I do believe that Barry is one of the smartest contemporary author and investor from New York. His blog page http://www.ritholtz.com/blog/ taught me a lot how being better and more disciplined trader. I love his style and his different approaches to different things in this business. In 2010, Barry was named one of the "15 Most Important Economic Journalists" in the US. All in all he is not only a great author, but he has placed plenty of brilliant statements about his rules. Some of the rules are common with other great traders, some are unique but we should consider all of them. Personally I do.
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Cut your losers short and let your winners run.
We are human beings with many many bad instincts. We love to hold the losing
positions for long time to avoid the pain of a loss. Barry calls this
phenomenon loss aversion.
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Avoid predictions and forecasts.
That is really great point. The most complex system is
ever invented by mankind is the macro economy with thousands of
uncertainty. In my view nobody knows what holds the future. On the other I hate
forecast too because if you proclaim your idea about EURUSD will go
down and after a while all datas show you are wrong the cross is going up. You
will still fight for your right and insist for your preconception. You have a commitment to your previous message
and we don't really like to confess that we are wrong and made a wrong
decision. We love to insist to our stupid preconceptions.
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Understand crowd behaviour.
Humans often herd. People like what others like, especially
when we are uncertain about the market or about ourselves. Barry says that is the real wise
if you are buying when others are fearful and selling when others are greedy.
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Think like a contrarian
Be most of the cases non conventional because the mass really
seldom has right. If you want to make money in the market think unlikely and use always
different approaches.
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Admit when you are wrong
Namely means leave the position when you start losing money on
that. It's that simple. Believe me, most of the traders don't understand that. Barry recommends, once you
say publicly "X is going up" it gives your brain a shot of stupid juice
when it comes to concluding that you might be wrong.
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Understand the cycles of the financial world.
Nothing good or bad goes on forever. You have to accept the markets have
correction periods in the strongest, stormy trends too. So don't be scary about
the pullbacks use them as another opportunities to build better position
structure.
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Reduce investing friction.
Paying high fees, costs and commissions is one of the simplest investing
errors to correct. Youcan find EURUSD spread for 2point and for
0,8points, obviously choose the cheaper one. If you fix this that is the first step for being profitable.
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There is no free launch.
There is no substitute for hard work and rational decision making. We have
to work hard, sometimes on weekends too. Think about when you out there and
partying around someone at the same time is working hard and getting smarter
and just winning. You can't climb on the ladder of success with your
hands in the pocket.
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