I read this book recently. As I read, I clipped parts that I found helpful. The way he sets up his ideas is interesting. He does a lot of leading up in hope to prepare the reader to be in a mind to best appreciate essentially two rules, among other observations.
His approach reminded me of a story I heard from Clayton Christiansen, which I will post elsewhere. The key take away is "if you aren't in a frame of mind to learn something, the most direct and simple explanation will be of no use to you." So the quotes below may not be as useful as the document because they make no attempt to prepare the reader, only capture snippets of ideas. As the Phantom notes himself, "You cannot dictate behavior to anyone."
I only like to give guidance, as all traders must make their own bed.
I can help guide them away from bad behavior, but it is their own determination that makes them a success.I don't like to ever give advice.
Trading is not "You win and you're right" but rather "You lose good and you're wrong small."
No promises, no requirements, no false hopes and no undue influences... I only need to be responsible for keeping them in the game forever.
[T]he BEST LOSER is the long-term winner.
It is inaccurate to think anyone moves the markets. If they could, I wouldn't trade!
Preparation: get a gliding rocker, talking clock, and a routine (10-20m excercise, shower, give thanks to higher power and explain what you will do with the funds, face north and acknowledge "up", have a favorite book, pick a person you admire for their accomplishments). On bad days read the book for 10 min to expel feelings of defeat.
A great number of traders got what we call "killed" today in the grain market. Most all of the new traders are now wondering what they did wrong today. There isn't anything they did right today because they most likely don't know what the right thing is.
To be prepared for that bad luck is a requirement in trading. You will not survive if you do not plan for bad luck. My first steps in trading remove the bad luck altogether.
Putting a limit on something infers that you actually can put a limit on exposure when having a position established. You really only have a ballpark limit in most cases.
The one thing that teaches most traders to take a small loss is a big loss.
Rule #1: In a losing game such as trading, we shall start against the majority and assume we are wrong until proven correct! (We do not assume we are correct until proven wrong.) Positions established must be reduced and removed until or unless the market proves the position correct! (We allow the market to verify correct positions.)
Rule 2: Press your winners correctly without exception.
You always want a larger position when you get a great move or trending market than when your position isn't correct.
"Correctly" in Rule 2 means you must have a qualified plan of adding to your position once a trend has established itself.
You can learn from other traders, but you never learn to be them.
Not one big trader started just big.
We wouldn't have markets if everyone agreed on a plan.
Traders mostly change their behavior by what they are told. Is this the proper behavior modification for traders? The answer, of course, is no, not at all.
A trader must learn from research what the proper behavior modification is in all possible situations. This takes lots of inner soul searching and market data to understand what behavior takes them to the threshold of successful behavior in trading.
You cannot dictate behavior to anyone.
If the trader didn't feel they had a good chance of being successful with that trade, they never would have made that trade. That feeling of better-than-average probabilities is selfdefeating because, with that feeling alone, it is possible to miss the big moves by being wrong first.
When in doubt, get out! You don't ever lose when you are out.
It isn't difficult to make money, it is difficult to keep it.
The nature of trading is that more often you see a negative effect from what you have just done. Seldom do you see or remember the good effects from the proper trading as often as the negative.
Traders are over-trading most of the time when they say they can't seem to justify adding to an existing position.
[Y]ou will never be able to correct a bad situation but only be able to remove that bad situation. Your mental well-being is worth a lot in trading. You can trade well when you are thinking well.
Most of your money from trading is going to come from trades that take off rather quickly from when you put them on.
If a trader thinks at any time they have a very good trade, they are going to get removed from trading very quickly.
[T]the best time to learn about trading is when the market is closed. Most traders only learn when the market is open, and what a mistake that can be!
The word E-X-E-C-U-T-I-O-N means make sure you guarantee you have that added position. There are times when execution is the most important aspect of a trade. If you can't get a position on, you sure can't take one off...You must say "at the market" in those situations.
If you have to unbutton your top button on your shirt, you had better get out. If the phone ringing irritates you, you had better get out. If you are beyond your reasonable time frame to hold a position that does not prove correct, you had better get out.
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Chapter 3: A Little History near the bottom of the first page
POP: I started to play games with my trades. Actually the funds do it now. It is so artificial but they fall for it. It worked like this: If I had a position and I wanted to take profits, I would pretend I wanted to add to my positions. So I would bid the market instead of offer. I had enough people following me that they, too, would bid the market. Then I would turn and, instead, hit the bid and sell my positions.