Study Investing Legends to Speed Up Your Learning Curve
Studying successful investors, both past and present, is a strategic approach new investors can utilize to accelerate their learning curve and minimize amateur mistakes in the stock market. Rather than learning the hard way through losing money, investors can gain valuable insights into effective market navigation and practices via other people's experiences. Though the following quotes are pieces of wisdom extracted from investors from different eras with different backgrounds and strategies, I think you’ll be surprised by how many of them share similar convictions and techniques regarding market trends. To make this proactive learning approach easier to digest, I’ve compiled several of my favorite trend-following quotes from investing legends like Ed Seykota, George Soros, and Paul Tudor Jones. In addition, I’ve provided interpretations of these quotes for easy understanding.
Lesson #1: Job #1 = Risk Management
“If you diversify, control your risk, and go with the trend, it just has to work.” ~ Larry Hite
“I have two basic rules about winning in trading as well as in life: 1. If you don’t bet, you can’t win. 2. If you lose all your chips, you can’t bet.” ~ Larry Hite
“Where you want to be is always in control, never wishing, always trading, and always first and foremost protecting you’re a**. That’s why most people lose money as individual investors or traders because 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% of their time on that, not 90% of the time on pie-in-the-sky ideas on how much money they’re going to make, then they will be incredibly successful investors.” ~ Paul Tudor Jones
Interpretation: While amateur investors focus on finding the next hot stock tip and making money, the investing legends I’ve studied view themselves as risk managers first and investors second. Investing is a marathon, not a sprint. Just one poor risk management decision can blow up your account and set you back years. Always hyper-focus on the risk of ruin! Buy uptrends, sell downtrends, and cut losses short.
Lesson #2: Be “Dumb,” Follow Price
“In order of importance to me are 1) the long-term trend 2) the current chart pattern 3) picking a good spot to buy or sell” ~ Ed Seykota
“The trend is your friend until the end when it bends.” ~ Ed Seykota
“There are no good or bad stocks, there are only rising and falling stocks.” ~ Nicolas Darvas
“Successful traders always follow the line of least resistance. Follow the trend. The trend is your friend.” ~ Jesse Livermore
Interpretation: Amateur investors often overcomplicate their market analysis with complicated and ambiguous macro analysis. However, before diving into the fundamental weeds, investors can avoid many headaches by simply identifying the trend and latching onto it. Remember, only price pays, not opinions.
Lesson #3: Avoid Predicting the Future: Instead, Interpret the Present
“Trend following is an exercise in observing and responding to the ever-present moment of now.” ~ Ed Seykota
“To anticipate the market is to gamble. To be patient and react only when the market gives the signal is to speculate.” ~ Jesse Livermore
“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” ~ George Soros
Interpretation: Wall Street media and investment banks are obsessed with making bold market calls and predictions. The benefit of such a practice is the notoriety attained if one’s prediction is correct. However, in real-world trading, the issue is that most market predictions are inaccurate. For example, in 2023 many Wall Street analysts were doom and gloom bearish just as the market bottomed. Instead of anticipating market moves, the investment legends interpret the price action in the present, leaving their ego at the door.
Lesson #4: Trends Tend to Persist, Patience Pays
“It is one of the great paradoxes of the stock market that what seems too high usually goes higher, and what seems too low usually goes lower.” ~ William O’Neil
“Once a trend is established it tends to persist and to run its full course.” ~ George Soros
“A good trend-following system will keep you in the market until there is evidence that the trend has changed.” ~ Richard Dennis
“Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make money.” ~ Jesse Livermore
Interpretation: The big money on Wall Street is accumulated by latching onto a trend and riding it for as long as possible. Often, market trends persist far longer than most investors anticipate. In a world full of hyperactivity and short attention spans, it’s the patient investors who end up on top.
Lesson #5: Avoid Bear Markets: Learn the Art of Doing Nothing
“I keep out in a bear market and leave such exceptional stocks to those who don’t mind risking their money against the market trend.” ~ Nicolas Darvas
“There is a time to go long, a time to go short, and time to go fishing.” ~ Jesse Livermore
Interpretation: Just as sitting in a winning trend is valuable, learning to sit out of bear markets and avoid fighting the trend is equally important. Being able to observe the market action without needing to be active is a superpower.
