Trading Psychology · Lesson 14 · Beginner
Market Wizards lessons
You internalize the overarching behavioral principles of the best traders and turn money into a mere score.
With a free account: interactive chart exercises, quizzes with answers, progress and XP.
The recurring principles
Ego is the most expensive luxury, the compulsion to be right is the main cause of losses. Money only counts as a score: whoever sizes for a specific money target trades worse. Learning to lose matters more than learning to win.
Distance and patience
Do not personalize the market, I wish and I hope are destructive. Be patient and selective: do nothing unless there is something to do. Follow your own method instead of other people's tips.
The recurring principles of the Market Wizards
Interactive exercise: here you learn right on the chart, with feedback on every click. Sign up freeto start it.
Test yourself
Schwartz says: To hell with my ego. What principle is behind it?
- Wanting to be right costs money, leave the ego out
- You should trade loud and confident
Kovner says: If you personalize these losses, you can't trade. What follows from that?
- Keep emotional distance, do not take the market personally
- Get more tips from other people
Why should you not trade for a specific money target?
- Once you think about the money, you are dead
- Because money is unimportant
Sign up free for the answers with an explanation for each option.
The key points at a glance
- Ego is the most expensive luxury in trading.
- Money is just a score, think in multiples of R.
- Learning to lose matters more than learning to win.
Deep dive
What do the best traders in the world have in common?
Schwager interviewed dozens of top traders with opposing methods. Yet the same principles keep showing up, and first on the list is never the method, it is risk control.
- Jones: 'Risk control is the most important thing in trading'
- The most repeated sentence: 'cut losses short, let winners run'
- Hite and Kovner never risk more than 1 percent per trade
- Marcus risks 5 percent per idea at most, so he can be wrong 20 times
Why is ego the most expensive luxury in trading?
Schwartz was a loser for 10 years, until he said: 'To hell with my ego, making money is more important.' The compulsion to be right is, according to Schwager, the main cause of losses.
- The break-even trap: 'I'll exit at zero' only protects your pride
- Jones: 'Don't be a hero. Don't have an ego'
- Kovner: 'If you personalize these losses, you can't trade'
- Weinstein: 'You have to learn how to lose' before you win
Patience, your scorecard, and having your own method
The second pillar is selectivity. Rogers waits 'until there is money lying in the corner', Dennis pulled 95 percent of his profits from 5 percent of his trades. Overtrading is the flip side and ruins most people.
Think in R multiples instead of euros and follow your own method. Marcus: 'Follow your own light.' That calm, selective way of trading is exactly what you practice on the demo exchange, without a single bad trade costing you real substance.
1R = your risk unit: the loss you planned per trade (distance from entry to stop-loss). +2R means: you won twice what you risked.
Sources: Schwager, Douglas, Elder, Taleb
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