Trading Quotes Library

The Mercenary
Trading Quotes Library

Table of Contents

 INSPIRATION……………………….…………….………..……….……pg. 02
Special Report:
The Mercenary  PERSEVERANCE………………………………..…….....…….…….…pg. 05
Trading Quotes Library
 RISK MANAGEMENT……….………………….….….………………pg. 12

 KNOWLEDGE………………………………………….……..….………pg. 17

 EXCELLENCE……………………………………..….………..………….pg. 23

 FUNDAMENTAL ANALYSIS………………………….….…….……pg. 28

 LIFE PRACTICES………………………………..………..….…....……pg. 31

 TIMING………………………………………………………..……………pg. 35

 PROFITABILITY………………………………………………...….…….pg. 37

 SKEPTICISM…………………………………………………….………...pg. 58

 FOCUS…………………………………………………………………….…pg. 60

 ADAPTABILITY……………………………………………………………pg. 72

 MISTAKES………………………………………………………………….pg. 83

 INTELLECTUAL HONESTY…………………………………...…..…pg. 87

 DEEP WISDOM………………………………..………….…….………pg. 90

 IRONY…………………………..…………………………………….…….pg. 98

 SIMPLICITY………………………………………………………………..pg.108

 AGGRESSION……………………………………………………………..pg.114

 INTROSPECTION…………………………………………………………pg.117

 HUMOR………………………………………………………..………...…pg.120

The Mercenary Trading Quotes Library
www.mercenarytrader.com/quoteslibrary
© 2013 Mercenary Trader LLC

A hand‐selected assortment of insightful quotes, memorable lines, and poignant axioms,
catalogued for your inspiration, contemplation, motivation, and enjoyment…

INSPIRATION

Anais Nin Life shrinks or expands in proportion to one's courage.
Antoine de Saint-Exupéry If you want to build a ship, don't assign people tasks and work, but rather teach them to
long for the endless immensity of the sea.
Ari Kiev Believing that an outcome is possible makes it achievable. The classic example is Roger
Bannister's penetration of the four-minute mile mark. Before he ran his sub four-minute
mile in 1954, this feat was considered an impossible barrier that was beyond human
physical capabilities. After he ran his so-called magic mile, many other runners suddenly
began breaking this once seemingly impossible barrier.
Arnold Schwarzenegger It is one thing to idolize heroes. It is quite another to visualize yourself in their place. When
I saw great people, I said to myself: "I can be there."
Arthur Schopenhauer Talent hits a target no one else can hit; Genius hits a target no one else can see.
Benjamin Disraeli Nurture your mind with great thoughts; to believe in the heroic makes heroes.
Big Trouble in Little China We really shook the pillars of heaven, didn't we, Wang?
Bruce Kovner When you are really involved, the screen almost reaches out and grabs you. The way the
quotes are made changes: They get wider, they get wilder. I have contacts all over the
world in each of these markets and I know what is going on. It is a tremendously exciting
game.
Canada Bill Jones Yeah, but it's the only game in town!
Charles Faulkner The people that I know who are the most successful at trading are passionate about it.
They fulfill what I think is the first requirement: developing intuitions about something they
care about deeply, in this case, trading... They develop a deep knowledge of whatever
form of analysis they use. Out of that passion and knowledge, their trading ideas, insights,
and intuitions emerge.
Ed Seykota I feel my success comes from my love of the markets. I am not a casual trader. It is my
life. I have a passion for trading. It is not merely a hobby or even a career choice for me.
There is no question that this is what I am supposed to do with my life.
Experienced traders can be very supportive just by being there for sharing joys and
sorrows.
Elbert Hubbard One machine can do the work of 50 ordinary men. No machine can do the work of one
extraordinary man.
Eugen Herrigel The spider dances her web without knowing that there are flies who will get caught in it.
Friedrich Nietzsche The higher we soar, the smaller we appear to those who cannot fly.
I am not a man, I am dynamite.
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Gary Player Success is there to motivate us, not to keep us stagnant. Keep following your passion.
You were not created to live a mediocre, safe life.
General Anthony McAuliffe Nuts!
Henry de Monfreid For eighteen years I followed the sea, took what it offered. It has brought me shipwreck
and success, sorrow, danger, and unutterable happiness.
Hunter S. Thompson There he goes. One of God's own prototypes. Some kind of high powered mutant never
even considered for mass production. Too weird to live, and too rare to die.
Inception You mustn't hesitate to dream a little bigger darling.
Jack Schwager Trading provides one of the last great frontiers of opportunity in our economy. It is one of
the very few ways in which an individual can start with a relatively small bankroll and
actually become a multi-millionaire.
Jack Sparrow Now... bring me that horizon.
Winners evolve.
John Facenda Give me a horse I can ride!
Jonathan Haidt ...rising to a challenge reveals your hidden abilities, and seeing those abilities changes
your self-concept. None of us knows what we are really capable of enduring.
Joseph Conrad I had ambition not only to go farther than any man had ever been before, but as far as it
was possible for a man to go.
Katawa Shoujo Do something you can't, simply because you can.
Keith Richards You'd be surprised when you're put right on the ball and you've got to do something and
everybody's looking at you going, OK, what's going to happen? You put yourself there on
the firing line — give me a blindfold and a last cigarette and let's go. And you'd be
surprised by how much comes out of you before you die.
Leonardo da Vinci When once you have tasted flight, you will forever walk the earth with your eyes turned
skyward, for there you have been and there you will always long to return.
M.C. Escher I believe that producing pictures, as I do, is almost solely a question of wanting so very
much to do it well.
So let us then try to climb the mountain, not by stepping on what is below us, but to pull us
up at what is above us, for my part at the stars; amen.
Marcus Aurelius The noblest way of taking revenge on others is by refusing to become like them.
Mark Minervini Perhaps the single most important factor was that I had a great passion for the game. I
think almost anyone can be net profitable in the stock market given enough time and
effort, but to be a great trader, you have to have a passion for it. You have to love trading.
Mark Twain Twenty years from now you will be more disappointed by the things that you didn't do than
by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch
the trade winds in your sails. Explore. Dream. Discover.
Keep away from people who try to belittle your ambitions. Small people always do that,
but the really great make you feel that you, too, can become great.


Marty Schwartz I always try to encourage people that are thinking of going into this business for
themselves. I tell them, 'Think that you might become more successful than you ever
dreamt, because that's what happened to me.'
Confidence is every part of trading. If you're not convinced that you can win, you should
never climb into the ring.
Maurice Sendak It's sublime, to go into another room and make pictures. It's magic time, where all your
weaknesses of character, the blemishes of your personality, whatever else torments you,
fades away, just doesn’t matter. You're doing the one thing you want to do and you do it
well and you know you do it well, and… you’re happy. The whole promise is to do the
work, sitting down at the drawing table, turning on the radio, and I think, what a
transcendent life this is, that I'm doing everything I want to do. In that moment, I feel like
I'm a lucky man.
Michelangelo The great danger for most of us lies in not setting our aim too high and falling short; but in
setting our aim too low, and achieving our mark.
Mike Bloomberg When I saw that screen light up that day in the Merrill Lynch offices, I lost any residual
doubt that Bloomberg could make it. We had picked just the right project. It was big
enough to be useful, small enough to be possible. Start with a small piece, fulfill one goal
at a time, on time. Do it with all things in life. Sit down and learn to read one-syllable
words. If you try to read Chaucer in elementary school, you'll never accomplish anything.
You can't jump to the end game right away, in computers, politics, love, or any other
aspect of life.
Patton Rommel, you magnificent bastard. I read your book!
Paul Tudor Jones There is nothing worse than a really bad trading day. You feel so low that it is difficult to
hold your head up. But, if I knew that I could also have a similar experience in the
exhilaration of winning, I would take the combination of winning and losing days any time
because you feel that much more alive. Trading gives you an incredibly intense feeling of
what life is all about.
Pink Floyd Come on you raver, you seer of visions — Come on you painter, you piper, you prisoner,
and shine!
Reminiscences of a Stock I was doing better than breaking even and that is why I didn't think there was any need to
Operator deprive myself of the good things in life. The market was always there to supply them. I
was acquiring the confidence that comes to a man from a professionally dispassionate
attitude toward his own method of providing bread and butter for himself.
For years I had been the victim of an unfortunate combination of inexperience, youth and
insufficient capital. But now I felt the elation of a discoverer.
That was the day I remember most vividly of all the days of my life as a stock operator. It
was the day when my winnings exceeded one million dollars.
Well, I was worth over one million after the close of business that day. But my biggest
winnings were not in dollars but in the intangibles: I had been right, I had looked ahead
and followed a clear-cut plan. I had learned what a man must do in order to make big
money; I was permanently out of the gambler class; I had at last learned to trade
intelligently in a big way. It was a day of days for me.
Scottie Pippen Winning is hard to do, and there's a price that you pay for it. And that's how I saw Michael
as a player — as someone that wanted to prove he's a winner every day.
Stephen Hawking If a star were a grain of salt, you could fit all the stars visible to the naked eye on a
teaspoon, but all the stars in the universe would fill a ball more than eight miles wide.


Steven Rosenberg I loved the night. I think secretly all scientists exult in working alone, surrounded by the
urgent private quiet of the dark. To be doing something no one had ever done... to be
alone and out on the edge like that, there was no feeling like it in the world.
Sukiyabashi Jiro You have to love your job. You must fall in love with your work.
T.E. Lawrence All men dream: but not equally. Those who dream by night in the dusty recesses of their
minds wake in the day to find that it was vanity; but the dreamers of the day are
dangerous men, for they may act their dreams with open eyes, to make it possible.
Teddy Roosevelt The credit belongs to the man who is actually in the arena; whose face is marred by dust
and sweat and blood; who strives valiantly… who knows the great enthusiasms, the great
devotions, and spends himself in a worthy cause; who, at best, knows the triumph of high
achievement; and who, at the worst, if he fails, at least fails while daring greatly, so that
his place shall never be with those cold and timid souls who know neither victory nor
defeat.
Teddy Roosevelt, 1912, after a Ladies and gentlemen, I don't know whether you fully understand that I have just been
failed assassination attempt shot; but it takes more than that to kill a Bull Moose.
Themistocles I cannot fiddle, but I can make a great state from a little city.
They Live The world needs a wake up call, gentlemen... We're gonna phone it in.
Outside the limit of our sight, feeding off us, perched on top of us, from birth to death, are
our owners! Our owners! They have us. They control us! They are our masters! Wake up!
They're all about you! All around you!
Thomas Edison If we did all the things we were capable of doing, we would literally astound ourselves.
Tim Ferriss David didn't beat Goliath with a whiteboard. Go get amongst it, and prepare to bob and
weave.
Training Day I walk a higher path, son.
Open your eyes, son. Can't you see?
When all this is behind you, a whole other world will open up for you.
U.S. Army General 'Vinegar' Joe illegitimi non carborundum (don't let the bastards grind you down)
Stillwell
Vince Lombardi Winning is habit. Unfortunately, so is losing.
Wayne Gretzky You miss 100% of the shots you don't take.
William James Believe that life is worth living and your belief will help create the fact.
Zombieland Time to nut up or shut up.

PERSEVERANCE

Albert Einstein Great spirits have always encountered violent opposition from mediocre minds.
Albert Einstein It's not that I'm so smart, it's just that I stay with problems longer.


Alexis de Tocqueville It may be readily conceived that if men passionately bent upon physical gratifications
desire greatly, they are also easily discouraged; as their ultimate object is to enjoy, the
means to reach that object must be prompt and easy or the trouble of acquiring the
gratification would be greater than the gratification itself. Their prevailing frame of mind,
then, is at once ardent and relaxed, violent and enervated. Death is often less dreaded by
them than perseverance in continuous efforts to one goal.
Andre Gide One doesn't discover new lands without consenting to lose sight of the shore for a very
long time.
Atul Gawande In the face of uncertainty, wisdom is to err on the side of pushing, to not give up. But you
have to be ready to recognize when pushing is only ego, only weakness. You have to be
ready to recognize when the pushing can turn to harm.
Bertrand Russell As all these results were obtained, not by any heroic method, but by patient and detailed
reasoning, I began to think it probable that philosophy had erred in adopting heroic
remedies for intellectual difficulties, and that solutions were to be found merely by greater
care and accuracy.
Big Trouble in Little China Just remember what ol' Jack Burton does when the earth quakes, and the poison arrows
fall from the sky, and the pillars of Heaven shake. Yeah, Jack Burton just looks that big ol'
storm right square in the eye and he says, "Give me your best shot, pal. I can take it."
Bill Lipschutz The really best traders don't think twice about how many hours they're working or whether
they come in on a weekend. There's no substitute for that level of commitment.
So many people want the positive rewards of being a successful trader without being
willing to go through the commitment and pain. And there's a lot of pain.
Blair Hull There are very few people who can develop the skills to get the edge, and far fewer still
who can withstand the losses emotionally and still stick with the system. Probably only
one in five hundred people has the necessary discipline to be successful.
Bruce Lee There are no limits. There are plateaus, but you must not stay there, you must go beyond
them. If it kills you, it kills you. A man must constantly exceed his level.
I fear not the man who has practiced 10,000 kicks once, but I fear the man who has
practiced one kick 10,000 times.
Calvin Coolidge Nothing in the world can take the place of Persistence. Talent will not; nothing is more
common than unsuccessful men with talent. Genius will not; unrewarded genius is almost
a proverb. Education will not; the world is full of educated derelicts. Persistence and
determination alone are omnipotent.
Daniel F. Chambliss But of course there is no secret; there is only the doing of all those little things, each one
done correctly, time and again, until excellence in every detail becomes a firmly ingrained
habit, an ordinary part of one's everyday life.
David Rubenstein Persist – don't take no for an answer. If you're happy to sit at your desk and not take any
risk, you'll be sitting at your desk for the next 20 years.
Doyle Brunson When luck shuts the door, you've got to come in through the window. And that's where
skill comes in.
Dr. Theodore Cuyler It is astonishing how many men lack this power of 'holding on' until they reach the goal.
They can make a sudden dash, but they lack grit. They are easily discouraged. They get
on as long as everything goes smoothly, but when there is friction they lose heart. They
depend on stronger personalities for their spirit and strength. They lack independence or
originality. They only dare to do what others do. They do not step boldly from the crowd
and act fearlessly.


Ed Seykota The biggest secret about success is that there isn't any big secret about it, or if there is,
then it's a secret from me, too. The idea of searching for some secret for trading success
misses the point.
Erica Jong Everyone has talent. What is rare is the courage to follow the talent to the dark place
where it leads.
Eugen Herrigel You must act as if the goal were infinitely far off.
Garry Kasparov We call these phases "positional play" because our goal is to impose our position. You
must avoid creating weaknesses, find small ways to improve your pieces, and think small
-- but never stop thinking. One tends to get lazy in quiet positions, which is why positional
masters such as Karpov and Petrosian were so deadly. They were always alert and were
happy to go long stretches without any real action on the board if it meant gaining a tiny
advantage, and then another. Eventually their opponents would find themselves without
any good moves at all, as if they were standing on quicksand.
Gentleman Jim Corbett You become a champion by fighting one more round. When things are tough, you fight
one more round.
George Santayana Skepticism is the chastity of the intellect, and it is shameful to surrender it too soon or to
the first comer: there is nobility in preserving it coolly and proudly.
Hadrian Brick by brick, my citizens, brick by brick.
Hannibal I will either find a way, or make one.
Henry Wadsworth Longfellow The heights by great men reached and kept, were not attained by sudden flight, but they,
while their companions slept, were toiling upward in the night.
Hunter S. Thompson Most people's lives are virtual monuments to cowardly indecision. Ah, that we lack the
courage of our romantic convictions; and thereby miss the wine of life, forgoing the very
thing that makes living worthwhile.
To let another man define your own goals is to give up one of the most meaningful
aspects of life — the definitive act of will which makes a man an individual.
No two ideals were ever more incompatible than the security of conformity and the
freedom of individuality. After the choice is made, the rest is easy — unless you don't
have the guts to stick by your choice.
Japanese Proverb Fall down seven times, stand up eight.
Jim Valvano Survive and advance.
John Locke Fortitude is the guard and support of the other virtues.
Joseph Conrad I don't like work. But I like what is in work—the chance to find yourself. Your own reality—
for yourself, not for others—which no other man can ever know.
Josh Waitzkin If I want to be the best, I have to take risks others would avoid, always optimizing the
learning potential of the moment and turning adversity to my advantage.
Khalil Gibran Your pain is the breaking of the shell that encloses your understanding.


