William Eckhardt Quotes

People want to buy cheap and sell dear; this by itself makes them countertrend. But the notion of cheapness or dearness must be anchored to something. People tend to view the prices they're used to as normal and prices removed from these levels as aberrant. This perpective leads people to trade counter to an emerging trend on the assumption that prices will eventually return to "normal". Therein lies the path to disaster.

If a betting game among a certain number of participants I played long enough, eventually one player will have all the money. If there is any skill involved, it will accelerate the process of concentrating all the stakes in a few hands. Something like this happens in the market. There is a persistent overall tendency for equity to flow from the many to the few. In the long run, the majority loses. The implication for the trader is that to win you have to act like the minority. If you bring normal human habits and tendencies to trading, you'll gravitate toward the majority and inevitably lose.

Investing is a negative game emotionally. If you're playing for the emotional satisfaction, you're bound to lose, because what feels good is often the wrong thing to do. When all the criteria are in balance, do the thing you least want to do.

It's much easier to learn what you should do in trading than to do it. Good systems tend to violate normal human tendencies.

One common adage ... that is completely wrongheaded is: You can't go broke taking profits. That's precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits.

The market likes to lull you into the false security of high success rate techniques, which often lose disastrously in the long run. The general idea is that what works most of the time is nearly the opposite of what works in the long run.

If the losses don't hurt, your financial survival is tenuous.

I haven't seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren't. Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.

Amateurs go broke taking large losses, professionals go broke taking small profits.

In many ways, large profits are even more insidious than large losses in terms of emotional destabilization. I think it's important not to be emotionally attached to large profits. I've certainly made some of my worst trades after long periods of winning. When you're on a big winning streak, there's a temptation to think that you're doing something special, which will allow you to continue to propel yourself upward. You start to think that you can afford to make shoddy decisions. You can imagine what happens next. As a general rule, losses make you strong and profits make you weak.

Large profits are even more insidious than large losses in terms of emotional destabilization. I think it's important not to be emotionally attached to large profits. I've certainly made some of my worst investments after long periods of winning.

The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.