If you haven’t seen this 1987 documentary starring Paul Tudor Jones, I strongly recommend that you watch it. At that time he was right in the middle of that spectacular 5 years run that would be documented in Jack Schwager’s Market Wizards. It has always amazed me how aspiring traders pay a lot of money and attention to slick marketers masquerading as traders and ignore the real titans of the industry. I guess one of the reasons is that they appeal to the deeply ingrained wish of most people to have riches without work. That’s why lotteries are so popular. In that respect, trading seems to be the perfect vehicle.
By just clicking a few buttons you have the possibility to multiply your account. And what about the risk of losing money? Well, that’s quickly glossed over by marketers with the promise of teaching you only high probability setups or with shows of their supposed wealth. After all, they couldn’t afford that new Ferrari or that long exotic vacation by losing money trading, right? Wrong! The truth is that if those are real to start with, they’re being paid by gullible people buying their stuff, not by trading profits.
So what can we learn from a real trader?
Where you want to be is always in control, never wishing, always trading, and always first and foremost protecting your ass. That’s why most people lose money as individual investors or as traders because of the fact they’re not focusing on losing money. They need to focus on the money that they have at risk and how much capital is at risk in any single investment they have. If everyone spent 90 percent of their time on that, not 90 percent of the time on pie-in-the-sky ideas of how much money they’re going to make, then they would be incredibly successful investors. – Paul Tudor Jones
As we can see, real trading is all about managing risk. Protecting your capital. Focusing on minimizing losses. It is not about day-dreaming of turning $1k accounts into $20k in a year.
If you’re not making any progress in your trading, ask yourself what is your number one priority: Making money or protecting what you have?