This guest blog post is written by Vlad Gubernat. He is a full-time trader based in Romania who shares his thoughts on his blog, JLTrader.
Bernard Baruch was a successful trader and investor in the first half of the 20th century. Although not as widely quoted as his contemporary, Jesse Livermore, he did leave behind a wealth of wisdom regarding the markets.
Here are some points I gathered reading about him (Bernard Baruch: The Adventures of a Wall Street Legend and his own book Baruch: My Own Story) that I believe are worth remembering:
– You will lose money following recommendations from others. The challenge for the successful speculator is how to disentangle the cold hard facts from the rather warm feelings of the people dealing with the facts. Self-reliance and “doing one’s own thinking” is a must.
– Cutting losses short is crucial. If a speculator is right half of the time, he’s hitting a good average. Even being right three or four times out of ten should yield a person a fortune if he has the sense to cut his losses quickly on the ventures when he is wrong.
– No one can catch bottoms and tops with any consistency. Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars.
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– Acting fast in the markets is important. A successful speculator is a man who observes the future and acts before it occurs.
– Baruch found it best to trade alone and keep silent about his trades and positions.
– It’s important to be flexible and not to favour the long side over the short side.
– It’s best when traders focus on one thing at a time, as no one can be an expert at too many things. This is why it makes more sense to have a few stocks and watch them carefully than to diversify.
– It’s important to examine past trades to see why you lost or made money.
– What matters is what the market is currently doing, not what one might think the market should do.
– If you’re awake at night worrying about your stocks, then you should sell them down to the “sleeping point.”
– To be truly successful in trading and investing takes time and dedication. But most people view the market as the place where the miracle of great and quick riches can be performed with little effort.
– Speculator comes from Latin “speculari” which means to spy out and observe. To be a successful speculator, three things are necessary: to get the facts, to form a judgement as to what those facts portend and then to act in time before it’s too late.