I was very excited to read Jack Schwager’s interview with Tom Basso from The New Market Wizards because Tom and I are friends on Facebook. I really liked hearing Basso’s laid back approach to trading. Not only do I admire his trading style, but his general approach to life seems to in line with my own views. He seems like the kind of guy I would enjoy having a few beers with.
Top Five Quotes From Market Wizard Tom Basso:
“I realized that every time I had a loss, I needed to learn something from the experience and view the loss as tuition at the College of Trading. As long as you learn something from a loss, it’s not really a loss.” – Tom Basso
This has always been my view on losses as well. I have often been criticized for both my poor performance and the lack of concern I have about it. The reason those losses don’t concern me is that they are insignificant in the long term view of a 50 year trading career. It is far more important that I am learning from the mistakes I am making than making money.
“When your account has these massive swings up and down, there’s a tendency to feel a rush when the market is going your way and devastation when it’s going against you. These emotions do absolutely nothing to make you a good trader. It’s far better to keep the equity swings manageable and strive for a sense of balance each day, no matter what happens.” – Tom Basso
This is something that I can absolutely relate to. I am the perfect example of the rush and devastation Basso is talking about. I was ecstatic for the entire time I held PCLN in early 2011. I was also completely devastated by my losses over the summer of that year. I have always struggled to keep my emotions in perspective like Basso is talking about. I am also far too emotional when it comes to checking the price of a stock multiple times during the day. Finding the sense of balance that Basso is talking about would do wonders for my trading.
“I probably do more mental exercises now than I ever did. Each morning while I’m driving to work, I make a conscious effort to relax. I mentally rehearse any conflict that might happen that day. The process of mentally organizing and relaxing before I get to work helps me start my day in a very positive frame of mind.” – Tom Basso
This reminded me of how calm my days are when I am able to get out of bed on time and relax for an hour reading the paper before going to work. I really like Basso’s idea of rehearsing any conflict that could potentially happen that day ahead of time. I completely agree with the idea that relaxing before work can put you in a positive frame of mind. My struggle has always been in the fact that I tend to sleep in and then rush into work late. If I could get out of bed on time, I could have a more relaxed life.
“Also, it helps if you view your life as a movie. If you go to a video store and rent a horror movie, you’re voluntarily letting yourself be horrified, and it’s not stressful because deep down you know it’s just a movie. What if you had the same attitude about life?” – Tom Basso
Again, I find Basso’s way of looking at life and trading to be very refreshing. I have often thought about my life as if I was starring in The Truman Show. My problem is that horror movies scare me, and so does life sometimes. I have a tendency to overemphasize the importance of things in the moment. This usually works in my favor for positive things, but is detrimental for negative things. If I could learn to look at everything from Basso’s movie perspective, perhaps my life would feel more calm and balanced.
“I think investment psychology is by far the most important element, followed by risk control, with the least important consideration being the question of where you buy and sell.” – Tom Basso
We have seen this from one Market Wizard after another. They all seem to think that most people could be successful if they simply had the right psychology and risk control, regardless of their system. While I have made great strides in terms of psychology and risk control, I still have a long way to go.