Image: Bigstock
The Trend Commandments (5 Lessons from Investing Legends)
Study Investing Legends to Speed Up Your Learning Curve
Studying successful investors, both past and present, is a strategic approach new investors can utilize to accelerate their learning curve and minimize amateur mistakes in the stock market. Rather than learning the hard way through losing money, investors can gain valuable insights into effective market navigation and practices via other people's experiences. Though the following quotes are pieces of wisdom extracted from investors from different eras with different backgrounds and strategies, I think you’ll be surprised by how many of them share similar convictions and techniques regarding market trends. To make this proactive learning approach easier to digest, I’ve compiled several of my favorite trend-following quotes from investing legends like Ed Seykota, George Soros, and Paul Tudor Jones. In addition, I’ve provided interpretations of these quotes for easy understanding.
Lesson #1: Job #1 = Risk Management
“If you diversify, control your risk, and go with the trend, it just has to work.” ~ Larry Hite
“I have two basic rules about winning in trading as well as in life: 1. If you don’t bet, you can’t win. 2. If you lose all your chips, you can’t bet.” ~ Larry Hite
“Where you want to be is always in control, never wishing, always trading, and always first and foremost protecting you’re a**. That’s why most people lose money as individual investors or traders because 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% of their time on that, not 90% of the time on pie-in-the-sky ideas on how much money they’re going to make, then they will be incredibly successful investors.” ~ Paul Tudor Jones
Interpretation: While amateur investors focus on finding the next hot stock tip and making money, the investing legends I’ve studied view themselves as risk managers first and investors second. Investing is a marathon, not a sprint. Just one poor risk management decision can blow up your account and set you back years. Always hyper-focus on the risk of ruin! Buy uptrends, sell downtrends, and cut losses short.
Lesson #2: Be “Dumb,” Follow Price
“In order of importance to me are 1) the long-term trend 2) the current chart pattern 3) picking a good spot to buy or sell” ~ Ed Seykota
“The trend is your friend until the end when it bends.” ~ Ed Seykota
“There are no good or bad stocks, there are only rising and falling stocks.” ~ Nicolas Darvas
“Successful traders always follow the line of least resistance. Follow the trend. The trend is your friend.” ~ Jesse Livermore
Interpretation: Amateur investors often overcomplicate their market analysis with complicated and ambiguous macro analysis. However, before diving into the fundamental weeds, investors can avoid many headaches by simply identifying the trend and latching onto it. Remember, only price pays, not opinions.
Lesson #3: Avoid Predicting the Future: Instead, Interpret the Present
“Trend following is an exercise in observing and responding to the ever-present moment of now.” ~ Ed Seykota
“To anticipate the market is to gamble. To be patient and react only when the market gives the signal is to speculate.” ~ Jesse Livermore
“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” ~ George Soros
Interpretation: Wall Street media and investment banks are obsessed with making bold market calls and predictions. The benefit of such a practice is the notoriety attained if one’s prediction is correct. However, in real-world trading, the issue is that most market predictions are inaccurate. For example, in 2023 many Wall Street analysts were doom and gloom bearish just as the market bottomed. Instead of anticipating market moves, the investment legends interpret the price action in the present, leaving their ego at the door.
Lesson #4: Trends Tend to Persist, Patience Pays
“It is one of the great paradoxes of the stock market that what seems too high usually goes higher, and what seems too low usually goes lower.” ~ William O’Neil
“Once a trend is established it tends to persist and to run its full course.” ~ George Soros
“A good trend-following system will keep you in the market until there is evidence that the trend has changed.” ~ Richard Dennis
“Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make money.” ~ Jesse Livermore
Interpretation: The big money on Wall Street is accumulated by latching onto a trend and riding it for as long as possible. Often, market trends persist far longer than most investors anticipate. In a world full of hyperactivity and short attention spans, it’s the patient investors who end up on top.
Lesson #5: Avoid Bear Markets: Learn the Art of Doing Nothing
“I keep out in a bear market and leave such exceptional stocks to those who don’t mind risking their money against the market trend.” ~ Nicolas Darvas
“There is a time to go long, a time to go short, and time to go fishing.” ~ Jesse Livermore
Interpretation: Just as sitting in a winning trend is valuable, learning to sit out of bear markets and avoid fighting the trend is equally important. Being able to observe the market action without needing to be active is a superpower.