A Trader’s Advice from 1923

After reading quotes from today’s traders, it is even more illuminating to quote here a page from another successful trader in a very different time and place, whose advice is remarkably the same. This list of Characteristics of a Successful Trader is quoted from Edwin Lefevre’s 1923 book, Reminiscences of a Stock Operator. It is even more poignant to remember that he wrote this book in the years before the 1929 Stock Market Crash, a time in America when it had become almost a craze to play the market.

Why so poignant? Because 80 years later his advice offers the perfect antidote to the pitfalls Behavioral Finance Scientists have found in today’s burgeoning era of online trading. And as for forex traders today, his voice speaks to us across time to a modern age when online traders are now flocking to the Forex Market in droves – the most rapidly growing market in the world, in fact in the history of the world.
Of course, it is also worth noting that every point he advises is a description of a mental trading tool achieved by mind training.

1. Caution. Excitement (and fear of missing an opportunity) often persuades us to enter the market before it is safe to do so. After a down-trend a number of rallies may fail before one eventually carries through. Likewise, the emotional high of a profitable trade may blind us to signs that the trend is reversing.

2. Patience. Wait for the right market conditions before trading. There are times when it is wise to stay out of the market and observe from the sidelines.
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3. Conviction. Have the courage of your convictions: Take steps to protect your profits when you see that a trend is weakening, but sit tight and don't let fear of losing part of your profit cloud your judgment. There is a good chance that the trend will resume its upward climb.

4. Detachment. Concentrate on the technical aspects rather than on the money. If your trades are technically correct, the profits will follow. Stay emotionally detached from the market. Avoid getting caught up in the short-term excitement. Screen-watching is a tell-tale sign: if you continually check prices or stare at charts for hours it is a sign that you are unsure of your strategy and are likely to suffer losses.

5. Focus Focus on the longer time frames and do not try to catch every short-term fluctuation. The most profitable trades are in catching the large trends.

6. Expect the unexpected. Investing involves dealing with probabilities – not certainties. No one can predict the market correctly every time. Avoid gamblers’ logic.




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