I have already said a few times that while I look forward to the interviews with names I recognize in Jack Schwager’s Market Wizards, the names that are unfamiliar to me always seem to be even more interesting. Mark Weinstein did not let me down. Schwager led into the interview by noting that Weinstein was back and forth on whether he would even do the interview. I found it interesting that despite being uncomfortable about the idea, he was very open about how his trading had affected him emotionally.
Weinstein’s system is far different from what I have been studying. However, like with every interview in this fantastic book, there was still plenty to be learned from the discussion. Like every trader featured in the book, Weinstein has a system, has a lose cutting method, and has the discipline to stick to his system. Over and over I am seeing this among these great traders.
Top 5 Quotes From Market Wizard Mark Weinstein:
“Not only an endeavor – it was an obsession! I slept with it; I dreamt about it. Sometime I would stay up all night thinking about what I would do the next day. If I didn’t need sleep, I would have done it twenty-four hours a day. At that point, it wasn’t the money that was motivating me. I was hooked on the game: on the challenge of trying to figure out the market.”
There are two aspects to this quote. First, I think anyone who has ever owned a stock, especially the first few buys, can relate to the excitement and passion Weinstein is talking about. Where I struggle is in maintaining that level of enthusiasm over the course of a number of years and hopefully decades. I began studying Livermore and O’Neil in 2004, but then took some time off during 2006 and 2007 due to a lack of focus. It is easy to be passionate about your stocks one day a week, but it takes a deeper level of commitment to maintain that focus every single day. I struggled with this for a very long time.
The second half of this quote deals with the motivation. I won’t say that the money isn’t motivating me, but it’s not my primary focus. It represents security of providing for my family, but in reality, the only reason I really want to grow my account from $5k to $500k is so that I can spend all of my working hours focused on the market because I am completely fascinated by it. Money aside, I prefer studying the market and past winners to any other hobby or vocation. It’s what I love to do, which is probably why this blog is becoming so popular.
“I didn’t consider the risk and took on too large a position. I was not using any type of rational jedgement. I was being guided by my material desires.”
I loved this section of the interview where Weinstein is talking about trying to make enough money to buy a castle in Europe and how that method of thinking sabotaged his trading. I think this paints a great example of why almost every single trader interviewed in Market Wizards has stressed the importance of risk controls and cutting short loses. I’ve never struggled with cutting loses, but as recently as a few months ago I was putting my entire trading account into one or two positions hoping to make big money fast.
Although I was shooting to make it big fast, I don’t think it was ever for material reasons. For me it has always been about proving that there is some validity in what I am doing. The main reason I started this blog was because I was tired of talking about my stocks at work only to be met with condescending or patronizing responses from people who don’t believe I am smart enough to be good at this. I just want to prove to myself and everyone else that I can trade successfully.
“I don’t believe anyone ever gets wiped out in the market because of bad luck; there is always some other reason for it. Either you were off when you did the trade, or you didn’t have the experience. There is always a mistake involved.”
Again, we are focused on risk control. This reminded me of the stories of Jesse Livermore blowing his entire fortune on bad trades. Everytime he lost it was because of a mistake HE had made. I try to remind myself of this constantly. We must always make sure that we can live to fight another day, and we can’t do that without capital.
“I also don’t lose much on my trades because I wait for the exact right moment.”
Weinstein elaborates on this by describing a cheetah sitting patiently waiting for the highest probability time to spring and attack its prey. I thought this was an interesting analogy because that is exactly what we do while waiting for breakouts from bases. We wait patiently while a stock forms a base, then insist on a big volume spike that corresponds with the breakout.
“Another major misconception is that people always expect the market to react to news. For example, when John F. Kennedy was assassinated, the market initially broke very sharply, but then quickly rebounded to new highs. This price action baffled many people.”
I have caught myself in this line of thinking a few times lately. Just because the market should react a certain way to a Super Storm, or a Presidential Election, or a Fiscal Cliff, doesn’t mean that it will. I always try to remind myself that it is at the points when everyone agrees that the market must go in one direction that it often goes the other.