Knockaround Guys 500 fights, that's the number I figured when I was a kid. 500 street fights and you could
consider yourself a legitimate tough guy. You need 'em for experience. To develop leather
skin. So I got started. Of course, along the way you stop thinking about being tough and
all that. It stops being the point. You get past the silliness of it all. But then, after, you
realize that's what you are.
Lao Tzu If you realize that all things change, there is nothing you will try to hold on to. If you are
not afraid of dying, there is nothing you cannot achieve.
Leonardo da Vinci I love those who can smile in trouble, who can gather strength from distress, and grow
brave by reflection. 'Tis the business of little minds to shrink, but they whose heart is firm,
and whose conscience approves their conduct, will pursue their principles unto death.
Linda Bradford Raschke Understand that learning the markets can take years. Immerse yourself in the world of
trading and give up everything else. Get as close to other successful traders as you can.
Louis C.K. The only road to good shows is bad ones. Just go start having a bad time and if you don't
give up you will get better.
...most comedians [whose] success really sticks come to it late in life. It takes a long time
to make a really successful comedian and I've known that from the start, truly. I always
expected that I'd work in obscurity for a long long time. It's what it takes and to me it was
worth it.
Marcus Aurelius Because your own strength is unequal to the task, do not assume that it is beyond the
powers of man; but if anything is within the powers and province of man, believe that it is
within your own compass also.
Mark Minervini Most people just cannot weather the learning curve. As soon as it gets difficult, and their
approach isn't working up to their expectations, they begin to look for something else. As
a result, they become slightly efficient in many areas without becoming very good in any
single methodology. The reality is that it takes a very long time to develop a superior
approach, and along the way, you are going to go through periods where you do poorly.
Ironically, those are the periods that give you the most valuable information.
Mark Twight Modern man is conditioned to expect instant gratification but any success or triumph
realized quickly, with only marginal effort, is necessarily shallow. Meaningful achievement
takes time, hard work, persistence, patience, proper intent and constant self-awareness.
The path to such success is punctuated by failure, consolidation and renewed effort. It is
wet with the tears of emotional breakdown. Personal reconstruction is art. Discovering
one's self, one's talent and ambition and learning how to express it is a creative process
so may not be rushed.
Marty Schwartz When I came back, I'd see a trade I liked and I'd do it small with a very tight stop, so if I
was wrong, I'd get right out. All the time I kept telling myself, make little profits, make little
profits, make little profits. Black ink, black ink, black ink. It's all psychological.
May Sarton Does anything in nature despair except man? An animal with a foot caught in a trap does
not seem to despair. It is too busy trying to survive. It is all closed in, to a kind of still,
intense waiting. Is this a key? Keep busy with survival. Imitate the trees. Learn to lose in
order to recover, and remember that nothing stays the same for long, not even pain,
psychic pain. Sit it out. Let it all pass. Let it go.
Meng Tzu, 3rd century BC When heaven is about to confer a great responsibility on any man, it will exercise his mind
with suffering, subject his sinews and bones to hard work, expose his body to hunger, put
him to poverty, place obstacles in the paths of his deeds, so as to stimulate his mind,
harden his nature, and improve wherever he is incompetent.


Michael Jordan I've missed more than 9,000 shots in my career. I've lost almost 300 games. 26 times, I've
been trusted to take the game winning shot and missed. I've failed over and over and over
again in my life. And that is why I succeed.
Michael Lewis Progress does not march forward like an army on parade; it crawls on its belly like a
guerrilla.
Michael Marcus I would sometimes think that maybe I ought to stop trading because it was very painful to
keep losing. In 'Fiddler on the Roof,' there is a scene where the lead looks up and talks to
God. I would look up and say, 'Am I really that stupid?' And I seemed to hear a clear
answer saying, 'No, you are not stupid. You just have to keep at it.' So I did.
Nelson Bunker Hunt First, you decide what you want specifically; and second, you decide if you're willing to
pay the price to make it happen, and then pay that price.
Nelson Mandela The greatest glory in living lies not in never falling, but in rising every time you fall.
Neville Shulman Thousands of repetitions, and out of one's true self perfection emerges.
Orison Swett Marden The power to hold on is characteristic of all men who have accomplished anything great;
they may lack in some other particular, have many weaknesses or eccentricities, but the
quality of persistence is never absent from a successful man. No matter what opposition
he meets or what discouragement overtakes him, drudgery cannot disgust him, obstacles
cannot discourage him, labor cannot weary him; misfortune, sorrow, and reverses cannot
harm him.
It is not so much brilliancy of intellect, or fertility of resource, as persistency of effort,

constancy of purpose, that makes a great man. Those who succeed in life are the men
and women who keep everlastingly at it, who do not believe themselves geniuses, but
who know that if they ever accomplish anything they must do it by determined and
persistent industry.
Most men fail, not through lack of education or agreeable personal qualities, but from lack
of dogged determination, from lack of dauntless will.
Otto von Bismarck The great questions of the time will not be resolved by speeches and majority decisions
— that was the great mistake of 1848 and 1849 — but by iron and blood.
Paul Tudor Jones [Eli Tullis] was the toughest son of a bitch I ever knew. He taught me that trading is very
competitive and you have to be able to handle getting your butt kicked. No matter how
you cut it, there are enormous emotional ups and downs involved.
That was when I first decided I had to learn discipline and money management. It was a
cathartic experience for me, in the sense that I went to the edge, questioned my very
ability as a trader, and decided that I was not going to quit. I was determined to come
back and fight. I decided that I was going to become very disciplined and businesslike
about my trading.
Predator I ain't got time to bleed.
Reminiscences of a Stock Speculation is a hard and trying business, and a speculator must be on the job all the time
Operator or he'll soon have no job to be on.
Robert Pirsig Mountains should be climbed with as little effort as possible and without desire. The reality
of your own nature should determine the speed. If you become restless, speed up. If you
become winded, slow down. You climb the mountain in an equilibrium between
restlessness and exhaustion. Then, when you're no longer thinking ahead, each footstep
isn't just a means to an end but a unique event in itself.


Rudolph Steiner We must eradicate from the soul all fear and terror of what comes toward us out of the
future. We must acquire serenity in all feelings and sensation about the future. We must
look forward with absolute equanimity to everything that may come.
Russell Kirsch Nothing is withheld from us which we have conceived to do.
saying of ancient Rome errare humanum est, perseverare diabolicum -- to err is human, to persist in erring is
diabolical.
SEAL Team Six member Howard Deprived of support in our environment and the support of our own bodies, the only thing
Wasdin propping us up was our belief in accomplishing the mission—complete Hell Week. In
psychology this belief is called self-efficacy. Even when the mission seems impossible, it
is the strength of our belief that makes success possible. The absence of this belief
guarantees failure. A strong belief in the mission fuels our ability to focus, put forth effort,
and persist. Believing allows us to see the goal (complete Hell Week) and break the goal
down into more manageable objectives (one evolution at a time).
Seneca It is a rough road that leads to the heights of greatness.
Serge Kahili King There is no limit as to how far you can go, and there will always be a guide of some kind
available at every stage. But each person has to get there on his or her own two feet.
There is no one to push or pull you, coax or cajole you, force you or lead you along. And
that's why it's tough.
Initiative is the hardest and most important lesson of all.
Siddhartha Gautama (Buddha) There are two mistakes one can make along the road to truth... not going all the way, and
not starting.
Simone Weil Even if our efforts of attention seem for years to be producing no result, one day a light
that is in exact proportion to them will flood the room.
Steven Callahan ...voyaging through wildernesses, be they full of woods or waves, is essential to the
growth and maturity of the human spirit. It is in the wilderness that you really learn who
you are. It is in facing the challenges of the wilderness that the thickness of your wallet
becomes irrelevant and your capabilities become the truer measure of your value.
We cannot grow without challenge. Challenges routinely produce crises that severely test
us. However, crises also offer us the greatest opportunities.
Stuart Walton I really admire people who do what they want to do and don't care about anything else. I
had a friend in college who was determined to be a rock and roll star. He formed the band
The Cowboy Junkies. When he started college, he couldn't even play a guitar, and now
he is sold out at every concert.
Sukiyabashi Jiro I do the same thing over and over, improving bit by bit. There is always a yearning to
achieve more. I’ll continue to climb, trying to reach the top, but no one knows where the
top is.
The Art of Learning In my experience, successful people shoot for the stars, put their hearts on the line in
every battle, and ultimately discover that the lessons learned from the pursuit of
excellence mean much more than the immediate trophies and glory.
The road to success is not easy or else everyone would be the greatest at what they do
— we need to be psychologically prepared to face the unavoidable challenges along our
way, and when it comes down to it, the only way to learn how to swim is by getting in the
water.


The Art of Learning When we have worked hard and succeed at something, we should be allowed to smell the
roses. The key, in my opinion, is to recognize that the beauty of those roses lies in their
transience. It is drifting away even as we inhale. We enjoy the win fully while taking a
deep breath, then we exhale, note the lesson learned, and move on to the next adventure.
Mental resilience is arguably the most critical trait of a world-class performer, and it should
be nurtured continuously. Left to my own devices, I am always looking for more and more
ways to become psychologically impregnable.
...the fields of learning and performance are an exploration of greyness — of the in-
between. There is the careful balance of pushing yourself relentlessly, but not so hard that
you melt down. Muscles and minds need to stretch to grow, but if stretched too thin, they
will snap. A competitor needs to be process-oriented, always looking for stronger
opponents to spur growth, but it is also important to keep on winning enough to maintain
confidence. We have to release our current ideas to soak in new material, but not so
much that we lose touch with our unique natural talents. Vibrant, creative idealism needs
to be tempered by a practical, technical awareness.
Great ones are willing to get burned time and again as they sharpen their swords in the
fire.
When aiming for the top, your path requires an engaged, searching mind. You have to
make obstacles spur you to creative new angles in the learning process. Let setbacks
deepen your resolve. You should always come off an injury or a loss better than when you
went down.
Once we learn how to use adversity to our advantage, we can manufacture the helpful
growth opportunity without actual danger or injury... we can notice external events that
trigger helpful growth or performance opportunities, and then internalize the effects of
those events without their actually happening. In this way, adversity becomes a
tremendous source of creative inspiration.
...armed with an understanding of how intuition operates, we can train ourselves to have
remarkably potent perceptual and physical abilities in our disciplines of focus. The key, of
course, is practice.
The real power of incremental growth comes to bear when we truly are like water, steadily
carving stone. We just keep on flowing when everything is on the line.
Thomas Edison Opportunity is missed by most people because it usually goes around wearing overalls
looking like hard work.
Everything comes to him who hustles while he waits.
Thucydides The bravest are surely those who have the clearest vision of what is before them, glory
and danger alike, and yet notwithstanding, go out to meet it.
Tom Basso I'm fond of thinking of trading in terms of scores of years. If I live long enough, I'll trade for
fifty or sixty years. I figure that, over that time span, I'll see devastating declines,
spectacular advances that I virtually can't believe, and everything in between.
Vince Lombardi The difference between a successful person and others is not a lack of strength, not a
lack of knowledge, but rather a lack of will.
William Blake He who desires but acts not, breeds pestilence.
William James Acceptance of what has happened is the first step to overcoming the consequences of
any misfortune.


Winston Churchill So long as I am acting from duty and conviction, I am indifferent to taunts and jeers. I
think they will probably do me more good than harm.
Winston Churchill Continuous effort—not strength or intelligence—is the key to unlocking our potential.
Zen master Hakuin Should you desire the great tranquility, prepare to sweat white beads.

RISK MANAGEMENT

Aaron Brown, Red-Blooded Risk Risk taking is not just a quantitative discipline, it is a philosophy of life. There are basically
two sensible attitudes about risk. The first is to avoid it whenever possible, unless there is
some potential payoff worth the risk. The second is to embrace risk taking opportunities
that appear to offer a positive edge. The advantage of the second course is that you take
enough gambles that the outcome of any one, or any ten or hundred, doesn't matter. In
the long run, you will end up near your expected income, like someone flipping a coin a
million times.
Adam Smith, Wealth of Nations Though the principles of the banking trade may appear somewhat abstruse, the practice
is capable of being reduced to strict rules. To depart upon any occasion from those rules,
in consequence of some flattering speculation of extraordinary gain, is almost always
extremely dangerous and frequently fatal to the banking company which attempts it.
Bill Dunn Money management is the true survival key.
Bill Lipschutz There are a lot of elements to risk control: Always know exactly where you stand. Don't
concentrate too much of your money on one big trade or group of highly correlated trades.
Always understand the risk-reward of the trade as it now stands, not as it existed when
you put the position on.
Bob Hoover It's not how close you get to the ground, but how precise can you fly the airplane. If you
feel so careless with your life that you want to be the world's lowest flying aviator, then
you might do it for a while — but then a great many former friends of mine are no longer
with us, simply because they cut their margins too close.
Bruce Kovner The first rule of trading — there are probably many first rules — is don't get caught in a
situation in which you can lose a great deal of money for reasons you don't understand.
Whenever I enter a position, I have a predetermined stop. That is the only way I can
sleep. I know where I'm getting out before I get in. The position size on a trade is
determined by the stop, and the stop is determined on a technical basis.
Through bitter experience, I have learned that a mistake in position correlation is the root
of some of the most serious problems in trading. If you have eight highly correlated
positions, then you are really trading one position that is eight times as large.
I would say that risk management is the most important thing to be well understood.
Undertrade, undertrade, undertrade is my second piece of advice. Whatever you think
your position ought to be, cut it at least in half.
My experience with novice traders is that they trade three to five times too big. They are
taking 5 to 10 percent risks on a trade when they should be taking 1 to 2 percent risks.
Cliff Asness I looked up and saw the Valkyries coming and heard the grim reaper's scythe knocking on
my door. I did my best to run to the light.


Ed Seykota One alternative [to expensive drama] is to keep bets small and then to systematically
keep reducing risk during equity drawdowns. That way you approach your safe money
asymptotically and have a gentle emotional and financial touchdown.
The key to long-term survival and prosperity has a lot to do with the money management
techniques incorporated into the technical system. There are old traders and there are
bold traders, but there are very few old, bold traders.
The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting
losses. If you can follow these three rules, you may have a chance.
Elroy Dimson Risk means more things can happen than will happen.
Erica Jong If you don't risk anything, you risk even more.
Gary Bielfeldt Most traders have a tendency to take risks that are too large at the beginning. They tend
not to be selective enough about when they take risks.
Gibbons Burke How much heat can you stand? Money management is a thermostat — a control system
for risk that keeps your trading within the comfort zone.
Heat Do you see me doin' thrill seeker liquor store robberies with a 'Born To Lose' tattoo on my
chest?
He knew the risks, he didn't have to be there. It rains... you get wet.
Howard Marks Risk control isn't an action so much as it is a mindset. It stems largely from putting at least
as much emphasis on avoiding mistakes as on doing great things.
There are two main risks in the investment world: the risk of losing money and the risk of
missing opportunity. You can completely avoid one or the other, or you can compromise
between the two, but you can't eliminate both.
Jack Schwager Risk control should not be confused with fear of risk. A willingness to accept risk is
probably an essential personality trait for a trader.
Jack Sparrow ...the practice of rigorous risk management is more than just preachy self-discipline or
boring bean counter talk. Managing risk is a key source of trading longevity, a means of
positioning for future profits, and a hallmark of competitive excellence. Smart risk
management not only helps preserve capital, it puts money in your pocket by ensuring
you have the mental and financial capacity to swing with conviction when the time is right.
Jesse Livermore Don't lose money -- don't lose your stake, don't lose your line. A speculator without cash
is like a store owner with no inventory. Cash is your inventory, your lifeline, your best
friend -- without cash you're out of business. Don't lose your damn line!
John Bender It might seem that if you have an edge, the way to maximize the edge is to trade as big as
you can. But that's not the case, because of risk. As a professional gambler or as a trader,
you are constantly walking the line between maximizing edge and minimizing your risk of
tapping out.
John Hussman The benefit of controlled risk and the avoidance of deep drawdowns is that it is often
possible to recover lost ground rapidly, particularly relative to a passive buy-and-hold.
John Kenneth Galbraith Of all the mysteries of the stock exchange there is none so impenetrable as why there
should be a buyer for everyone who seeks to sell. October 24, 1929 showed that what is
mysterious is not inevitable. Often there were no buyers, and only after wide vertical
declines could anyone be induced to bid ... Repeatedly and in many issues there was a
plethora of selling orders and no buyers at all.


John W. Henry We have made our business managing risk. We are comfortable with risk and we get our
reward from risk.
Larry Hite For some reason, the idea of trading on 5 percent margin made perfect sense to me.
I have a friend who has amassed a fortune in excess of $100 million. He taught me two
basic lessons. First, if you never bet your lifestyle, from a trading standpoint, nothing bad
will ever happen to you. Second, if you know what the worst possible outcome is, it gives
you tremendous freedom. The truth is that, while you can't quantify reward, you can
quantify risk.
Risk is a no-fooling-around game; it does not allow for mistakes. If you do not manage the
risk, eventually they will carry you out.
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.
Manro Haydan motto Risk not thy whole wad.
Mark Minervini Containing your losses is 90 percent of the battle, regardless of the strategy. In addition, if
you put yourself in a position to buy stocks that have the potential to go up a lot, your
odds will be better.
It is much better to learn the lesson that you can lose everything when you don't have that
much money than to learn the same lesson later on.
You can't get beat if you have a great defense. I would always prefer to bet on a football
team that has a great defense as opposed to one that has a great offense. If a trade
doesn't work out quickly, I take a small loss, and I may have to take a small loss many
times.
I would rather get stopped out of a trade five times in a row, taking a small loss each time,
than take one large loss.
I don't think anyone is more disciplined than I am. When I put on a trade, I have a
contingency plan for every possible outcome. I can't think of any circumstance that would
be an exception. If there were, I would have a plan for that too.
Marty Schwartz The most important thing is to protect your trading capital until you can regain your
equilibrium and put all the shadows of the losing streak behind you. Losing streaks are an
unfortunate part of the game, but if you are a good disciplined trader who can shift into
neutral, the losing will end and black ink will start to flow again.
Whenever you have jealousy as an emotion, or greed, or envy, it distorts your judgment.
The market's like the bleached blonde in Vegas. It doesn't care about you. That's why you
have to put aside your ego and get out. If you have trouble doing that, as most people do,
be like Odysseus; tie yourself to the mast with an automatic stop and take your emotions
out of play.
The more you lose in a trade, the less objective you become. Exiting a losing trade quickly
clears your head and restores your objectivity. After a breather, you might put the same
trade back on if you can intellectually justify it, but you have to constantly remind yourself
that there's a myriad of opportunities in the marketplace. By preserving your capital
through the use of a stop, you make it possible to wait patiently for a high-probability trade
with a low-risk entry point.
When you're trading, it's important to have your guns on. You can't be wandering around
the Street unarmed, and if you don't know the terrain, you're going to get killed.


