Updated: Aug 27, 2020
Market Wizards: Prince of The Pits
Richard Dennis was a Systematic Trend Follower who trades the Futures market, mainly in commodities. He is also the founder of the Turtle Traders where he turned random people from the public into heavily profitable and professional traders. It was actually a bet he made with a friend. He is famously known as a market wizard after turning $400 to $200 million.
However, with such high returns came some downfall and heavy draw downs. Here are some valuable lessons you can learn from his experience.
1. Whatever method you use to enter trades, the most critical thing is that if there is a major trend, your approach should assure that you get in that trend.
2. A good trend following system will keep you in the market until there is evidence that the trend has changed.
3. When you have a position, you put it on for a reason, and you’ve got to keep it until the reason no longer exists.
4. You should expect the unexpected in this business; expect the extreme. Don’t think in terms of boundaries that limit what the market might do.
5. If there is any lesson I have learned in the nearly twenty years that I’ve been in this business, it is that the unexpected and the impossible happen every now and then.
6. Trading decisions should be made as unemotionally as possible.
7. Trade small because that’s when you are as bad as you are ever going to be. Learn from your mistakes.
8. I could trade without knowing the name of the market.
9. In the real world, it is not too wise to have your stop where everyone else has their stop.
10. You could publish trading rules in the newspaper and no one would follow them. The key is consistency and discipline.
11. There are lots more false breakouts, perhaps because there are more computer-based trend followers.
12. It is misleading to focus on short-term results.
13. You have to minimize your losses and try to preserve capital for those very few instances where you can make a lot in a very short period of time. What you can’t afford to do is throw away your capital on sub optimal trades.
14. I learned that a certain amount of loss will affect your judgment, so you have to put some time between that loss and the next trade.
15. Trading has taught me not to take the conventional wisdom for granted. What money I made in trading is a testimony to the fact that the majority is wrong a lot of the time.
16. Almost anybody can make up a list of rules that are 80 percent as good as what we taught people.
17. I’ve learned that markets, which are often just mad crowds, are often irrational; when emotionally overwrought, they’re almost always wrong.