With Tony Saliba, Jack Schwager profiled a man who is completely obsessed with and addicted to trading. What’s great about this Market Wizards interview is that you can feel Saliba’s passion for the market dripping from every sentence. This guy really loves what he does.
Top Five Quotes From Market Wizard Tony Saliba:
“This period taught me to be regimented and disciplined. To this day, I live by the credo of hard work, homework, and discipline. I teach my guys that.”
Here we have yet another successful investor stressing the importance of hard work, homework, and discipline. What is interesting from my perspective is that hearing someone stress these points hasn’t gotten old. Every time I read something like that I am reminded that I cannot allow myself to lighten up or lose focus. This is the key to successful investing.
This also reminds me that all of the traders I have come in contact with over the years have shown a direct correlation between their trading success and the amount of time and effort they put in. The successful traders I interact with on Stocktwits and Twitter are constantly analyzing, studying, reading, and writing about the market. Conversely, the guys who show up at the local IBD Meetup Group once a month and don’t bother to read the paper aren’t very successful.
“I always define my risk, and I don’t have to worry about it. I walk into the pit every day with a clean slate, so that I can take advantage of what is going on.”
I find risk to be the most fascinating topic in most of these interviews. For me, by the time I learned enough to know how important risk control was, I was already implementing O’Neil’s 7-8% loss cutting policy and trading only slightly larger positions than I should have been. What is interesting, is that before I realized this, like most rookie traders, I was incredibly reckless and took on way too much risk. I see this in a lot of young traders.
There is a huge calming factor in knowing the worst case scenario before you even enter a trade. That is how you can achieve the calm “clean slate” feeling that Saliba is talking about here.
“Clear thinking, ability to stay focused, and extreme discipline. Discipline is number one: Take a theory and stick with it. But you also have to be open-minded enough to switch tracks if you feel that your theory has been proven wrong. You have to be able to say, ‘My method worked for this type of market, but we are not in that type of market anymore.'”
Again, we see a strong emphasis on discipline. One of the key principles that runs through Market Wizards is that there are lots of ways to make money trading lots of different types of markets. The one constant across each style of trading, is that the traders don’t switch styles. They find a system that works for their personality and stick to it.
I find that a lot of the young traders I talk to bounce back and forth between two or three different strategies based on what books they read or what someone on TV recommends. One thing I always stress to new traders is that while it is possible to find success with any style of investing, it is not possible to find success using every style of investing.
“Always respect the marketplace. Never take anything for granted. Do your homework. Recap the day. Figure out what you did right and what you did wrong. That is one part of the homework; the other part is projective. What do I want to happen tomorrow? What happens if the opposite occurs? What happens if nothing happens? Think through all the ‘what-ifs.’ Anticipate and plan, rather than react.”
Saliba does a nice job here of breaking down a daily routine. In my experience, it helps to recap the day using something like Investor’s Business Daily that only uses facts, not opinions. It is also important to break down what you did right and what you did wrong. This post-analysis is the only way to prevent yourself from repeating the same mistakes.
The projective part is a little harder for me. It is hard for me to keep my biases and predictions out of my projective analysis. This is where the rules of O’Neil’s CANSLIM system save me because I am able to form my “what-if” scenarios in the context of the rules.
“I might have the TV on, but my head is always on trading. Last night I came back from a dinner date at midnight. I was tired and wanted to go to bed, but I was up until 2:00 AM figuring out trades. It’s an addiction. I used to be much worse. I got lots of grief from former girlfriends because I would take my work with me on dates. I don’t do that anymore, but I’m always still thinking about trading.”
Here again we see Saliba’s complete obsession with trading. This makes me feel completely inadequate. My wife wouldn’t stand for stock charts at the dinner table, but is that the cost of success in this business? I feel like there is probably a middle ground somewhere, however quotes like this really force me to consider how I spend my free time. Perhaps that fantasy football team is costing me a lot more that the couple hundred dollars a year in entry fees.