Marty Schwartz Don't get in a shootout if you've left your guns at home. The markets are no place to be
trying to impress people. The only way to impress anybody is to stay on your toes, be
consistent, and trade within your means.
Michael Marcus If you become unsure about a position, and you don't know what to do, just get out. You
can always come back in. When in doubt, get out and get a good night's sleep. I've done
that lots of times and the next day everything was clear.
Miguel de Cervantes There is nothing so subject to the inconstancy of fortune as war.
More Money Than God ...the storm in the equity market was surely a warning. The most sophisticated hedge
funds had lost control of their models. The rocket scientists had blown up their rockets.
Ned Davis We are in the business of making mistakes. The only difference between the winners and
the losers is that the winners make small mistakes, while the losers make big mistakes.
Niccolo Machiavelli Among other evils which being unarmed brings you, it causes you to be despised.
Niels Jensen ...our brains are not calibrated to deal with the unexpected. Most of us believe we are
good risk managers but in reality we are not. Most of us trust that risk can always be
quantified and expressed through some fancy modelling whereas, often, it cannot.
Paul Graham ...the way most fortunes are lost is not through excessive expenditure, but through bad
investments.
Paul Tudor Jones Ninety percent of any great trader is going to be the risk control.
I lost my stakes a couple of times, which taught me risk control and risk management.
Losing those stakes in my early 20s gave me a healthy dose of fear and respect for Mr.
Market and hardwired me for some great money management tools.
I think I am the single most conservative investor on earth in the sense that I absolutely
hate losing money.
There's no reason to take substantial amounts of financial risk ever, because you should
always be able to find something where you can skew the reward risk relationship so
greatly in your favor that you can take a variety of small investments with great reward risk
opportunities that should give you minimum drawdown pain and maximum upside
opportunities.
...at the end of the day, the most important thing is how good are you at risk control.
Ninety-percent of any great trader is going to be the risk control.
When I was younger, I had much greater drawdowns, much greater drawdown frequency,
much greater leverage... I'm probably the exact same trader as I was 15 years ago, it's
just less risk, less return.
Don't ever let them get into your pocket — that means there's no reason to leverage
substantially.
Losers average losers.
First of all, never play macho man with the market. Second, never overtrade.
I have a mental stop. If it hits that number, I am out no matter what.
Risk control is the most important thing in trading.
When I am trading poorly, I keep reducing my position size. That way, I will be trading my
smallest position size when my trading is worst.


Paul Tudor Jones Everything gets destroyed a hundred times faster than it is built up. It takes one day to
tear down something that might have taken ten years to build.
Randy McKay The most important advice is to never let a loser get out of hand... I'll keep on reducing my
trading size as long as I'm losing. I've gone from trading as many as three thousand
contracts per trade to as few as ten when I was cold, and then back again.
Reminiscences of a Stock My losses have taught me that I must not begin to advance until I am sure I shall not have
Operator to retreat. But if I cannot advance I do not move at all.
What happened shows you that I am right in never trading at limits. Suppose I had limited
my selling price to 300? I'd never have got it off. No, sir! When you want to get out, get
out.
Losing money is the least of my troubles. A loss never bothers me after I take it. I forget it
overnight. But being wrong — not taking the loss — that is what does damage to the
pocketbook and to the soul.
An old broker once said to me: 'If I am walking along a railroad track and I see a train
coming toward me at sixty miles an hour, do I keep on walking on the ties? Friend, I
sidestep. And I do not even pat myself on the back for being so wise and prudent.'
Richard D. Wyckoff Risk should almost invariably be limited. Not only the experience of those whose trading I
have observed but my own experience proves that whenever one departs from this
general principle he is inviting serious losses.
Richard Dennis What you can't afford to do is throw away your capital on suboptimal trades. If you do, you
will be too debilitated to trade when the right position comes along. Even if you put the
trade on, it will be relatively small because your capital will have been depleted by the
other trades.
When you are getting beat to death, get your head out of the mixer.
Richard Driehaus Most people believe high turnover is risky, but I think just the opposite. High turnover
reduces risk when it's the result of taking a series of small losses in order to avoid larger
losses. I don't hold on to stocks with deteriorating fundamentals or price patterns. For me,
this kind of turnover makes sense. It reduces risk; it doesn't increase it.
Seth Klarman The river may overflow its banks only once or twice in a century, but you still buy flood
insurance.
Rather than targeting a desired rate of return, even an eminently reasonable one,
investors should target risk.
A market downturn is the true test of an investment philosophy.
Stuart Walton Sometimes the opportunities are so obvious that you almost can't lose when they come
around; the only problem is that they don't come around that often. The key is not to lose
money in the times in between.
Sun Tzu The good fighters of old first put themselves beyond the possibility of defeat, and then
waited for an opportunity of defeating the enemy.
Tommy Angelo I knew that if I ever went broke at poker, it wouldn't be because my best wasn't good
enough to keep me afloat. It'd be because my worst was bad enough to sink me.
Tony Saliba How do you lose money? It's either a bad day trading or a losing position. If it's a bad
position that is the problem, then you should just get out of it.
Trading proverb Making money in commodities is easy -- but just try to keep it.


unknown If they're going to get my money, it'll be like getting nibbled to death by ducks.
Victor Sperandeo I know this will sound like a cliche, but the single most important reason that people lose
money in financial markets is that they don't cut their losses short. It is a curiosity of
human nature that no matter how many books talk about this rule, and no matter how
many experts offer this advice, people still keep making the same mistake.
Wall Street proverb Pigs get fat but hogs get slaughtered.
If you're going to bet the farm, you'd better have two farms.
William J. Bernstein Leveraging gargantuan sums without a proper appreciation of the capriciousness of the
capital markets is the financial equivalent of skydiving while drunk. And if your models are
largely based on the last few years of data, you've just left your parachute on the plane...
William O' Neill My philosophy is that all stocks are bad. There are no good stocks unless they go up in
price. If they go down instead, you have to cut your losses fast.
The secret for winning in the stock market does not include being right all the time. In fact,
you should be able to win even if you are right only half the time. The key is to lose the
least amount of money possible when you are wrong.
Letting losses run is the most serious mistake made by most investors. The public doesn't
really understand the philosophy of cutting losses quickly.
Zen and the Art of Poker War, battles, and conflicts of all kinds (including poker) set in motion forces that quickly
become unpredictable. Small defects or problems that are present at the beginning can
quickly spiral out of control. And if small problems can do this, think what starting out with
large problems means.
Zen proverb When two tigers fight, one will be killed and the other will be seriously wounded.

KNOWLEDGE

Albert Camus All great deeds and all great thoughts have a ridiculous beginning. Great works are often
born on a street corner or in a restaurant's revolving door.
Albert Einstein The important thing is to never stop questioning.
All that is valuable in human society depends upon the opportunity for development
accorded the individual.
The pursuit of truth and beauty is a sphere of activity in which we are permitted to remain
children all our lives.
It is nothing short of a miracle that the modern methods of education have not yet entirely
strangled the holy curiosity of inquiry… It is a very grave mistake to think that the
enjoyment of seeing and searching can be promoted by means of coercion and a sense
of duty.
There is no logical way to the discovery of these elemental laws. There is only the way of
intuition, which is helped by a feeling for the order lying behind the appearance.
A man should look for what is, and not for what he thinks should be.
Small is the number of people who see with their eyes and think with their minds.


Aldous Huxley A child-like man is not a man whose development has been arrested; on the contrary, he
is a man who has given himself a chance of continuing to develop long after most adults
have muffled themselves in the cocoon of middle-aged habit and convention.
Anais Nin There are very few human beings who receive the truth, complete and staggering, by
instant illumination. Most of them acquire it fragment by fragment, on a small scale, by
successive developments, cellularly, like a laborious mosaic.
Anil Ambani Concentration can be cultivated. One can learn to exercise will power, discipline one's
body and train one's mind.
Aristotle All men by nature desire to know.
Barton Biggs Keep an investment diary and re-read it from time to time but particularly at moments
when there is tremendous exuberance and also panic. We are in a very emotional
business, and any wisdom we can extract from our own experience is very valuable.
Benjamin Franklin An investment in knowledge always pays the best interest.
Charles Darwin I am turned into a sort of machine for observing facts and grinding out conclusions.
Charlie Munger I have said that in my whole life, I have known no wise person, over a broad subject
matter who didn't read all the time -- none, zero. Now I know all kinds of shrewd people
who by staying within a narrow area do very well without reading. But investment is a
broad area. So if you think you're going to be good at it and not read all the time you have
a different idea than I do.
Confucius By three methods we may learn wisdom: First by reflection, which is noblest; Second by
imitation, which is easiest; and third by experience, which is bitterest.
Decision Traps If you understand your biases, know how to create good feedback, and can interpret
feedback realistically, you can consistently turn your experiences into reliable knowledge
— perhaps for the first time.
People do not learn as easily from experience as you might expect — even intelligent,
highly motivated people.
E.O. Wilson We are drowning in information, while starving for wisdom. The world henceforth will be
run by synthesizers, people able to put together the right information at the right time,
think critically about it, and make important choices wisely.
Eckhart Tolle The beginning of freedom is the realization that you are not 'the thinker.' The moment you
start watching the thinker, a higher level of consciousness becomes activated. You then
begin to realize that there is a vast realm of intelligence beyond thought, that thought is
only a tiny aspect of that intelligence.
Émile Zola, L'Argent, 1891 ...for the rottenness of our financial world has become such a crying scandal, and the
inefficiency of our company laws has been so fully demonstrated, that the absolute
urgency of reform can no longer be denied... A work, therefore, which exposes the evils of
'speculation,' which shows the company promoter on the war-path, and the 'guinea-pig'
basking at his ease, which demonstrates how the public is fooled and ruined by the
brigands of Finance, is evidently a work for the times...
Fred Brooks Good judgment comes from experience, and experience comes from bad judgment.


Gary Klein Judgments based on intuition seem mysterious because intuition doesn't involve explicit
knowledge. It doesn't involve declarative knowledge about facts. Therefore, we can't
explicitly trace the origins of our intuitive judgments. They come from other parts of our
knowing. They come from our tacit knowledge and so they feel magical. Intuitions
sometimes feel like we have ESP, but it isn't magical, it's really a consequence of the
experience we've built up.
The concept of intuition gives a lot of people pause because intuition feels magical, it feels
like Luke Skywalker getting in touch with The Force, and we're not talking about that,
about people somehow drawing on pyramid power, or something occult, or ESP...
Intuition is about expertise and tacit knowledge.
There are several different routes for people to develop insights. A lot of the laboratory
research on insights follows one of those routes: putting people in a position where they're
trying to solve a puzzle and they reach an impasse, and they're stuck, and then the key
for that route is to escape the fixation, to reach the insight by realizing that they're making
an inappropriate assumption. So it's really looking for the assumption that isn't working for
me here, trying to find what is, what is the assumption that's fixating me so that I can get
beyond it. But that's only one of the routes that we're discovering. We're finding that there
are a few other routes that are also important.
George Soros What is imperfect can be improved. Accepting the uncertainties connected with our
fallibility opens up the vista for infinite improvement.
Basically, thinking is the most important aspect of my existence. I'm quite contemplative. I
like to understand.
I used to do a lot of philosophical speculation as a young man. I wasted a large part of my

youth regurgitating certain ideas. Then I discovered that one can learn a great deal more
through action than through contemplation. So I became an active thinker where my
thinking played an important role in deciding what actions to take and my actions play an
important role in improving my thinking. This two-way interaction between thinking and
action became the hallmark of my philosophy and the hallmark of my life.
I content that taking fallibility as the starting point makes my conceptual framework more
realistic. But at a price: the idea that laws or models of universal validity can predict the
future must be abandoned.
Henri Bergson Genius is that which forces the inertia of humanity to learn.
Henry Ford The only real security that a man will have in this world is a reserve of knowledge,
experience, and ability.
Herbert Simon A wealth of information creates a poverty of attention and a need to allocate that attention
efficiently among the overabundance of information sources that might consume it.
Hugh Hendry The joy of life is partly in the strange and unexpected. It is in the constant exclamation
"Who would have thought it?"
Isaac Asimov The most exciting phrase to hear in science, the one that heralds new discoveries, is not
'Eureka!' but 'That's funny…'
Jack Sparrow Rather than daydreaming of a huge windfall in markets, perhaps traders should
proactively seek out windfalls of experience, seasoning and knowledge…
As William Blake once observed, "The road of excess leads to the palace of wisdom."
Sometimes the way to learn the right thing is by having the guts to do to the wrong thing,
at a scale you can afford, until experience and determination grant you the advanced
ability you seek.


Jack Sparrow Becoming a great trader is an evolutionary process. It's a series of trial and error
transformations, mental map adjustments, and incrementally acquired skill sets, all
blended together. And there is no substitute for hypothesizing, testing, and experimenting,
with the requirement of organizing one's thoughts logically and clearly serving as the great
crystallizer.
Progressing forward as a trader is a matter of filling in knowledge gaps and connecting

abstract concepts with vivid memories of real world application. The absolute beginner is
so void of experience he has no idea where his gaps even are. At the point of starting out,
all trading knowledge is a swirl of hypotheticals. The trick of advancement, then, is to go
back and forth between theory and experience, theory and experience, in a regular
intertwined dance
Jon Kabat-Zinn A full life is painted with broad brush strokes. There are many paths to understanding and
wisdom.
Jonas Salk Intuition will tell the thinking mind where to look next.
Karl Popper How would you disprove your viewpoint?
Keith Richards I think we both knew we were in a process of learning, and it was something that you
wanted to learn and it was ten times better than school. I suppose at that time, it was the
mystery of how it was done, and how could you sound like that? This incredible desire to
sound that hip and cool. And then you bump into a bunch of guys that feel the same way.
And via that you meet other players and people and you think it actually can be done.
Lee Humphries Not only have experts gathered many 'elemental' facts about their field; they have linked
them to one another to produce a vast array of 'relational' facts... It is these latent
relationships that the mind processes in its search for insight. The processing is
autonomous and subliminal, but you can encourage it. Reflection compounds knowledge.
Leonardo da Vinci Although nature commences with reason and ends in experience, it is necessary for us to
do the opposite—that is, to commence with experience, and from this proceed to
investigate the reason.
There are three classes of people: those who see, those who see when they are shown,
those who do not see.
The truth of things is the chief nutriment of superior intellects.
The noblest pleasure is the joy of understanding.
Ludwig Von Mises Against all this frenzy of agitation there is but one weapon available: reason. Just
common sense is needed to prevent man from falling prey to illusory fantasies and empty
catchwords.
Marcel Proust We do not receive wisdom, we must discover it for ourselves, after a journey through the
wilderness which no one else can make for us, which no one can spare us, for our
wisdom is the point of view from which we come at last to regard the world.
Mark Twight Knowledge and expertise are tricky things: being keys to locks and also bars on cages.
What we know and believe can just as easily help us solve problems and achieve
objectives as it can enslave us to automatic, thoughtless response.
Questions open the mind. Answers may either free or close it. The closed mind stagnates,
and repeats its meager experience over and over.
Marvin Minsky The bottom line is that we really haven't progressed too far toward a truly intelligent
machine. We have collections of dumb specialists in small domains; the true majesty of
general intelligence still awaits our attack.


Michel de Montaigne I write to keep from going mad from the contradictions I find among mankind — and to
work some of those contradictions out for myself.
Michelangelo Genius is infinite patience.
Neil Gershenfeld The most common misunderstanding about science is that scientists seek and find truth.
They don't — they make and test models.
Nikola Tesla Be alone, that is the secret of invention; be alone, that is when ideas are born.
Paul Tudor Jones The secret to being successful from a trading perspective is to have an indefatigable and
an undying and unquenchable thirst for information and knowledge. Because I think there
are certain situations where you can absolutely understand what motivates every buyer
and seller and have a pretty good picture of what's going to happen. And it just requires
an enormous amount of grunt work and dedication to finding all possible bits of
information.
Richard Feynman You can know the name of a bird in all the languages of the world, but when you're
finished, you'll know absolutely nothing whatever about the bird… So let's look at the bird
and see what it's doing—that's what counts. I learned very early the difference between
knowing the name of something and knowing something.
We have found it of paramount importance that, in order to progress, we must recognize

our ignorance and leave room for doubt.
Learn from science that you must doubt the experts. As a matter of fact, I can also define
science another way: Science is the belief in the ignorance of experts.
I can live with doubt and uncertainty and not knowing. I think it is much more interesting to
live not knowing than to have answers that might be wrong.
I think the problem is not to find the best or most efficient method to proceed to a
discovery, but to find any method at all.
Seth Klarman Value investors are students of the game; they learn from every pitch, those at which they
swing and those they let pass by. They are not influenced by the way others are
performing; they are motivated only by their own results.
Sneakers There's a war out there, old friend. A world war. And it's not about whose got the most
bullets. It's about who controls the information. What we see and hear, how we work, what
we think... it's all about the information!
Takuan Soho The mind must always be in the state of "flowing," for when it stops anywhere that means
the flow is interrupted and it is this interruption that is injurious to the well-being of the
mind. In the case of the swordsman, it means death. When the swordsman stands against
his opponent, he is not to think of the opponent, nor of himself, nor of his enemy's sword
movements. He just stands there with his sword which, forgetful of all technique, is ready
only to follow the dictates of the subconscious. The man has effaced himself as the
wielder of the sword. When he strikes, it is not the man but the sword in the hand of the
man's subconscious that strikes.
The Art of Learning Often in chess, you feel something is there before you find it. The skin suddenly perks up,
senses heighten like an animal feeling danger or prey. The unconscious alerts the
conscious player that there is something to be found, and then the search begins.
Musicians, actors, athletes, philosophers, scientists, writers understand that brilliant

creations are often born of small errors. Problems set in if the performer has a brittle
dependence on the safety of absolute perfection or duplication. Then an error triggers
fear, detachment, uncertainty, or confusion that muddies the decision-making process.


