Market Wizard Tom Baldwin

In Jack Schwager’s introduction to his Market Wizards interview with Tom Baldwin, he discusses how the interview was not done under ideal settings. Having just read that, I picked up on that notion, however if he wouldn’t have pointed it out I may not have noticed. Regardless, just like the last few traders we have covered in this series, Baldwin is not even close to the style of trader we are trying to be. Like those other traders though, he does offer some advice that transcends strategy and investment vehicle.

Top Five Quotes from Market Wizard Tom Baldwin:

“You don’t need any education at all to do it. The smarter you are, the dumber you are. The more you know, the worse it is for you.”

I thought this quote fell right in line with what Michael Covel has been preaching for years. It seems that the more educated a person is, the more likely they are to try to use some complicated model or statistic to try to predict the future.

Meanwhile, many of the most profitable traders we have studied make it a point to make no predictions whatsoever. They simply buy and sell based on historical research and current price trends. The simplicity of this process is what makes it so appealing to me.

“It is a lot of hard work, for one. It’s perseverance. You have to love to do it. Also, in our business, you have to have a total disregard for money. You can’t trade for money.”

Passionate love for studying the markets is something we have seen time and time again from the great traders we have studied. The truly successful investors aren’t trying to make money to send their kids to college. They genuinely love the never ending challenge and competition associated with trading. One of the best things about Market Wizards is that it gives you a glimpse inside the world of these trading icons and lets you see their passion for what they do.

“They trade too much. They don’t pick their spots selectively enough. When they see the market moving, they want to be in on the action. So, they end up forcing the trade rather than waiting patiently. Patience is an important trait many people don’t have.”

This was Baldwin’s answer when Schwager asked him what most losing traders do wrong. I found it interesting that this describes me from two years ago perfectly. I can remember buying just about anything that broke out without even checking the fundamentals or base count.

Patience has been the most difficult thing for me to work on. Although I have made great strides in the past two years, I still catch myself worrying that the next bull market is going to take off without me. I expect that I will continue to improve in this area as I continue to gain more experience.

I also see this in a lot of young traders that I talk to. Many traders will email me about a stock they want to buy when they are still halfway through the first trading book they’ve ever read. It is very hard to take a step back from the excitement on TV and actually learn about yourself and your system before diving in.

“Trading is like any other job. You work hard, put in the time and effort, and make your own luck.”

This is another trait that we have seen multiple times now in these interviews. Many of the great traders profiled in Market Wizards don’t believe that there is anything special about them. They just show up to work everyday and study their asses off.

“Actually, the best traders have no ego. To be a great trader, you have to have a big enough ego only in the sense that you have confidence in yourself. You cannot let ego get in the way of a trade that is a loser; you have to swallow your pride and get out.”

As I’ve said before, ego has never been an issue for me as far as cutting loses. For me, the issue is having the self confidence to believe that I am going to be successful. I have come a long way with this as well, of course having a few big winners under my belt would really help!