With the Brian Gelber interview in Jack Schwager’s Market Wizards, once again we see a not so famous trader who has posted crazy returns while remaining virtually unknown. We also see, once again, a trader who trades very differently from our CANSLIM approach, but still uses many of the same key principles that we have seen discussed throughout this book.
Top Five Quotes from Market Wizard Brian Gelber:
“If you are a broker, you are not a trader; if you are a trader, you are not a broker.”
I found it very interesting that Gelber was able to act as both a broker and an individual trader at the same time. One thing that I continue to experience is that when people find out that I am interested in pursuing a career in stock speculation, they automatically assume that I want to be a broker (or that I don’t know what I’m getting into) and tell me about some distant cousin that “works on Wall Street.”
I don’t want to be a broker. I never have. I also don’t want to sell life insurance or explain to people (who don’t care enough to do it themselves) how to set up their 401k. I just want to trade and grow my own money by myself, quietly. At some point down the road, I could potentially see taking on some investor funds, but they would have to be well qualified and understand the apporach. Actually, I would probably rather teach my investing style than handle other peoples money. From day one I have maintained that while I am perfectly comfortable losing my own money, losing someone else’s money would be very difficult to handle.
“I had learned that an opinion isn’t worth that much. It is more important to listen to the market. I became a reactive trader as opposed to an opinionated trader.”
If you’ve done any reading of Investor’s Business Daily or How To Make Money in Stocks, you already know that we don’t have any interest in opinions. This falls right in line with that. I would never make an investment based on what I think or hope might happen. We make investments based on historical evidence that points to the most optimal times to purchase the securities that are most likely to outperform the market.
Because we don’t make predictions, the second part of this is even more important. We must stay very in tune with what the general market indexes as well as leading stocks are doing. We use what is happening right now to determine how we should proceed in order to most align the odds in our favor.
“This is my view of a year in the life of a trader: Four out of twelve months you are hot. You are so excited that you can’t sleep at night. You can’t wait to get to work the next day; you’re just rolling. Two months out of the year, you are cold. You are so cold, you are miserable. You can’t sleep at night. You can’t figure out where the next trade is going to come from. The other six months out of the year, you make and lose, make and lose.”
This is a great point because it is so in line with both CANSLIM and general Trend Following strategies. Our goal is to find a few BIG winners that more than pay for all of our smaller losers.
This quote is also a good summary of the past year for my trading. From January through the end of March I was on fire. Everything I picked was making money and I felt like I had everything figured out. Then from June through the beginning of September I lost money on every single trade and felt like I didn’t know up from down. It is interesting how the market can humble you when you feel invinsible and then encourage you when you feel stupid.
“Most traders who fail have large egos and can’t admit that they are wrong. Even those who are willing to admit that they are wrong early in their careers can’t admit it later on. Also, some traders fail because they are too worried about losing.”
This goes hand-in-hand with the quote about having an opinion. Ego is something I have never had a problem with. Actually, I tend to fall on the other side of the spectrum. I lack the self confidence to believe in what I am doing.
As far as failing because a trader is worried about losing, I went through some of that this past summer. I felt like every decision I was making was wrong, which led me to question every decision I thought about making. The fear of adding another loser to my records almost kept me from making some trades.
“Never add to a loser.”
I included this as one of the top five quotes not because it is incredibly original, but because it seems to be a universal truth. Cutting loses short seems to be a key component of successful trading according to just about every trader I have ever read, talked to, or heard. Every last one.