The Art of Learning A key component of high-level learning is cultivating a resilient awareness that is the
older, conscious embodiment of a child's playful obliviousness.
...if we feed the unconscious, it will discover connections between what may appear to be
disparate realities. The path to artistic insight in one direction often involves deep study of
another — the intuition makes uncanny connections that lead to a crystallization of
fragmented notions.
Every high-level attacking chess creation emerges from a subtle building of forces that is
at the core of positional chess. Just as the yin-yang symbol possesses a kernel of light in
the dark, and of dark in the light, creative leaps are grounded in a technical foundation.
...intuition is our most valuable compass in this world. It is the bridge between the
unconscious and the conscious mind, and it is hugely important to keep in touch with what
makes it tick. If we get so caught up in narcissistic academic literalism that we dismiss
intuition as nonexistent because we don't fully understand it, or if we blithely consider the
unconscious to be a piece of machinery that operates mystically in a realm that we have
no connection to, then we lose the rich opportunity to have open communication with the
wellspring of creativity.
Over time each chess principle loses rigidity, and you get better and better at reading the
subtle signs of qualitative relativity. Soon enough, learning becomes unlearning. The
stronger chess player is often the one who is less attached to a dogmatic interpretation of
the principles. This leads to a whole new layer of principles — those that consist of the
exceptions to the initial principles. Of course the next step is for those counter-intuitive
signs to become internalized just as the initial movements of the pieces were.
The network of my chess knowledge now involves principles, patterns, and chunks of
information, accessed through a whole new set of navigational principles, patterns, and
chunks of information, which are soon followed by another set of principles and chunks
designed to assist in this interpretation of the last. Learning chess at this level becomes
sitting with paradox, being at peace with and navigating the tension of competing truths,
letting go of any notion of solidity.
While the weaker player might say, "I just had a feeling," the stronger player would shrug
and explain the principles behind the inspired move. This is why Grandmasters can play
speed chess games that weaker masters wouldn't understand in hundreds of hours of
study: they have internalized such esoteric patterns and principles that breathtakingly
precise decisions are made intuitively. The technical afterthoughts of a truly great one can
appear to be divine inspiration to the lesser artist.
We have created a body of theory around a fleeting moment of inspiration. Now there are
techniques and principles that make this weapon accessible all the time. We have taken
our pyramid of knowledge up one level and solidified a higher foundation for new leaps.
The Call of Cthulhu The most merciful thing in the world, I think, is the inability of the human mind to correlate
all its contents. We live on a placid island of ignorance in the midst of black seas of
infinity, and it was not meant that we should voyage far. The sciences, each straining in its
own direction, have hitherto harmed us little; but some day the piecing together of
dissociated knowledge will open up such terrifying vistas of reality, and of our frightful
position therein, that we shall either go mad from the revelation or flee from the light into
the peace and safety of a new dark age.
The Once and Future King There is only one thing for it then—to learn. Learn why the world wags and what wags it.
That is the only thing which the mind can never exhaust, never alienate, never be tortured
by, never fear or distrust, and never dream of regretting.
Thomas Edison The best thinking has been done in solitude. The worst has been done in turmoil.


Victor Hugo A man is not idle because he is absorbed in thought. There is a visible labor and there is
an invisible labor.
William James Wisdom is learning what to overlook.
William Least Heat-Moon Boredom lies only with the traveler's limited perception and his failure to explore deeply
enough.
Winston Churchill I am always ready to learn, although I do not always like being taught.
Let our advance worrying become advance thinking and planning.

EXCELLENCE

Albert Einstein After a certain high level of technical skill is achieved, science and art tend to coalesce in
aesthetics, plasticity, and form. The greatest scientists are artists as well.
I have no special talents. I am only passionately curious.
Only one who devotes himself to a cause with his whole strength and soul can be a true
master. For this reason mastery demands all of a person.
You have to learn the rules of the game. And then you have to play better than anyone
else.
Ari Kiev The objective of setting a target is not necessarily to reach it, but rather to establish a
standard against which to measure your performance. If you are not reaching your target,
it forces you to focus on what you are doing wrong or what you may not be doing that you
should. The target holds you to a higher standard of performance.
Define a target, a strategy consistent with the target, a set of disciplines to follow, and risk
management guidelines. Then trade, track, and evaluate your performance.
Aristotle Moral virtues come from habits. They are not in us neither by nature, nor in despite of
nature, but we are furnished by nature with a capacity for receiving them, and we develop
them through habit. These virtues we acquire first by exercising them, as in the case of
other arts. Whatever we learn to do, we learn by actually doing it: men come to be
builders, for instance, by building, and harp players by playing the harp. In the same way
by doing just acts we come to be just; by doing self-controlled acts, we come to be self-
controlled; and by doing brave acts, we come to be brave.
Excellence is an art won by training and habituation. We do not act rightly because we
have virtue or excellence, but we rather have those because we have acted rightly.
Excellence, then, is not an act, but a habit.
Arthur Schopenhauer Great minds are like eagles, and build their nests in some lofty solitude.
Arthur Sokoloff No matter what the activity — be it music, art, sports, a profession or trade — there is a
state of achievement wherein it becomes so perfected through practice and a certain
mental attitude, that it seems to function independently of the performer.
Bruce Lee A man must constantly exceed his level.
Chip Reese [Poker is] a very simple game; a five-year-old can learn it. But it's also highly
mathematical. If you never play someone on the next level, you don’t even know that level
exists. It's almost another dimension.


Cicero What one has, one ought to use: and whatever he does he should do with all his might.
The spirit is the true self. The spirit, the will to win, and the will to excel are the things that
endure.
Daniel F. Chambliss Superlative performance is really a confluence of dozens of small skills or activities, each
one learned or stumbled upon, which have been carefully drilled into habit and then are
fitted together in a synthesized whole. There is nothing extraordinary or superhuman in
any one of those actions; only the fact that they are done consistently and correctly, and
all together, produce excellence.
Athletes move up to the top ranks through qualitative jumps: noticeable changes in their
techniques, discipline, and attitude, accomplished usually through a change in settings
(e.g., joining a new team with a new coach, new friends, etc.) who work at a higher level.
Without such qualitative jumps, no major improvements (movements through levels) will
take place...
In the pursuit of excellence, maintaining mundanity is the key psychological challenge. In

common parlance, winners don’t choke. Faced with what seems to be a tremendous
challenge or a strikingly unusual event, such as the Olympic Games, the better athletes
take it as a normal, manageable situation ('It's just another swim meet,' is a phrase
sometimes used by top swimmers at a major event such as the Games) and do what is
necessary to deal with it.
David Swensen Great investors tend to have a 'screw loose,' pursuing the game not for profit, but for
sport.
Ed Seykota Good traders have a special talent for trading just as good musicians and good athletes
have talents for their fields. Great traders are ones who are absorbed by the talent. They
don't have the talent — the talent has them.
Eugen Herrigel The technically learnable part of it must be practiced to the point of repletion.
Frank Curiel To play ball, you need three things. Heart. Mind. Balls. If you have two, you can play, but
you will never be great. To be great, all three.
Garry Kasparov The obligation to move can be a burden to a player without strategic vision. Unable to
form a plan when there isn't an immediate crisis, he is likely to try to precipitate a crisis
himself and usually ends up damaging his own position. We learned from Petrosian that
vigilant inaction is a viable strategy in chess, but the art of useful waiting takes
consummate skill. What exactly do you do when there is nothing to do?
Gary Klein There was a decision point. He didn't experience it as a decision point because for him it
was obvious what to do. That's what 20 years of experience buys you. You build up all
these patterns, you quickly size up situations, and you know what to do, and that's why it
doesn't feel like you're making any conscious decisions.
George Soros I stood back and looked at myself with awe: I saw a perfectly honed machine.
Glenn Frey (the Eagles) I didn't really know how to write songs. I knew I wanted to write songs, but I didn't know
exactly, did you just wait around for inspiration, you know, what was the deal? I learned
through [Jackson Browne's] ceiling and my floor exactly how to write songs, 'cause
Jackson would get up, and he'd play the first verse and first chorus, and he'd play it 20
times, until he had it just the way he wanted it. And then there'd be silence, and then I'd
hear the teapot going off again, and it would be quiet for 20 minutes, and then I'd hear him
start to play again … and I'm up there going, so that's how you do it. Elbow grease. Time.
Thought. Persistence.
Henry de Monfreid I have lived a rich, restless, magnificent life.


Jack Sparrow Truly excellent traders are open to the fact they have flaws. Truly excellent traders are
realistic about the fact that all methodologies have strengths and weaknesses, and that a
constant incremental process of improvement and evolution must be applied over time.
Truly excellent traders reflect on mistakes they have made in the past, and recognize that,
as much as they hate it, they will make mistakes in future. Truly excellent traders are
proud of their skills, and yet deeply humble, because they know the market is bigger than
any one man and that new challenges are constantly arising.
Nuance and subtlety are powerful performance enhancers. Rejecting a viewpoint for
simplistic reasons is suboptimal in comparison to considering the deeper elements and
pragmatically extracting what works or otherwise proves helpful.
Academic assertions that outperformance is impossible pose a useful sort of litmus test. If
one is cowed enough by the dogma to accept mediocrity as inevitable, then one most
likely lacks the drive, the talent or the intellect (or some combination of the three) to
achieve excellence in the first place.
You develop some ideas, go forth into the market and try some things. Over time, you
build up experience this way. (Profitable or unprofitable, it's still experience.) Then, having
accumulated that experience, you step back to examine and theorize. You analyze what
happened and why. You think about the strengths and weaknesses of what you just tried.
You start to develop a new round of ideas. You get a sense of where the holes are in your
capability, where the most profitable areas of exploration might be.
James Daly You've just got to focus on excellence and try not to be distracted by the news and the
rumors and the absurdities of the stories that were coming out.
Jerry Seinfeld I'm not filling a deep emotional hole here. I'm playing a very difficult game, and if you'd like
to see someone who's very good at a difficult game, that's what I do.
Jim Collins A great piece of art is composed not just of what is in the final piece, but equally
important, what is not. It is the discipline to discard what does not fit — to cut out what
might have already cost days or even years of effort — that distinguishes the truly
exceptional artist and marks the ideal piece of work, be it a symphony, a novel, a painting,
a company or, most important of all, a life.
John Wooden Don't look for the big, quick improvement. Seek the small improvement one day at a time.
That's the only way it happens – and when it happens, it lasts.
Josh Waitzkin A lifetime of competition has not cooled my ardor to win, but I have grown to love the
study and training above all else. After so many years of big games, performing under
pressure has become a way of life. Presence under fire hardly feels different from the
presence I feel sitting at my computer, typing these sentences.
It has been my observation that the greatest performers convert their passions into fuel
with tremendous consistency. There are examples in every discipline.
Keith Richards People say, 'Why don't you give it up?' I can't retire until I croak. I don't think they quite
understand what I get out of this. I'm not doing it just for the money or for you. I'm doing it
for me.
I've never wanted to play like anybody else, except when I was first starting, when I
wanted to be Scotty Moore or Chuck Berry. After that, I wanted to find out what the guitar
or piano could teach me.
Mark Twight The outcome of sports competition, actual combat and life itself is decided largely by
one's attitude. Superior firepower, whether physical or technical is a contributing factor but
"heart" governs the application of resources. Spirit is the most powerful force on the field.


Marty Schwartz My attitude is that I always want to be better prepared than someone I'm competing
against. The way I prepare myself is by doing my work each night.
A great trader is like a great athlete. You have to have natural skills, but you have to train
yourself how to use them.
Mihaly Csikszentmihalyi The ego falls away. Time flies. Every action, movement, and thought follows inevitably
from the previous one, like playing jazz. Your whole being is involved, and you're using
your skills to the utmost.
Mike Bloomberg Think. Prepare. Plan in advance when there's no time pressure. Then, in real life, do what
you said.
Orison Swett Marden The man who would forge to the front in this competitive age must be a man of prompt
and determined decision.
Paul Graham I've found that people who are great at something are not so much convinced of their own
greatness as mystified at why everyone else seems so incompetent.
Paul Konerko You try to stay steady. Not change too much. You prepare. You do your work every day,
so you're swinging well and you know your pitcher and the situation. Then you go in and
try to focus and execute. In the box, keep it simple. I try to concentrate on tracking a pitch
into a zone I've chosen to focus on, swing hard at those. Sometimes you get fooled. But
you stick to your routine, stay focused. Don't overthink.
Paul Tudor Jones I love trading macro. If trading is like chess, then macro is like three-dimensional chess. It
is just hard to find a great macro trader.
Pearl S. Buck The secret of joy in work is contained in one word — excellence. To know how to do
something well is to enjoy it.
Pete Docter, Pixar Director Write the cliche first, then recognize you just wrote a cliche and rewrite it. Repeat until
your scene works. Our secret here is that we make 8+ lousy versions of every film that we
change until we think it's good enough for you to see it.
Robert Henri Do whatever you do intensely.
Robert Pirsig You want to know how to paint a perfect painting? It's easy. Make yourself perfect and
then just paint naturally.
Rudyard Kipling If you can dream — and not make dreams your master; If you can think — and not make
thoughts your aim; If you can meet with Triumph and Disaster; And treat those two
impostors just the same...
Samurai maxim A man who has attained mastery of an art reveals it in his every action.
Silicon Valley proverb They can steal your idea, but they can't steal execution.
Steve Jobs It comes down to trying to expose yourself to the best things that humans have done —
and then try to bring those things into what you're doing.
Steve Prefontaine To give anything less than your best is to sacrifice the gift.
Susan Polgar I had an inner drive... I think that is the difference between the very good and the best.
Ted Williams If I can help somebody, fine. That's the whole idea. I feel in my heart that nobody in this
game ever devoted more concentration to the batter's box than Theodore Samuel
Williams, a guy who practiced until the blisters bled, and loved doing it, and got more
delight out of examining by conversation and observation the art of hitting the ball. If that
does not qualify me, nothing will.


The Art of Learning The key to pursuing excellence is to embrace an organic, long-term learning process, and
not to live in a shell of static, safe mediocrity. Usually, growth comes at the expense of
previous comfort or safety.
...the fields of learning and performance are an exploration of grayness — of the in-
between. There is the careful balance of pushing yourself relentlessly, but not so hard that
you melt down. Muscles and minds need to stretch to grow, but if stretched too thin, they
will snap. A competitor needs to be process-oriented, always looking for stronger
opponents to spur growth, but it is also important to keep on winning enough to maintain
confidence. We have to release our current ideas to soak in new material, but not so
much that we lose touch with our unique natural talents. Vibrant, creative idealism needs
to be tempered by a practical, technical awareness.
...it is essential to have a liberating incremental approach that allows for times when you
are not in a peak performance state. We must take responsibility for ourselves, and not
expect the rest of the world to understand what it takes to become the best that we can
become.
What made [Michael Jordan] the greatest was not perfection, but a willingness to put
himself on the line as a way of life. Did he suffer all those nights when he sent twenty
thousand Bulls fans home heartbroken? Of course. But he was willing to look bad on the
road to basketball immortality.
The fact is that when there is intense competition, those who succeed have slightly more
honed skills than the rest. It is rarely a mysterious technique that drives us to the top, but
rather a profound mastery of what may well be a basic skill set. Depth beats breadth any
day of the week, because it opens a channel for the intangible, unconscious, creative
components of our hidden potential.
It is all too easy to get caught up in the routines of our lives and to lose creativity in the
learning process. Even people who are completely devoted to cultivating a certain
discipline often fall into a mental rut, a disengaged lifestyle that implies excellence can be
obtained by going through the motions. We lose presence. Then an injury or some other
kind of setback throws a wrench into the gears. We are forced to get imaginative.
This is where things get interesting. We are at the moment when psychology begins to
transcend technique. Everyone at a high level has a huge amount of chess
understanding, and much of what separates the great from the very good is deep
presence, relaxation of the conscious mind, which allows the unconscious to flow
unhindered. This is a nuanced and largely misunderstood state of mind that when refined
involves a subtle reintegration of the conscious mind into a free-flowing unconscious
process. The idea is to shift the primary role from the conscious to the unconscious
without blissing out and losing the precision the conscious can provide.
Most people would be surprised to discover that if you compare the thought process of a
Grandmaster to that of an expert (a much weaker, but quite competent chess player), you
will often find that the Grandmaster consciously looks at less, not more. That said, the
chunks of information that have been put together in his mind allow him to see much more
with much less conscious thought. So he is looking at very little and seeing quite a lot.
This is the critical idea.
If an NFL running back, NBA ball handler, or World Cup Soccer player can get the
defender to put weight in the wrong place at the wrong time, then he can blow on by and
leave the guy tripping over himself. In virtually every competitive physical discipline, if you
are a master of reading and manipulating footwork, then you are a force to be reckoned
with.


The Art of Learning In the absence of continual external reinforcement, we must be our own monitor, and
quality of presence is often the best gauge. We cannot expect to touch excellence if
"going through the motions" is the norm of our lives. On the other hand, if deep, fluid
presence becomes second nature, then life, art, and learning take on a richness that will
continually surprise and delight.
Those who excel are those who maximize each moment's creative potential — for these
masters of living, presence to the day-to-day learning process is akin to that purity of
focus others dream of achieving in the rare climactic moments when everything is on the
line.
The secret is that everything is always on the line. The more present we are at practice,
the more present we will be in competition, in the boardroom, at the exam, the operating
table, the big stage. If we have any hope of attaining excellence, let alone of showing
what we've got under pressure, we have to be prepared for a lifestyle of reinforcement.
Presence must be like breathing.
At the highest levels of any kind of competitive discipline, everyone is great. At this point
the decisive factor is rarely who knows more, but who dictates the tone of the battle. For
this reason, almost without exception, champions are specialists whose styles emerge
from profound awareness of their unique strengths, and who are exceedingly skilled at
guiding the battle in that direction.
Let's think about this method in the language of chess: If a chess expert were to have his
most inspired day he would come up with ideas that would blow his mind and the minds of
others at his level. But for the master, these inspired creations would be humdrum. They
are the everyday because his knowledge of chess allows him to play this way all the time.
Tom Baldwin Most important, losers don't work hard enough. Most people walk in and think there is a
50/50 chance on any trade. They don't think there is anything more to it than that. They
don't concentrate. They don't watch the factors that affect the market. You can see it in
their eyes; it is almost as if there is a wall in front of their face.
unknown A true craftsman never stands for wrinkles in the duct tape.
Vince Lombardi Success demands singleness of purpose.
Wayne Gretzky The highest compliment that you can pay me is to say that I work hard every day, that I
never dog it.
Zen and the Art of Poker It is not enough to rely on luck or hope to carry us past the weak parts of our game. These
parts must be attended to. The system must be whole and complete.
The best poker players — the very best, world-class players when they are in action —
are machines. They are cool headed, intuitive, impassive, imperturbable, and relentless.

