As the first interview in the original Market Wizards book by Jack Schwager, Michael Marcus offers an entire spectrum of trading wisdom. The common theme that I noticed throughout the entire interview was Marcus’s focus on discipline. He notes his lack of discipline leading to early losses. He discusses developing the discipline to cut losses at a moment’s notice. He also talkes about having the discipline to do your own homework. While none of these concepts are new to me, it is always interesting to hear just how important most traders feel they are.
I think I wasn’t patient enough to wait for a clearly defined situation. – Michael Marcus
Marcus spends a large portion of the interview reviewing his early failures. He talkes in detail about growing his initial stake, then going bust. Then borrowing money from his mother and losing that as well. His example illustrates why we should never risk all of our capital on one position. We must have the discipline to define and hold to our money management rules.
If you become unsure about a position, and you don’t know what to do, just get out. You can always come back in. – Michael Marcus
The discipline to get out of a position at the first sign of weakness is something I struggle with. I tend to let all of my positions play out to either big winners or 7% losers. I know that most of the losers will be losers well before they hit 7%, but I generally don’t have the discipline to get out of a position before it hits my stop. I tend to do what most losing traders do and list reasons why the market is wrong about my stock. This has become my most glaring weakness.
Trading requires an intense personal involvement. You have to do your own homework. – Michael Marcus
Marcus spends the latter part of the interview discussing how one must have the discipline to do their own homework. He talks about how you can’t rely on experts to trade for you because most people, especially most brokers, don’t have a winning track record. This is something I have never had a problem with. I have always felt more comfortable doing my own research and keeping my own counsel.
I believe I am very strong with respect to most of the disciplines Marcus discusses. I obviously have some work to do when it comes to handling active positions, but I have the knowledge and the passion to improve in that area.