes in statistical analyses and systematic trading and he is known as the 'Quant King'. His fund, Renaissance Technologies, is implementing quantitative techniques, using algorithms and sophisticated models to trade market inefficiencies. As for 2019, and according to Forbes, his net worth was estimated to be $23 billion. JAMES SIMONS TRADING TIPS ■ Looking for anomalous patterns We search through historical data looking for anomalous patterns that we would not expect to occur at random. Our scheme is to analyze data and markets to test for statistical significance and consistency over time. Once we find one, we test it for statistical significance and consistency over time. After we determine its validity, we ask, ‘Does this correspond to some aspect of behavior that seems reasonable?’ ■ Three criteria when selecting assets We have three criteria: If it's publicly traded, liquid and amenable to modeling, we trade it ■ Patterns are not completely random Patterns of price movement are not random. However, they're close enough to random ■ About trading models Our trading models actually tend to be contrarian often buying stocks recently out of favour and selling those recently in favour. Models can lower your risk. It reduces the daily aggravation. Of course, we can't show the model or tell people how we calculate our forecasts. That would be like Warren Buffett telling the world what stocks he's buying before he buys them. ■ Predicting the course of a comet is easier than predicting the course of Citigroup's stock One can predict the course of a comet more easily than one can predict the course of Citigroup's stock. The attractiveness, of course, is that you can make more money successfully predicting a stock than you can a comet. ■ Predicting future success Past performance is the best predictor of success. ■ Trading systems cannot remain stable The system is always leaking, and we keep having to add water to keep it ahead of the game. ■ About luck In this business, it's easy to confuse luck with brains. Luck plays a meaningful role in everyone’s lives. Luck is largely responsible for my reputation for genius. I don’t walk into the office in the morning and say, ‘Am I smart today?’ I walk in and wonder, ‘Am I lucky today?’ At a certain point, the luck evens out. ■ Mathematics and science are two different disciplines Mathematics and science are two different notions, two different disciplines. By its nature, good mathematics is quite intuitive. Experimental science doesn't really work that way. Intuition is important. Making guesses is important. Thinking about the right experiments is important. But it's a little broader and a little less deep. So the mathematics we use here can be sophisticated. But that's not really the point. We don't use very, very deep stuff. Certain of our statistical approaches can be very sophisticated. I'm not suggesting it's simple. I want a guy who knows enough math so that he can use those tools effectively but has a curiosity about how things work and enough imagination and tenacity to dope it out. ■ You need to build a system that is layered and layered Many of the anomalies we initially exploited are intact, though they have weakened some. What you need to do is pile them up. You need to build a system that is layered and layered. And with each new idea, you have to determine, Is this really new, or is this somehow embedded in what we've done already? So you use statistical tests to determine that, yes, a new discovery is really a new discovery. Okay, now how does it fit in? What's the right weighting to put in? And finally, you make an improvement. Then you layer in another one. And another one. ■ We start with the data, not models We don't start with models. We start with data. We don't have any preconceived notions. We look for things that can be replicated thousands of times. A trouble with convergence trading is that you don't have a time scale. ■ The thrill of finding a new predictor And we’ve found lots of new predictors over the years. You find a new predictor and it’s really terrific. You run the simulation and you say ‘Oh my goodness this is a real statistical advantage to this particular predictor and it’s independent to the other ones.’ We’ve built up the system that way. I’ve found that very, very gratifying. The risk control things. ■ The best way to conduct research The best way to conduct research on a larger scale is to make sure everyone knows what everyone else is doing. The sooner the better. Start talking to other people about what you’re doing. Because that’s what will stimulate things the fastest. ■ The efficient market theory Efficient market theory is correct in that there are no gross inefficiencies, but we look at anomalies that may be small in size and brief in time. ■ Trend-following system Trend-following is not such a good model. It’s simply eroded.Statistic predictor signals erode over the next several years; it can be five years or 10 years. You have to keep coming up with new things because the market is against us. If you don’t keep getting better, you’re going to do worse.
Didn't know about Augustus Caesar, I've updated my mental map on wealthiest in history, thanks. These compiled trading tips you've posted are interesting, what's the source?
For reason I do not want to publish source, but I posted nearly all trading tips from great traders, so feel free to look at those posts.