FUNDAMENTAL ANALYSIS

Barry Ritholtz The bottom line is if you are buying something you don't understand based on a narrative
that is half myth pushed by people with an incentive to bring in more buyers, well then,
you are setting yourself up for a disaster…
Barton Biggs The successful macro investor must be some magical mixture of an acute analyst, an
investment scholar, a listener, a historian, a river boat gambler, and be a voracious
reader. Reading is crucial.


Bruce Kovner One of the jobs of a good trader is to imagine alternative scenarios. I try to form many
different mental pictures of what the world should be like and wait for one of them to be
confirmed. You keep trying them on one at a time. Inevitably, most of these pictures will
turn out to be wrong — that is, only a few elements of the picture may prove correct. But
then, all of a sudden, you will find in that one picture, nine out of ten elements click. That
scenario then becomes your image of the world reality.
Ed Seykota Fundamentals that you read about typically are useless as the market has already
discounted the price, and I call them 'funny-mentals.' However, if you catch on early,
before others believe, then you might have valuable 'surprise-a-mentals.'
Gold tends to be dug up, refined, and then buried again. The geographical entropy of all
gold on the planet seems to decrease over time. A lot has been collected in vaults. I
project the trend as one toward a central world gold stash.
Psychology motivates the quality of analysis and puts it to use. Psychology is the driver
and analysis is the road map.
George Soros Financial markets, far from accurately reflecting all the available knowledge, always
provide a distorted view of reality. This is the principle of fallibility. The degree of distortion
may vary from time to time. Sometimes it's quite insignificant, at other times it is quite
pronounced.
Reflexivity sets up a feedback loop between market valuations and the so-called
fundamentals which are being valued. The feedback can be either positive or negative.
...a positive feedback is self-reinforcing. It cannot go on forever because eventually,

market prices would become so far removed from reality that market participants would
have to recognize them as unrealistic. When that tipping point is reached, the process
becomes self-reinforcing in the opposite direction.
Every bubble has two components: an underlying trend that prevails in reality and a
misconception relating to that trend. When a positive feedback develops between the
trend and the misconception, a boom-bust process is set in motion. The process is liable
to be tested by negative feedback along the way, and if it is strong enough to survive
these tests, both the trend and the misconception will be reinforced.
When the California residential home market collapsed, the market thought the company
might go broke, but it survived the test and we made a fortune. That is when I made the
rule that one should own stocks when they have successfully passed a difficult test, but
one should avoid them during the test — something that is easier said than done.
Economic theory needs to be fundamentally reconsidered. There is an element of

uncertainty in economic processes that has been largely left unaccounted for... We must
take a radically different view of the role that thinking plays in shaping events.
Usually some error in the act of valuation is involved. The most common error is a failure
to recognize that a so-called fundamental value is not really independent of the act of
valuation. That was the case in the conglomerate boom, where per-share earnings growth
could be manufactured by acquisitions, and also in the international lending boom where
the lending activities of the banks helped improve the debt ratios that banks used to guide
them in their lending activity.
As a student of economics, I found it strange that classical economic theory, particularly

the theory of perfect competition, should assume perfect knowledge. I was also rather
weak in mathematics, so I preferred to question the assumptions rather than to study the
equations based on them. I cogitated and concluded that economics theory is based on
false premises. That is how I developed my theory of reflexivity, which recognizes a two-
way interaction between thinking and reality.


George Soros The reflexive nature of human relations is so obvious that the question I would like to ask
is, why has reflexivity not been properly recognized? Why, for instance, did economic
theory deliberately ignore it? [And the answer is because] it cannot be reconciled with the
goals of analytical science, which is to provide determinate predictions and explanations.
Reflexivity throws a monkey-wrench into the works by introducing an element of
uncertainty.
Helmut Weymar I thought random walk was bullshit... The whole idea that an individual can't make serious
money with a competitive edge over the rest of the market is wacko.
Howard Marks When governments are big issuers of debt, it can be hard for non-government issuers to
raise money. But when governments are big buyers of securities instead, the capital they
inject into the markets can make it easy for others to issue securities.
Jack Schwager A great company could be a terrible investment if its price rise has already more than
discounted the bullish fundamentals. Conversely, a company that has been experiencing
problems and is the subject of negative news could be a great investment if its price
decline has more than discounted the bearish information.
John Hussman If there is one thing that is singularly responsible for the abysmal returns of the S&P 500...
it is the ludicrous set of valuation 'models' that Wall Street has repeatedly foisted onto an
uninformed public in order to sell them on the notion that dangerously overvalued markets
were actually 'cheap.' Knowledge is your best defense. Valuation matters.
Marc Faber Markets are no different than empires. They expand, rise in value, become over-
extended, and eventually collapse.
Marty Schwartz When I was in the first grade, the teacher asked each of us what we wanted to be when
we grew up. I said, 'a detective.' This investigative nature has carried through into
adulthood. I love searching for clues, synthesizing tons of unrelated data, and arriving at a
logical conclusion. While these observations are not entirely scientific, they are things I've
seen repeatedly over the years.
Michael Marcus The best trades are the ones in which you have all three things going for you:
fundamentals, technicals, and market tone. First, the fundamentals should suggest that
there is an imbalance of supply and demand, which could result in a major move. Second,
the chart must show that the market is moving in the direction that the fundamentals
suggest. Third, when news comes out, the market should act in a way that reflects the
right psychological tone.
Michael Steinhardt We went short Polaroid when it was selling at sixty times earnings, which we thought was
absurd; it then went to seventy times earnings. The market seemed to lose track of reality,
and we found ourselves asking, 'What is the difference between forty times earnings and
eighty times earnings?' By putting a different number on the secular growth rate estimate,
you could justify almost any multiple. That is how people were thinking in those days.
More Money Than God Events as disparate as Japanese trade negotiations and Mexican assassinations had
been linked in terrifying ways by the tentacles of leverage.
Paul Tudor Jones ...at the end of the day, your job is to buy what goes up and to sell what goes down so
really who gives a damn about PE's? If it's going up you're supposed to be long it. But
there's no question that it's just easier for me to leverage with some degree of conviction
the short side of some markets.
I know from studying history that credit eventually kills all great societies. We have
essentially taken out our American Express card and said we are going to have a great
time.


Paul Tudor Jones Maybe there are macroeconomic forces at work that are part of a larger super cycle that
we don't have any control over. Perhaps we are simply responding to the same type of
cycles that most advanced civilizations fell prey to, whether it was the Romans, sixteenth-
century Spain, eighteenth-century France, or nineteenth-century Britain.
Peter Thiel We might describe our world as having retail sanity, but wholesale madness. Details are
well understood; the big picture remains unclear. A fundamental challenge... is to
integrate the micro and macro such that all things make sense.
Richard Bookstaber You can't build in a feedback or reactive model, because you don't know what to model.
And if you do know — by the time you know — the odds are the market has changed.
That is the whole point of what makes a trader successful — he can see things in ways
most others do not, anticipate in ways others cannot, and then change his behavior when
he starts to see others catching on.
Robert J. Shiller Stock prices are likely to be among the prices that are relatively vulnerable to purely social
movements because there is no accepted theory by which to understand the worth of
stock... investors have no model or at best a very incomplete model of behavior of prices,
dividends, or earnings of speculative assets.
Seth Klarman A margin of safety is achieved when securities are purchased at prices sufficiently below
underlying value to allow for human error, bad luck, or extreme volatility in a complex,
unpredictable and rapidly changing world.
Stuart Walton The theme I noticed back then that has persisted through bull and bear markets is: Good
companies, on balance, continue to go up. Grandmothers in Kansas City know that.
The Art of Learning A chess student must initially become immersed in the fundamentals in order to have any
potential to reach a high level of skill. He or she will learn the principles of endgame,
middlegame, and opening play. Initially one or two critical themes will be considered at
once, but over time the intuition learns to integrate more and more principles into a sense
of flow. Eventually the foundation is so internalized that it is no longer consciously
considered, but is lived. This process continuously cycles along as deeper layers of the
art are soaked in.
Tony Boekh Manias and bubbles are an integral part of the Age of Inflation because they are caused
by too much money and credit.

LIFE PRACTICES

Adam Smith, The Theory of Moral Through the whole of his life he pursues the idea of a certain artificial and elegant repose
Sentiments, 1759 which he may never arrive at, for which he sacrifices a real tranquility that is at all times in
his power, and which, if in the extremity of old age he should at last attain to it, he will find
to be in no respect preferable to that humble security and contentment which he had
abandoned for it. It is then, in the last dregs of life, his body wasted with toil and disease,
his mind galled and ruffled by the memory of a thousand injuries and disappointments
which he imagines he has met with from the injustice of his enemies, or from the perfidy
and ingratitude of his friends, that he begins at last to find that wealth and greatness are
mere trinkets of frivolous utility, no more adapted for procuring ease of body or tranquility
of mind, than the tweezer-cases of the lover of toys.
Alan Perlis Dealing with failure is easy: Work hard to improve. Success is also easy to handle: You've
solved the wrong problem. Work hard to improve.
Albert Einstein He who joyfully marches to music in rank and file has already earned my contempt. He
has been given a large brain by mistake, since for him the spinal cord would fully suffice.


Albert Einstein We act as though comfort and luxury were the chief requirements of life, when all that we
need to make us happy is something to be enthusiastic about.
All these primary impulses, not easily described in words, are the springs of man's
actions.
Concern for man and his fate must always form the chief interest of all technical
endeavors. Never forget this in the midst of your diagrams and equations.
Albert Ellis The best years of your life are the ones in which you decide your problems are your own.
You do not blame them on anyone or anything. You realize that you control your own
destiny.
Alexander Graham Bell Concentrate all your thoughts upon the work at hand. The sun's rays do not burn until
brought to a focus.
Atul Gawande Discipline is hard — harder than trustworthiness and skill... We are by nature flawed and
inconstant creatures. We can't even keep from snacking between meals. We are not built
for discipline. We are built for novelty and excitement, not for careful attention to detail.
Discipline is something we have to work at.
Barry Ritholtz Search for the rare bird, but do not be confused by the common street pigeon... lest you
become one.
Big Trouble in Little China We take what we want and leave the rest, just like your salad bar.
Blake Masters Your mind is software. Program it. Your body is a shell. Change it. Death is a disease.
Cure it. Extinction is approaching. Fight it.
Bruce Lee ...if you always put limits on what you can do, physical or anything else, it'll spread over
into the rest of your life. It'll spread into your work, into your morality, into your entire
being.
Charles Sumner Three things are necessary: first, backbone; second, backbone; third, backbone.
Chris Dixon When I was a kid, I tagged along with my grandfather who was an oboist in a big city
symphony. I was struck by the dramatic discrepancy between the culture of the audience
and the culture of the musicians. Before the show, the audience attended fancy events,
and talked in abstract terms about classical music. After the show, the musicians played
poker, told jokes, swigged bourbon, and traded tips about the best places to get parts for
their instruments.
Croupier Hold on tightly, let go lightly.
Descartes When it is not in our power to follow what is true, we ought to follow what is most
probable.
Dwight D. Eisenhower I have always found that plans are useless, but planning is indispensable.
Ed Seykota Striking a workable ecology seems to promote trading longevity, which is one key to
success.
Edward Gibbon The winds and waves are always on the side of the ablest navigators.
Epictetus The world turns aside to let any man pass who knows where he is going.
Eugen Herrigel You must learn to wait properly.


Garry Kasparov In chess we have the obligation to move; there is no option to skip a turn if you can't
identify a direction that suits you. One of the great challenges of the game is how to make
progress when there are no obvious moves, when action is required, not reaction. The
great Polish chess master and wit Tartakower half-joking called this the "nothing to do"
phase of the game. In reality, it is here that we find what separates pretenders from
contenders.
George Washington I am embarked on a wide ocean, boundless in its prospect and, in which, perhaps, no
safe harbor is to be found.
Grandmaster Cho Every moment wasted is a moment the opponent trains. When you meet him, he will win.
Helen Keller Ideas without action are worthless.
Henry Miller From the very beginning almost I was deeply aware there is no goal... With the endless
burrowing a certitude develops which is greater than faith or belief. I become more and
more indifferent to my fate, as a writer, and more and more certain of my destiny as man.
Horace Wisdom is not wisdom when it is derived from books alone.
Hunter S. Thompson Buy the ticket, take the ride.
Play your own game, be your own man, and don't ask anybody for a stamp of approval.
Beware of looking for goals: look for a way of life. Decide how you want to live and then
see what you can do to make a living WITHIN that way of life.
I Ching When the way comes to an end, then change. Having changed, you pass through.
Jack Sparrow Follow your own path, seek out what has worth to you, and who gives a shit about what's
said from the side of the road.
Worry about your own fortunes gentlemen. The deepest circle of hell is reserved for
betrayers and mutineers.
There's practice, and then there is deep practice. All too often, the first is a waste of time.
Life is a race. Death is the finish line. The objective is to go out with the highest score
possible — not in terms of dollars earned or battles won, but a life most fully lived.
For traders, work nights are really like school nights: Rest up and do your homework, or
the market will school you good.
Japanese proverb Let others take their own way, and I take my own.
Johann Wolfgang von Goethe Things which matter most must never be at the mercy of things which matter least.
Jon Kabat-Zinn One of the principal virtues of a daily discipline is an acquired transparency toward the
appeals of transitory mood states... Discipline provides a constancy which is independent
of what kind of a day you had yesterday and what kind of a day you anticipate today.
Leonardo da Vinci Every now and then go away, have a little relaxation, for when you come back to your
work your judgment will be surer. Go some distance away, because then the work
appears smaller... more of it can be taken in at a glance, and a lack of harmony and
proportion is more readily seen.
He who loves practice without theory is like the sailor who boards ship without rudder and
compass, and never knows where he may cast.


Leonardo da Vinci I have been impressed with the urgency of doing. Knowing is not enough; we must apply.
Being willing is not enough; we must do.
Marcus Aurelius If you are distressed by anything external, the pain is not due to the thing itself, but to your
estimate of it; and this you have the power to revoke at any moment.
Mark Foo, 1958-1994 If you want the ultimate thrill, you've got to be willing to pay the ultimate price.
Mihaly Csikszentmihalyi For a person to become deeply involved in any activity it is essential that he knows
precisely what tasks he must accomplish, moment by moment.
Mortality Sucks If you assume nothing is your fault, you forego any chance of improvement. Things you
can control will be overlooked and your life will be a rudderless ship. On the other hand, if
you assume you are responsible for everything that happens to you, no opportunities to
improve your lot in life will be missed. It doesn't mean you'll be able to take advantage of
them all, but you'll always have the chance to try.
Orison Swett Marden It was the will, quiet or pugnacious, gentle or grim, of men like Wilberforce and Garrison,
Goodyear and Cyrus Field, Bismarck and Grant, that made them indomitable. They simply
would do what they planned. Such men can no more be stopped than the sun can be, or
the tide.
Paul Buchheit I kind of like uncertainty to some extent, because it's a little bit of suspense and
excitement and adventure... And you can learn a lot even if things don't work out. But not
everyone likes adventure. A lot of people seem to be against uncertainty, actually. In all
areas of life.
Paul Saffo Iterate the process a few times, and it is surprising how quickly one can get to a useful
forecast.
Paul Tudor Jones I think there's a natural progression that everyone goes through. The older you get, the
more you'll realize that a quality life is one that has an extraordinary balance in it.
Reminiscences of a Stock The weaknesses that all men are prone to are fatal to success in speculation — usually
Operator those very weaknesses that make him likable to his fellows or that he himself particularly
guards against in those other ventures of his where they are not nearly so dangerous as
when he is trading in stocks or commodities.
Richard Dennis You have to maintain your perspective. There is more to life than trading. Also, to me,
being emotionally deflated would mean lacking confidence in what I am doing. I avoid that
because I have always felt that it is misleading to focus on short-term results.
There is no way to play just one side of that street. If you feel too good when things are
going well, then inevitably you will feel too bad when they are going poorly. I wouldn't
claim that I realized that after three years of trading, but after you've done it for about
twenty years, it either drives you crazy, or you learn to put it into perspective.
Richard Feynman To see life as part of the universal mystery of greatest depth, is to sense an experience
which is rarely described. It usually ends in laughter, delight in the futility of trying to
understand. These scientific views end in awe and mystery, lost at the edge in
uncertainty...
It was effortless. It was easy to play with these things. It was like uncorking a bottle:
Everything flowed out effortlessly. I almost tried to resist it! There was no importance to
what I was doing, but ultimately there was.
Richard Wrangham There is a lot more biology to our behavior than we used to think.
Schopenhauer Will power is to the mind like a strong blind man who carries on his shoulders a lame man
who can see.


Shakespeare There is a tide in the affairs of men, Which taken at the flood, leads on to fortune. Omitted,
all the voyage of their life is bound in shallows and in miseries. On such a full sea are we
now afloat. And we must take the current when it serves, or lose our ventures.
Shakespeare Have more than thou showest, speak less than thou knowest, lend less than thou owest.
Steve Jobs Your work is going to fill a large part of your life, and the only way to be truly satisfied is to
do what you believe is great work. And the only way to do great work is to love what you
do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart,
you'll know when you find it. And, like any great relationship, it just gets better and better
as the years roll on. So keep looking until you find it. Don't settle.
Ted Williams Wait for a good pitch to hit.
The Art of Learning One we reach a certain level of expertise at a given discipline and our knowledge is
expansive, the critical issue becomes: How is all this stuff navigated and put to use?
The Divine Comedy Midway on our life's journey, I found myself in dark woods, the right road lost.
Thucydides Those who make wise decisions are more formidable to their enemies than those who
rush madly into strong action.
Tom Peters Life is pretty simple: You do some stuff. Most fails. Some works. You do more of what
works. If it works big, others quickly copy it. Then you do something else. The trick is the
doing something else.
Tommy Angelo The best way to get better at poker is to get better at everything and let poker rise with the
tide.
If only we could be like water. When water moves, it follows the path of least resistance.
Water would be good at poker.
Total Recall You are what you do. A man is defined by his actions, not his memory.
Walter White Never give up control. Live life on your own terms.
Warren Buffett The difference between successful people and very successful people is that very
successful people say 'no' to almost everything.
William Blake I must create a system or be enslaved by another man's.
Winston Churchill It is a mistake to look too far ahead. Only one link in the chain of destiny can be handled
at a time.
Zen and the Art of Poker We must be able to back away from the game, but not by putting great commitment and
the muscle of our emotions into doing so.

TIMING

Cliff Asness ...you want to see a black swan? Try making nothing on your equities in your final 20
years until retirement because you bought them at an extremely high price (low expected
return). That is one pile of ebony long-necked bird. If risk is about surviving the short
term, expected return is about whether, after surviving, you think it was worth it.


George Soros Typically bubbles have an asymmetric shape. The boom is long and slow to start. It
accelerates gradually until it flattens out again during the twilight period. The bust is short
and steep because it involves the forced liquidation of unsound positions. Disillusionment
turns into panic, reaching its climax in a financial crisis.
Jim Lau You must learn to allow patience and stillness to take over from anxiety and frantic
activity... The good player is patient. He is observant, controlling his patience, and
organizing his composure. When he sees an opportunity, he explodes.
Louis Rukeyser There was no shortage of terror and despair in the financial markets . . . It was all a bit
reminiscent of the fable about the little boy who cried wolf. By the time one finally
appeared, most people had lost their capacity to believe and be alarmed.
Mark Cook When you buy an option, the premium steadily evaporates over time. It's like holding an
ice cube in your hand: the longer it's there, the more it diminishes until finally it doesn't
exist at all.
Mark Minervini The motivation is always the same. Although I may hold the position much longer, I am
buying the stock because I think it will go up within hours or at most days.
Mark Weinstein My fear of the markets has forced me to hone my timing with great precision. When I am
trading properly, it is like a pool player running racks. If my gut feel of market conditions
is not right, I don't trade.
Most people will not wait for the environment to tip itself off. They will walk into the forest
when it is still dark, while I wait until it gets light.
Don't trade until an opportunity presents itself. Knowing when to stay out of the markets
is as important as knowing when to be in them.
Michael Steinhardt There is a very important difference between being a theoretical contrarian and dealing
with it in practical terms. In order to win as a contrarian, you need the right timing and
you have to put on a position in the appropriate size. If you do it too small, it's not
meaningful; if you do it too big, you can get wiped out if your timing is slightly off. The
process requires courage, commitment, and an understanding of your own psychology.
Miyamoto Musashi There is timing in the whole life of the warrior, in his thriving and declining, in his
harmony and discord. Similarly, there is timing in the Way of the merchant, in the rise
and fall of capital. All things entail rising and falling timing. You must be able to discern
this. In strategy there are various timing considerations. From the outset you must know
the applicable timing and the inapplicable timing, and from among the large and small
things and the fast and slow timings find the relevant timing, first seeing the distance
timing and the background timing. This is the main thing in strategy. It is especially
important to know the background timing, otherwise your strategy will become uncertain.
Randy McKay You don't want to have a position before a move has started. You want to wait until the
move is already under way before you get into the market.
Reminiscences of a Stock Operator The way to make money is to make it. The way to make big money is to be right at
exactly the right time. In this business a man has to think of both theory and practice. A
speculator must not be merely a student, he must be both a student and a speculator.
There is a time for all things, but I didn't know it. And that is precisely what beats so
many men in Wall Street who are very far from being in the main sucker class. There is
the plain fool, who does the wrong thing at all times everywhere, but there is the Wall
Street fool, who thinks he must trade all the time.
But not even a world war can keep the stock market from being a bull market when
conditions are bullish, or a bear market when conditions are bearish. And all a man
needs to know to make money is to appraise conditions.


Reminiscences of a Stock Operator I think it was a long step forward in my trading education when I realized at last that
when old Mr. Partridge kept on telling the other customers, 'Well, you know this is a bull
market!' he really meant to tell them that the big money was not in the individual
fluctuations but in the main movements — that is, not in reading the tape but in sizing up
the entire market and its trend.
…the point is not so much to buy as cheap as possible or go short at the top prices, but
to buy or sell at the right time.
Obviously the thing to do was to be bullish in a bull market and bearish in a bear market.
Sounds silly, doesn't it? But I had to grasp that general principle firmly before I saw that
to put it into practice really meant to anticipate probabilities. It took me a long time to
learn to trade on those lines.
I had made a mistake. But where? I was bearish in a bear market. That was wise. I had
sold stocks short. That was proper. I had sold them too soon. That was costly. My
position was right but my play was wrong.
That is what happened. I didn't wait to determine whether or not the time was right for
plunging on the bear side. On the one occasion when I should have invoked the aid of
my tape-reading I didn't do it. That is how I came to learn that even when one is properly
bearish at the very beginning of a bear market it is well not to begin selling in bulk until
there is no danger of the engine back-firing.
I have in mind certain hazards of speculation that from time to time remind a man that no
profit should be counted safe until it is deposited in your bank to your credit.
After the real movement started, how long would it take to make up the fifty thousand
dollars I had dropped in order to make sure that I began to load up at exactly the right
time? No time at all! It always pays a man to be right at the right time.
It would not be so difficult to make money if a trader always stuck to his speculative guns
— that is, waited for the line of least resistance to define itself and began buying only
when the tape said up or selling only when it said down.

PROFITABILITY

Aaron Brown, Red-Blooded Risk Although the world is not supposed to intrude on play, play can have enormous effect on
the world. Elections, trials, and some wars are contests governed by rules that occur in
designated times and places. Market competition can be considered a game, and game
theory is a major part of the study of economics. Less serious games constitute a large
portion of the economy: sports, gambling, video games, hobbies, and many other
activities represent a sizable aggregate demand for products and services... In a deep
sense, risk is play and play is risk.
Alfred Winslow Jones Too many men don't want to do something after they make money. They just go on and
make a lot more money.
Alice Schroeder That is the nature of pattern recognition, asking 'What can I infer about this situation
based on similarities to what I already know and trust that I understand?' There is less
emphasis on trying to reason out things on the basis that they are special because they
are unique, which in a financial context is perhaps the definition of a speculation... It
creates an impulse always to connect new knowledge to old and to primarily be interested
in new knowledge that genuinely builds on the old.
Baron Rothschild Buy when there's blood in the streets, even if the blood is your own.


Barry Ritholtz The data overwhelmingly shows that most of the time, stocks and [the] economy are
wholly uncorrelated. Over the short and medium term (days weeks months), there is
almost no relationship in either direction or magnitude. People often have difficulty
accepting that, but the academic studies on it are overwhelming. Over the longer haul
(decades), there is some correlation between GDP growth (3-4%) and corporate earnings
(6%), and I assume they are not coincidental. But that is only over long periods of time,
and even then they can become somewhat disconnected.
Good traders know that opportunistic speculation is a process. Ignore any one single
outcome, focus on the methodology that can consistently avoid catastrophic losses,
manage risk, preserve capital. A good process can be replicated, a random spin of the
wheel cannot.
Barton Biggs Good information, thoughtful analysis, quick but not impulsive reactions, and knowledge
of the historic interaction between companies, sectors, countries, and asset classes under
similar circumstances in the past are all important ingredients in getting the legendary 'it'
right that we all strive so desperately for.
The history of the world is one of progress, and as a congenital optimist, I believe in
equities. Fundamentally, in the long run, you want to be an owner, not a lender. However,
you always have to bear in mind that this time truly may be different as Reinhart and
Rogoff so eloquently preach. Remember the 1930s, Japan in the late 1990s, and then, of
course, as Rogoff said once with a sly smile, there is that period of human history known
as 'The Dark Ages' and it lasted three hundred years.
Mr. Market is a manic depressive with huge mood swings, and you should bet against
him, not with him, particularly when he is raving.
At the extreme moments of fear and greed, the power of the daily price momentum and
the mood and passions of 'the crowd' are tremendously important psychological
influences on you. It takes a strong, self-confident, emotionally mature person to stand
firm against disdain, mockery, and repudiation when the market itself seems to be
absolutely confirming that you are both mad and wrong.
BCA Research History shows that whenever authorities limit the commitment to a particular value, it
encourages investors to quantify their worst case scenario (which during times of financial
sector strains can be horrific), leading to a panic and meltdown.
Benjamin Graham Undervaluations caused by neglect or prejudice may persist for an inconveniently long
time, and the same applies to inflated prices caused by over-enthusiasm or artificial
stimulants.
Bennett W. Goodspeed Why do investment professionals get such poor marks? The main reason is that they are
victims of their own methodology. By making a science out of an art, they are opting to be
precisely wrong rather than generally correct.
Bernard Baruch Bears can only make money if the bulls push up stocks to where they are overpriced and
unsound.
Bulls always have been more popular than bears in this country because optimism is so
strong a part of our heritage. Still, over-optimism is capable of doing more damage than
pessimism since caution tends to be thrown aside.
To enjoy the advantages of a free market, one must have both buyers and sellers, both
bulls and bears. A market without bears would be like a nation without a free press. There
would be no one to criticize and restrain the false optimism that always leads to disaster.
Bill Lipschutz Foreign exchange is a very psychological market... if you move the market 4 percent, for
example, you're probably going to change the market psychology for the next few days.


Bill Lipschutz You have to trade at a size such that if you're not exactly right in your timing, you won't be
blown out of your position. My approach is to build to a larger size as the market is going
my way.
I don't have a problem letting my profits run, which many traders do. You have to be able
to let your profits run. I don't think you can consistently be a winning trader if you're
banking on being right more than 50 percent of the time.
It's not enough to simply have the insight to see something apart from the rest of the
crowd, you also need to have the courage to act on it and to stay with it. It's very difficult
to be different from the rest of the crowd the majority of the time, which by definition is
what you're doing if you're a successful trader.
Blair Hull In a sense, I owe everything that I have to the state of Nevada. It not only provided me
with my original trading stake, but the betting experience taught me a lot of things that
allowed me to become a successful trader.
Boaz Weinstein People make a lot of connections between chess and investing and say things like, "Oh,
you must be able to see many moves ahead," as if skill at chess can directly translate to
markets in a way that non-chess players cannot access. I think that"s overstated. That
said, there certainly are some related concepts, such as the ability to quickly recognize
patterns, and the discipline of being hyperrational in evaluating the strength of your
position.
Bob Rodriguez The financial system is held together with a very thin filament called confidence. When
you clip that, all hell breaks loose.
Brian Barish Most of these billionaires got super-wealthy because they had one big position, one big
activity they were a majority owner of, that did amazingly well.
Bruce Kovner I'm not sure one can really define why some traders make it, while others do not. For
myself, I can think of two important elements. First, I have the ability to imagine
configurations of the world different from today and really believe it can happen... Second,
I stay rational and disciplined under pressure.
The market usually leads because there are people who know more than you do.
For me, technical analysis is like a thermometer. Fundamentalists who say they are not
going to pay attention to the charts are like a doctor who says he's not going to take a
patient's temperature. But, of course, that would be sheer folly. If you are a responsible
participant in the market, you always want to know where the market is — whether it is hot
and excitable, or cold and stagnant. You want to know everything you can about the
market to give you an edge.
Technical analysis reflects the vote of the entire marketplace and, therefore, does pick up
unusual behavior. By definition, anything that creates a new chart pattern is something
unusual.
...as a trader who has seen a great deal and been in a lot of markets, there is nothing
disconcerting to me about a price move out of a trading range that nobody understands.
Tight congestions in which a breakout occurs for reasons that nobody understands are
usually good risk-reward trades.
The more a price pattern is observed by speculators, the more prone you are to have
false signals. The more a market is the product of nonspeculative activity, the greater the
significance of technical breakouts.


Bruce Kovner ...the point about a technical barrier — and I've studied the technical aspects of the
market for a long time — is that the market shouldn't go there if you are right.
[The] principle characteristic of a bear market is very sharp down movements followed by
quick retracements... In a bear market, you have to use sharp countertrend rallies to enter
positions.
What I am really looking for is a consensus that the market is not confirming. I like to know
that there are a lot of people who are going to be wrong.
The general rule is: The less observed, the better the trade.
The stock market has far more short-term countertrends. After the market has gone up, it
always wants to come down. The commodity markets are driven by supply and demand
for physical goods; if there is a true shortage, prices will tend to keep trending higher.
As an alternative approach, one of the traders I know does very well in the stock index
markets by trying to figure out how the stock market can hurt the most traders. It seems to
work for him.
Chris Moorman I don't like gambling, but I do like edges. Anything I do with my money has to have a
positive expectation.
Poker, in many ways, is just investing. Those who do their homework and know their stuff
are likely to get a nice return on their investment, and those who don't are likely to lose it
all.
Dan Harrington Remember that big stack poker is a game of patience. You don't have to make a big play
in every marginal situation that comes along, just as a good hitter in baseball doesn't have
to swing at balls outside the strike zone. Wait for good solid situations before making big
plays.
Dan Loeb Looking at portfolios, think deeply about process over outcome. If you do something the
right way enough times, you'll win.
David Tepper This company looks cheap, that company looks cheap, but the overall economy could
completely screw it up. The key is to wait. Sometimes the hardest thing to do is to do
nothing.
Decision Traps We all know the false clarity of hindsight. Events may seem inevitable in hindsight, even
though they might have been very hard to predict beforehand.
Dickson G. Watts Don't storm the fortress of fortune—lay siege to it.
Ed Seykota Systems don't need to be changed. The trick is for a trader to develop a system with
which he is compatible.
Systems trading is ultimately discretionary. The manager still has to decide how much risk
to accept, which markets to play, and how aggressively to increase and decrease the
trading as a function of equity change. These decisions are quite important — often more
important than trade timing.
All trading is done on some sort of system, whether or not it is conscious. Many of the
good systems are based on following trends. Life itself is based on trends. Birds start
south for the winter and keep on going. Companies track trends and alter their products
accordingly. Tiny protozoa move in trends along chemical and luminescence gradients.


Ed Seykota The profitability of trading systems seems to move in cycles. Periods during which trend-
following systems are highly successful will lead to their increased popularity. As the
number of system users increases, and the markets shift from trending to directionless
price action, these systems become unprofitable, and undercapitalized and inexperienced
traders will get shaken out. Longevity is the key to success.
Charting is a little like surfing. You don't have to know a lot about the physics of the tides,
resonance, and fluid dynamics in order to catch a good wave. You just have to be able to
sense when it's happening and then have the drive to act at the right time.
'Luck' or 'smarts' or 'gift' are words indicating an attitudinal proclivity for mastery. One
tends to do well at one's calling. I think most good traders have a little extra spark about
trading.
Pyramiding instructions appear on dollar bills. Add smaller and smaller amounts on the
way up. Keep your eye open at the top.
Encyclopedia Americana, 1838 The history of every industrious and commercial community, under a stable government,
Edition will present successive alternate periods of credit and distrust, following each other with a
good deal of regularity.
French expression (Look for the Cherchez L'Argent!

money!)
Gary Bielfeldt The best thing anyone can do when starting out is to learn how a trend system works... If
you can just learn discipline by using a trend-following system, even temporarily, it will
increase your odds of being a successful trader.
Whenever too many people are doing the same thing, the market will go through a period
of adjustment.
I have always tried to keep the concept of patience in mind by waiting for the right trade,
just like you wait for the percentage hand in poker.
George Soros It's not whether you're right or wrong that's important, but how much money you make
when you're right, and how much you lose when you're wrong.
My approach works not by making valid predictions, but by allowing me to correct false
ones.
Volatility is greatest at turning points, and diminishes as a [new] trend is established.
Bubbles are not the only manifestations of reflexivity, but they are the most spectacular.
Economic history is a never-ending series of episodes based on falsehoods and lies, not
truths. It represents the path to big money. The object is to recognize the trend whose
premise is false, ride that trend, and step off before it is discredited.
I work with hypotheses. I form a thesis about the anticipated sequence of events and then
I compare the actual course of events with my thesis; that gives me a criterion by which I
can evaluate my hypothesis.
I look for conditions of disequilibrium. They send out certain signals that activate me. So
my decisions are really made using a combination of theory and instinct. If you like, you
may call it intuition.
The prevailing wisdom is that markets are always right. I take the opposite position. I
assume that markets are always wrong. Even if my assumption is occasionally wrong, I
use it as a working hypothesis.


George Soros I watch out for telltale signs that a trend may be exhausted. Then I disengage from the
herd and look for a different investment thesis. Or, if I think the trend has been carried to
excess, I may probe going against it.
Risk taking is painful. Either you are willing to bear the pain yourself or you try to pass it
on to others. Anyone who is in a risk taking business but cannot face the consequences is
no good.
There is nothing like danger to focus the mind, and I do need the excitement connected
with taking risks in order to think clearly. It is an essential part of my thinking ability. Risk
taking is, to me, an essential ingredient in thinking clearly.
...I am particularly keen on investment theses that the market is reluctant to accept. These
are usually the strongest.
I felt it was too late to go short, but then I re-read my memo that predicted that they would
go bust and I realized that it could never be too late. It was the only time I made more
than 100 percent on my money on the short side because, as the stocks went down, I
kept topping up my short positions.
If a self-reinforcing process goes on long enough it must eventually become

unsustainable because either the gap between thinking and reality becomes too wide or
the participant's bias becomes too pronounced. Hence, reflexive processes that become
historically significant tend to follow an initially self-reinforcing, but eventually self-
defeating, pattern. That is what I call the boom/bust sequence.
...It goes to show that when you are confused it is best to do nothing. You are just going
for a random walk and that is when you are liable to get mugged because you don't have
staying power. You are likely to be faked out by some stray fluctuation because you lack
the courage of your convictions.
As an investor, I find statistical probability of limited value; what matters is what happens
in a particular case. The same applies with even greater force to historic events. I cannot
make reliable predictions about them; all I can do is formulate scenarios. I can then
compare the actual course of events with the hypothetical ones. Such hypotheses have
no scientific validity, but they have considerable practical utility. They provide a basis for
real-life decisions.
The generally accepted theory is that the financial markets tend toward equilibrium and,
on the whole, discount the future correctly. I operate using a different theory, according to
which financial markets cannot possibly discount the future correctly because they do not
merely discount the future; they help to shape it.
At any moment of time there are myriads of feedback loops at work, some of which are
positive, others negative. They interact with each other, producing the irregular price
patterns that prevail most of the time; but on the rare occasions that bubbles develop to
their full potential they tend to overshadow all other influences.
My interpretation of financial markets differs from the prevailing paradigm in many ways. I
emphasize the role of misunderstandings and misconceptions in shaping the course of
history. And I treat bubbles as largely unpredictable. The direction and its eventual
reversal are predictable; the magnitude and direction of the various phases is not.
Ghost of Cutten The thing to do with momentum is to follow it until i) it reaches an overdone extreme, at
which point it is prone to reversal ii) it slowly peters out, at which point you are likely to
see an extended trading range iii) it gets 'broken' by stronger momentum the other way.
But whilst it is still in place, as shown by larger rallies than pullbacks, longer-lasting rallies
and short-lived pullbacks, vigorous reaction to good news and resilient reaction to bad
news, then the right play is to follow it.


Ghost of Cutten The thing to do with momentum is to follow it until i) it reaches an overdone extreme, at
which point it is prone to reversal ii) it slowly peters out, at which point you are likely to
see an extended trading range iii) it gets 'broken' by stronger momentum the other way.
But whilst it is still in place, as shown by larger rallies than pullbacks, longer-lasting rallies
and short-lived pullbacks, vigorous reaction to good news and resilient reaction to bad
news, then the right play is to follow it.
Gone With the Wind My dear, one can make just as much money from the destruction of a civilization as from
the building of it.
Harvey Houtkin There is no veiled incantation, magnetic lodestone, patented formula, or arcane process
any one individual can use to move general market prices, because a market is millions of
people interacting for their own personal reasons.
Howard Marks Theory assumes investors are clinical, unemotional and objective, and always willing to
substitute a cheap asset for a dear one. In practice, there are numerous reasons why one
asset can be priced wrong – in the absolute or relative to others – and stay that way for
months or years. Those are mistakes, and superior investment records belong to
investors who take advantage of them consistently.
Many of the biggest mistakes made in the business and investment worlds have to do
with cycles. People extrapolate uptrends and downtrends into eternity, whereas the truth
is that trends usually correct: rather than go well or poorly forever, most things regress to
the mean.
The longer a trend has gone on – making it appear more permanent – the more likely it
usually is that the time for it to reverse is near. And the longer an uptrend goes on, the
more optimistic, risk-tolerant and aggressive most people become... just as they should
be turning more cautious.
When everyone believes something is risky, their unwillingness to buy usually reduces its
price to the point where it’s not risky at all. Broadly negative opinion can make it the least
risky thing, since all optimism has been driven out of its price. And, of course, as
demonstrated by the experience of Nifty Fifty investors, when everyone believes
something embodies no risk, they usually bid it up to the point where it’s enormously risky.
No risk is feared, and thus no reward for risk bearing—no 'risk premium'—is demanded or
provided. That can make the thing that's most esteemed the riskiest. This paradox exists
because most investors think quality, as opposed to price, is the determinant of whether
something's risky. But high quality assets can be risky, and low quality assets can be
safe. It's just a matter of the price paid for them... Elevated popular opinion, then, isn't just
the source of low return potential, but also of high risk.
People who doubt the existence of inefficient markets and the ability to profit from them
may disagree with me. But if you think you're operating in an inefficient market like I try to
do, a lot can be accomplished by getting great people, developing an effective investment
approach, hunting for misvaluations, keeping psychology under control, and
understanding where you are in the cycle. I am not saying that everyone should try this.
Risk aversion is absolutely essential for the markets to function properly.
In the same way that expanded risk tolerance accompanies appreciated past prices and
contributes to the risk of loss, so does risk aversion tend to rise in times of depressed
prices, increasing the risk of missed opportunity.
Investing defensively requires that when everything seems to be going well and investors
are feeling positive, we must sense the implicit danger and prepare for negative
developments.


Hugh Hendry I have resigned from the professional undertaking of coin flipping. I am not here to tell you
where gold's gonna be. I have no idea. That's my existentialism. I am a student of
uncertainty. I have no idea where the stock market is going to be. So when I am creating
trades in my portfolio for my clients, I am agnostic. I just want to enhance the probability
that I make money come what may.
Hyman Minsky A fundamental characteristic of our economy is that the financial system swings between
robustness and fragility, and these swings are an integral part of the process that
generates business cycles.
Jack Schwager When to get out of a position is as important as when to get in. Any market strategy that
ignores trade liquidation is by definition incomplete.
Jack Sparrow The crowd is NOT 'always wrong'... it is only wrong at turning points.
Tuition that can be measured in a handful of basis points is wonderful stuff indeed.
It is wise to avoid predictions when possible, and to recognize that the scope of accurate
prediction making is very limited. Successful macro trading is much less about "knowing"
what is going to happen in future, and much more about having a handle on odds,
probabilities and scenarios, without growing attached to any single one, and then acting
fluidly in the moment as the picture crystallizes in actionable ways.
As the saying goes, "If you're going to bet the farm, have two farms." This is taken as a
warning not to risk too much. But you can also look at it like this: After building a cushion
of profits over an excellent trading period, you can take a goodly portion of that profit and
treat it as your "second farm," making a large bet with a limited risk options position
(assuming the conviction-based opportunity is there). If you are wrong, you wind up
having a good year instead of a great year. But if you are right, you go from a great year
to an absolutely fantastic year - without ever placing your original farm at risk. Knowing
how to do this, and how to do it properly without unduly increasing mortality risk or initial
capital risk, is one of the hidden factors rarely talked about that puts some traders head
and shoulders above the rest, in respect to their ability to deliver superior risk-adjusted
returns.
Markets have a distinct game theory component in that, the fewer the total number of
survivors after a "wash and rinse" period, the greater the future opportunity that comes
available (with comparatively few left to exploit it). To put it another way: If the money
always came flying in through the window, too many profit seekers would crowd the
window. Pain facilitates gain by blocking the pathways of the insufficiently persistent,
motivated and seasoned.
Short-term trading can be professional and profitable, but all too often becomes a video
game approach rooted in lack of ideas and patience. When you can nail an inflection point
in size, pyramid at the right time, and ride it for weeks or months, why would you want to
start over each day?
There's a time to bet big, a time to bet small, and a time to bet nothing at all...
Trading is a curious mix of mostly going with the flow, yet knowing when to selectively
fade the flow.
If you can preserve your financial and mental capital when others have depleted or
squandered theirs, the long-term rewards will be great.


Jack Sparrow Knowing when to "get a hunch and bet a bunch" is not so much a matter of luck. It is more
a matter of hard work, intuition and experience, coupled with a dedicated focus on being
in touch with the ebb and flow of markets from day to day. In other words, the hard work
of being deeply in tune with markets — and justifying your convictions through constant
interaction and hypothesis testing at lower risk levels — is precisely what fuels the
winning combination of careful and conservative 90% of the time plus balls-out aggressive
10% of the time. You earn the right to swing, and just as importantly the insight as to
when to swing, through consistency, diligence, and dedication.
The greater the number of conditional probabilities -- small edges -- you have in your
favor, the better, and trades are like poker hands in this regard: The "setup," especially
when as thin as a single bar, should be validated or invalidated (taken or passed) based
on surrounding factors (much as certain poker hands are either played or not played
depending on multiple elements of situational context).
James Grant In bull markets, people have faith; in bear markets, doubt. The other way around might be
more profitable.
Jeff Yass Just by watching markets, I noticed that prices tend to come down much harder and faster
than they go up.
In a nutshell, if you're too conservative, you won't do any trades, and if you're too
aggressive, you're going to get picked off a lot. The trick is to try to strike a balance
between the two.
Jeremy Grantham All bubbles break, all investment frenzies pass away. You absolutely must ignore the
vested interests of the industry and the inevitable cheerleaders who will assure you that
this time it's a new high plateau or a permanently higher level of productivity...
By far the biggest problem for professionals in investing is dealing with career and
business risk: Protecting your own job as an agent. The second curse of professional
investing is over-management caused by the need to be seen to be busy, to be earning
your keep. The individual is far better-positioned to wait patiently for the right pitch while
paying no regard to what others are doing, which is almost impossible for professionals.
If you can be patient and ignore the crowd, you will likely win. But to imagine you can, and
to then adopt a flawed approach that allows you to be seduced or intimidated by the
crowd into jumping in late or getting out early is to guarantee a pure disaster.
John Bender Regardless of whether technical analysis has any validity, enough people believe in it to
impact the market. For example, if people expect a stock to find support at 65, lo and
behold, they're willing to buy it at 66. That is not a random walk statement.
Each stock has its own probability distribution that depends on a host of factors. Who has
what position? Where did the major buyers accumulate their positions? Where are their
stop-loss points? What price levels are likely to be technically significant?
A market that is driven by inflows can have small corrections, but it has to then
immediately recover to new highs to keep generating new money inflows. Otherwise,
money inflows are likely to dry up, and the market will fall apart. Therefore, this type of
market is likely to either trend higher or break sharply.
John Dorfman Investing on raw momentum — buying stocks that are going up, just because they are
going up — used to be considered as unsophisticated as picking your nose in public.
Now, many people consider it a legitimate school of investing.
An old-fashioned bear doesn't stab you with a sword, as in the crash of 1987 and the
mini-crash of 1989. It nicks you with a thousand cuts.


John Hussman Robust demand is the only thing that holds prices from falling vertically in the face of
eager selling. Overvalued, overbought, overbullish markets are often already spent of that
demand.
John Maynard Keynes The central principle of investment is to go contrary to the general opinion, on the grounds
that if everyone agreed about its merit, the investment is inevitably too dear and therefore
unattractive.
John Templeton The time of maximum pessimism is the best time to buy and the time of maximum
optimism is the best time to sell.
John W. Henry Man's expectations manifest in trends.
Since investors are human and make mistakes, they're never 100% sure of their vision
and whether or not their view is correct. So price adjustments take time as they fluctuate
and a new consensus is formed in the face of changing market conditions and new facts.
For some changes this consensus is easy to reach, but there are other events that take
time to formulate a market view. It's those events that take time that form the basis of our
profits.
Joseph Dear, CIO of CalPERS ...the standard method that we use, that is sold by consultants and is deemed prudent, is
predicated on a set of assumptions which are empirically false. The whole edifice is built
on the assumption that returns are normally distributed and that this is a formula driven
exercise whereby returns, volatilities and correlations can be derived by looking at history.
As a result, everyone's portfolio ends up looking like everyone else so it is deemed okay if
you lose money along with everyone else. But it does not adequately address risk.
Julian Robertson All you have to do in hedge funds is perform. If you perform, money is going to pour in.
Justin Mamis I've gotten so old I can't remember the names of those ladies at the Old Howard, but I can
remember that all you got was a flash of this or that, before they waltzed off. Stock market
tops are like that. You know it's there somewhere if you squint hard enough, but you
never quite see it, so you keep waiting for more. And then, in the end, as the curtain
comes down on the bull market you realize that the one rule about tops is not that they
provide this or that signal, but that they come before anyone is ready.
Larry Hite There is a very important message here: People don't change. That is why this whole
game works.
Liar's Poker My client loved risk. Risk, I had learned, was a commodity in itself. Risk could be canned
and sold like tomatoes. Different investors place different prices on risk. If you are able, as
it were, to buy risk from one investor cheaply, and sell it to another investor dearly, you
can make money without taking any risk yourself. And this is what we did.
Many of the trades that Alexander suggested followed one of two patterns. First, when all
investors were doing the same thing, he would actively seek to do the opposite. The word
stockbrokers use for this approach is contrarian. Everyone wants to be, but no one is, for
the sad reason that most investors are scared of looking foolish. Investors do not fear
losing money as much as they fear solitude, by which I mean taking risks that others
avoid. When they are caught losing money alone, they have no excuse for their mistake,
and most investors, like most people, need excuses. They are, strangely enough, happy
to stand on the edge of a precipice as long as they are joined by a few thousand others...
Linda Bradford Raschke Part of the trading process is testing the water. If your entry timing is good enough, you
won't lose much even when you're wrong.
Louis Moore Bacon As a speculator you must embrace disorder and chaos.


Louis Moore Bacon We kind of had the moniker 'global macro' thrust upon us. We didn't sign up for it. But I
look at it as kind of the 007 license to do whatever we want, and we're in a period now
where globally there is no lack of opportunity...
Ludwig Von Mises There is no means of avoiding the final collapse of a boom expansion brought about by
credit expansion. The alternative is only whether the crisis should come sooner as the
result of a voluntary abandonment of further credit expansion, or later as a final and total
catastrophe of the currency system involved.
Mark Minervini My basic philosophy is: Expose your portfolio to the best stocks that the market has to
offer and cut your losses very quickly when you're wrong. That one sentence essentially
describes my strategy.
The key is to know when to do nothing. Most people, even if they have a winning strategy,
will not follow it because they lack discipline.
Let's say I buy a stock because of a signal and the market dips enough to stop me out.
The stock then witnesses a huge reversal and closes near the high of the day. That price
action may be an indication that there was a shakeout, which knocked out most of the
weak hands, and the stock is ready to go up. Putting the long back on at that point may
well be a higher probability trade than the original trade.
I constantly try to figure out how the market can trick or fool the majority of investors. Then
after the majority have been fooled I get in at what I call the 'point of smooth sailing.' A so-
called failed signal can actually be the beginning of a more complex pattern that is far
more reliable than the initial signal based on a conventional pattern.
Mark Ritchie Magnitude of losses and profits is purely a matter of position size. Controlling position size
is indispensable to success. Of all the traits necessary to trade successfully, this factor is
the most undervalued.
You need to have the courage to stand up against the crowd, decide your position, and
execute it.
Mark Weinstein I am always looking for a market that is losing momentum, and then go the other way.
Be your own person. Think against the herd, as they must lose in time.
Marty Schwartz After a devastating loss, I always play very small and try to get black ink, black ink. It's not
how much money I make, but just getting my rhythm and confidence back. I shrink my
size totally — to a fifth or a tenth of the position that I trade normally. And it works. I think I
ended up losing only $57,000 in November 1982, after taking a $600,000 hit on
November 4.
The most important thing is money management, money management, money

management. Anybody who is successful will tell you the same thing.
If you're ever very nervous about a position overnight, and especially over a weekend,
and you're able to get out at a much better price than you thought possible when the
market trades, you're usually better off staying with the position.
I always take my losses quickly. That is probably the key to my success. You can always
put the trade back on, but if you go flat, you see things differently.
For two hundred days a year, I'd end up with reasonably small losses netted out with
similar-sized gains. Lose $5,000 here, make $6,000 there, round after round, twenty,
thirty, forty times a day. But I'd win the other fifty trading days by clear-cut unanimous
decisions. Smack the bonds for $75,000, hit a stock for $100,000, nail a couple of options
for $125,000, pound the S&Ps for $150,000. Over time it made me a big winner, to the
tune of $5 million a year.


Marty Schwartz Technical indicators that show me low-risk entry points for high probability trades are at
the core of my methodology. But I am always intensely searching for patterns, setups,
recurring themes, no matter how small, to help further swing the odds in my favor on a
given trade.
If the market gets negative news and the market shrugs it off and it continues to go up,
this is a bullish reaction because it means the market has already discounted the news.
On the other hand, a sign of a fully priced market is one that reacts poorly to good news.
Michael Marcus My trading in those days was a little bit like being a surfer. I was trying to hit the crest of
the wave just at the right moment. But if it didn't work, I just got out. I was getting a shot at
making several hundred points and hardly risking anything. I later used that surfing
technique as a desk trader.
I think to be in the upper echelon of successful traders requires an innate skill, a gift. It's
just like being a great violinist. But to be a competent trader and make money is a skill you
can learn.
Perhaps the most important rule is to hold on to your winners and cut your losers. Both
are equally important. If you don't stay with your winners, you are not going to be able to
pay for the losers.
In the final analysis, you need to have the courage to hold the position and take the risk.
You need to be aware that the world is very sophisticated and always ask yourself: 'How
many people are left to act on this particular idea?' You have to consider whether the
market has already discounted your idea.
I look for confirmation from the chart, the fundamentals, and the market action. I think you
can trade anything in the world that way.
Mike Caro The amazing truth is that poker's biggest winners aren't necessarily those with the
greatest skills. Among accomplished players, the ones who come closest to playing their
best game all the time make the most money.
Mitchell Julis, Canyon Capital Spreadsheets make everything look linear and controlled, but the real world oscillates,
overshoots, collapses, and rebounds. A company with operational and financial
flexibility—what we mean by staying power—is able to exercise options that are quite
valuable at different points in the cycle. Without the firm handle on that flexibility that credit
analysis provides, we'd argue you can't fully understand the wealth-creation process as
an equity investor.
Monroe Trout The most liquid period is the opening. Liquidity starts falling off pretty quickly after the
opening. The second most liquid time of day is the close. Trading volume typically forms a
U-shaped curve throughout the day. There's a lot of liquidity right at the opening, it then
falls off, reaching a nadir at midday, and then it starts to climb back up, reaching a
secondary peak on the close. Generally speaking, this pattern holds in almost every
market. It's actually pretty amazing.
More Money Than God To all great human traders, knowing when to go for the jugular and when to be patient is a
large part of the skill; spotting the best opportunities and betting big could make a greater
contribution to the bottom line than increasing the share of bets that you were right on.
Niels Jensen Abuse of statistics is another source of poor risk management in our field. One such
example is the widespread confusion between correlation and causation. Just because a
statistician can prove a correlation between ice cream consumption in Angola and the
number of single mums in Panama doesn't mean that there is causation (i.e. one is a
function of the other).


Niels Jensen We know from experience that an asset bubble that bursts is likely to create what are
often referred to as echo bubbles. An echo bubble is a follow-on bubble from the initial
asset bubble and is usually created when monetary and/or fiscal policy is relaxed in
response to the bursting of the initial bubble.
Paul Graham To get rich you need to get yourself in a situation with two things, measurement and
leverage. You need to be in a position where your performance can be measured, or
there is no way to get paid more by doing more. And you have to have leverage, in the
sense that the decisions you make have a big effect.
Paul Tudor Jones After a while size means nothing. It gets back to whether you're making 100% rate of
return on $10,000 or $100 million... It doesn't make any difference.
When trading macro, you never have a complete information set or information edge the
way analysts can have when trading individual securities. It's a hell of a lot easier to get
an information edge on one stock than it is on the S&P 500.
The inability to read a tape and spot trends is also why so many in the relative value
space who rely solely on fundamentals have been annihilated in the past decade. Markets
have consistently experienced '100-year events' every five years.
While I spend a significant amount of my time on analytics and collecting fundamental

information, at the end of the day, I am a slave to the tape and proud of it.
The only way to learn how to trade during that last, exquisite third of a move is to do it, or,
more precisely, live it — a sort of baptism by fire. One has to experience both the elation
and fear as markets move five and six standard deviations from conventional definitions of
value.
I'd say that my investment philosophy is that I don't take a lot of risk, I look for
opportunities with tremendously skewed reward-risk opportunities.
You've got to look at good traders historically. If a trader can on average annually deliver
two to three times their worst drawdown, then that's a very good track record, and I'd say
that that's what I try to do.
You pick an instrument and there's a whole variety of benchmarks, things that you look at
when trading a particular instrument whether it's a stock or a commodity or a bond.
There's a fundamental information set that you acquire with regard to each particular
asset class and then you overlay a whole host of technical indicators and that's how you
make a decision.
You look at every bear market and they've always basically occurred because of an up-
tick in inflation and an up-tick in interest rates.
...every time I've seen volatility like that, I don't care what the market was, whether it was
soybeans in '76 or '83 or whether it was silver at the top in 1980 or whether it was some of
the biotech stocks at the top earlier in the '90’s, when you get that kind of volatility you
know that generally that's associated with a top.
Everything is a function of leverage, how much of a drawdown are you willing to tolerate,
how much leverage do you want to put on.
Always look for a trending market.
Tullis taught me about moving volume. When you are trading size, you have to get out
when the market lets you out, not when you want to get out. He taught me that if you want
to move a large position, you don't wait until the market is in new high or low ground
because very little volume may trade there if it is a turning point.


Paul Tudor Jones All the trades I have on are interrelated. I look at it in terms of what my equity is each
morning. My goal is to finish each day with more than I started.
I consider myself a premier market opportunist. That means I develop an idea on the
market and pursue it from a very low-risk standpoint until I have repeatedly been proven
wrong, or until I change my viewpoint.
Everyone says you get killed trying to pick tops and bottoms and you make all the money
by catching the trends in the middle... I have often been missing the meat in the middle,
but I have caught a lot of bottoms and tops.
If I go into the market at just the right moment, by giving it a little gas on the upside, I can
create the illusion of a bull market. But, unless the market is really sound, the second I
stop buying, the price is going to come right down.
When you get a range expansion, the market is sending you a very loud, clear signal that
the market is getting ready to move in the direction of that expansion.
...because of the complexity of defining interacting and changing market patterns, a good
trader will usually be able to outperform a good system.
It's not that we had any unfair knowledge that other people didn't have, it is just that we
did our homework. People just don't want to believe that anyone can break away from the
crowd and rise above mediocrity.
Peter Brandt My experience has been that the really significant profits come not so much with the
signals themselves, but with how the signals are played. Poker players can relate, I am
sure.
Ralph Wanger For professional investors like myself, a sense of humor is essential . . . We are very
aware that we are competing not only against the market averages but also against one
another. It's an intense rivalry.
Randy McKay The beginning of a price move is usually hard to trade because you're not sure whether
you're right about the direction of the trend. The end is hard because people start taking
profits and the market gets very choppy. The middle of the move is what I call the easy
part.
When you're trading well, you have a better mental attitude. When you're trading poorly,
you start wishing and hoping. Instead of getting into trades you think will work, you end up
getting into trades you hope will work.
Sometimes the reason people lose is that they're not sufficiently selective. Upon analysis,
a trader may find that if he only concentrates on the trades that do well and lets go of the
other types of trades, he might actually be successful.
Reminiscences of a Stock Another lesson I learned early is that there is nothing new in Wall Street. There can't be
Operator because speculation is as old as the hills. Whatever happens in the stock market today
has happened before and will happen again.
Your business with the tape is now — not tomorrow. The reason can wait. But you must
act instantly or be left.
That's all the fun there is — being right by using your own head.
I have heard of people who amuse themselves conducting imaginary operations in the
stock market to prove with imaginary dollars how right they are. Sometimes these ghost
gamblers make millions. It is very easy to be a plunger that way.


Reminiscences of a Stock After all, the game of speculation isn't all mathematics or set rules, however rigid the main
Operator laws may be. Even in my tape reading something enters that is more than mere
arithmetic.
There is what I call the behavior of a stock, actions that enable you to judge whether or
not it is going to proceed in accordance with the precedents that your observation has
noted. If a stock doesn't act right don't touch it; because, being unable to tell precisely
what is wrong, you cannot tell which way it is going. No diagnosis, no prognosis. No
prognosis, no profit.
I had to start much earlier if I wanted to catch the move in Fullerton's office. In other
words, I had to study what was going to happen; to anticipate stock movements. That
sounds asininely commonplace, but you know what I mean.
It was the change in my own attitude toward the game that was of supreme importance to
me. It taught me, little by little, the essential difference between betting on fluctuations and
anticipating inevitable advances and declines, between gambling and speculating.
They say you never grow poor taking profits. No, you don't. But neither do you grow rich
taking a four point profit in a bull market.
Time and again I heard him say, 'Well, this is a bull market, you know!' as though he were
giving you a priceless talisman wrapped up in a million-dollar accident insurance policy.
And of course I did not get his meaning.
And right here let me say one thing: After spending many years in Wall Street and after
making and losing millions of dollars I want to tell you this: It never was my thinking that
made the big money for me. It was always my sitting. Got that? My sitting tight!
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 big
money.
One of the most helpful things that anybody can learn is to give up trying to catch the last
eighth — or the first. These two are the most expensive eighths in the world. They have
cost stock traders, in the aggregate, enough millions of dollars to build a concrete highway
across the continent.
Without faith in his own judgment no man can go very far in this game. That is about all I
have learned — to study general conditions, to take a position and stick with it.
I can wait without a twinge of impatience. I can see a setback without being shaken,
knowing that it is only temporary.
I have been short one hundred thousand shares and seen a big rally coming. I have
figured — and figured correctly — that such a rally as I felt was inevitable, and even
wholesome, would make a difference of one million dollars in paper profits. And I
nevertheless have stood pat and seen half my paper profit wiped out, without once
considering the advisability of covering my shorts to put them out again on the rally. I
knew that if I did I might lose my position and with it the certainty of a big killing. It is the
big swing that makes the big money for you.
From then on I began to think of basic conditions instead of individual stocks. I promoted
myself to a higher grade in the hard school of speculation. It was a long and difficult step
to take.
I never want to buy stocks too cheap or too easily.
If you begin right you will not see your profitable position seriously menaced; and then you
will find no trouble in sitting tight.


Reminiscences of a Stock I was too eager to prove to myself that I had seen real dollars and not a mirage. I saw,
Operator and knew that I saw. Thinking about the reward for my excellent sight kept me from
considering the distance to the dollar-heap. I should have walked and not sprinted.
But I can tell you after the market began to go my way I felt for the first time in my life that
I had allies — the strongest and truest in the world: underlying conditions. They were
helping me with all their might. Perhaps they were a trifle slow at times in bringing up the
reserves, but they were dependable, provided I did not get too impatient.
I was not pitting my tape-reading knack or my hunches against chance. The inexorable
logic of events was making money for me.
You ought to have seen that cornered stock, that it was sure suicide to go short of, take a
headlong dive when those competitive orders struck it. I let 'em have a few thousand
more. The price was 111 when I started selling it. Within a few minutes I took in my entire
short line at 92.
The way to make money is to make it. The way to make big money is to be right at exactly
the right time. In this business a man has to think of both theory and practice. A
speculator must not be merely a student, he must be both a student and a speculator.
I never buy a stock even in a bull market, if it doesn't act as it ought to act in that kind of
market.
I have sometimes bought a stock during an undoubted bull market and found out that
other stocks in the same group were not acting bullishly and I have sold out my stock.
Why? Experience tells me that it is not wise to buck against what I may call the manifest
group-tendency.
I cannot expect to play certainties only. I must reckon on probabilities — and anticipate
them.
I study because my business is to trade. The moment the tape told me that I was on the
right track my business duty was to increase my line. I did. That is all there is to it.
Experience has taught me that the way a market behaves is an excellent guide for an
operator to follow. It is like taking a patient's temperature and pulse or noting the colour of
the eyeballs and the coating of the tongue.
A man can have great mathematical ability and an unusual power of accurate observation
and yet fail in speculation unless he also possesses the experience and the memory. And
then, like the physician who keeps up with the advances of science, the wise trader never
ceases to study general conditions, to keep track of developments everywhere that are
likely to affect or influence the course of the various markets.
The training of a stock trader is like a medical education. The physician has to spend long
years learning anatomy, physiology, materia medica and collateral subjects by the dozen.
He learns the theory and then proceeds to devote his life to the practice.
When I lose money by reason of some development which nobody could foresee I think
no more vindictively of it than I do of an inconveniently timed storm. Life itself from the
cradle to the grave is a gamble and what happens to me because I do not possess the gift
of second sight I can bear undisturbed.
In booms, which is when the public is in the market in the greatest numbers, there is
never any need of subtlety, so there is no sense of wasting time discussing either
manipulation or speculation during such times; it would be like trying to find the difference
in raindrops that are falling synchronously on the same roof across the street.


Reminiscences of a Stock At first, when I listened to the accounts of old-time deals and devices I used to think that
Operator people were more gullible in the 1860's and 70's than in the 1900's. But I was sure to read
in the newspapers that very day or the next something about the latest Ponzi or the bust-
up of some bucketing broker and about the millions of sucker money gone to join the
silent majority of vanished savings.
On the news the market broke badly and I naturally covered. It was the only play possible.
When something happens on which you did not count when you made your plans it
behooves you to utilize the opportunity that a kindly fate offers you.
I cleared about three million dollars in 1916 by being bullish as long as the bull market
lasted and then by being bearish when the bear market started. As I said before, a man
does not have to marry one side of the market till death do them part.
And there is another thing to remember, and that is that a market does not culminate in
one grand blaze of glory. Neither does it end with a sudden reversal of form. A market can
and does often cease to be a bull market long before prices generally begin to break.
When you read contemporary accounts of booms or panics the one thing that strikes you
most forcibly is how little either stock speculation or stock speculators today differ from
yesterday. The game does not change and neither does human nature.
Of all speculative blunders there are few worse than trying to average a losing game. My
cotton deal proved it to the hilt a little later. Always sell what shows you a loss and keep
what shows you a profit. That was so obviously the wise thing to do and was so well
known to me that even now I marvel at myself for doing the reverse.
The professional concerns himself with doing the right thing rather than with making
money, knowing that the profit takes care of itself if the other things are attended to.
It is absolutely wrong to gamble in stocks the way the average man does.
In a narrow market, when prices are not getting anywhere to speak of but move within a
narrow range, there is no sense in trying to anticipate what the next big movement is
going to be — up or down.
...any important piece of news given out between the closing of one market and the
opening of another is usually in harmony with the line of least resistance. The trend has
been established before the news is published, and in bull markets bear items are ignored
and bull news exaggerated, and vice versa.
And right here I will say that, though I do not give it as a mathematical certainty or as an
axiom of speculation, my experience has been that accidents — that is, the unexpected or
unforeseen — have always helped me in my market position whenever the latter has
been based upon my determination of the line of least resistance.
For purposes of easy explanation we will say that prices, like everything else, move along
the line of least resistance. They will do whatever comes easiest, therefore they will go up
if there is less resistance to an advance than to a decline; and vice versa.
The thing to do is watch the market, read the tape to determine the limits of the get-
nowhere prices, and make up your mind that you will not take an interest until the price
breaks through the limit in either direction.
Richard Bookstaber A better analogy than physics or biology is a military one. The point is that there is a
strategy of intelligent reaction to any action, an arms race to leapfrog one another in
information gathering and technology, to know what others are doing, and to react in a
way that they will not anticipate. This is the point where I could pull out quotes from The
Art of War about seeing into the mind of the enemy, attacking when your opponent
believes you will retreat, and the like. That is not physics.


Richard D. Wyckoff The main factor is the trend. If you work in harmony with the trend of the market, your
chances for success are three or four times what they would be if you buck the trend.
Anticipated profits should be at least three or four times the amount of the risk. It must be
expected that a percentage of your transactions will show a loss. The trader should aim to
have such large profits on his successful trades that his losses and other expenses will
still leave him something to the good.
Dealings should be in the active stocks. In order to make a profit, a stock must move. A
great deal of money and many opportunities are lost by traders who keep themselves tied
up in stocks which are sluggish in their action. In a commercial line you would not carry
goods on your shelves indefinitely -- you would keep your stock moving. In trading, keep
on moving stocks!
Wall Street history shows that securities more often reach their low point when some
danger or disaster is threatened, than upon the actual occurrence of these incidents, and
the reason the low point is made just prior to, or at the time the event actually occurs, is:
By that time every one who is subject to fear-of-what-will-happen, is sold out. When the
thing does happen or is prevented, there is no more liquidation, and the price rallies on
the short interest, or else on the investment demand created by the improved situation.
Large interests are practically always in the market. They usually have their scale orders
in on both sides so that they buy on declines and sell on rallies. They always have money
with which to buy on declines, because they sell on the rallies. They thus realize a profit
as well as supply funds for the next decline. If the public would learn to do this, there
would be fewer stock market fatalities.
Success in trading means an excess of profits over losses. Success in the investment
field means more good than bad investments. If any one tells you he can be almost
invariably successful, put him down as trying to impose on your credulity.
Richard Dennis The idea that one side of the market is more likely to work in the absence of anything else
is an illusion. The market just wouldn't be here if that was true.
You should expect the unexpected in this business; expect the extreme. Don't think in
terms of boundaries that limit what the market might do.
If there is any lesson I have learned... it is that the unexpected and the impossible happen
every now and then.
Trading to me is like betting on independent rolls of the dice that you think are loaded a
little bit in your favor, because you know some statistical things about the market.
After all is said and done, you have to minimize your losses and try to preserve capital for
those few instances when you can make a lot in a very short period of time.
...so many people would make incredibly bad trades just to take a profit. They would get
out even though the market was locked limit-up and almost sure to go up the next day.
They couldn't stand the profits burning a hole in their pocket.
I always say that you could publish trading rules in the newspaper and no one would
follow them. The key is consistency and discipline.
On any individual trade it is almost all luck. It is just a matter of statistics. If you take
something that has a 53 percent chance of working each time, over the long run there is a
100 percent chance of it working.


Richard Driehaus The essential element is having a core philosophy. Without a core philosophy you're not
going to be able to hold on to your positions or stick with your trading plan during really
difficult times. You must fully understand, strongly believe in, and be totally committed to
your trading philosophy.
Rick Bookstaber The interaction between market participants, and for that matter between the market
participants and the regulators, is not a game, but a war. Complexity in the information
battlefield, the willful creation of complexity – complexity that is peculiarly human in origin
– and the resulting endogenous uncertainty, is particularly confounding for the
neoclassicists. The battle spells trouble for the foolhardy armed only with the neoclassical
methods.
Robert L. Bacon The beginner plunges ahead on a favorite that loses, then bets lightly on a fair-priced
horse that wins. He keeps switching amounts and positions, so that he never has a
worthwhile bet on a winner at a worthwhile price. He is always one race behind the form
of a horse and several races behind the rhythm of the results sequences.
Some amateur players carry inconsistency to such a degree that they demand
consistency from the horses, while at the same time being utterly inconsistent in their
methods of play. It's not the races that beat these players — it's the switches!
[Horse] Racing is simple. Everything about the game is logical and common sense and
elementary. All the figures and the mathematics and the mechanics of racing can be
understood by a child in junior-high school. But the game is decked out in an endless
number of minor contradictions and open switches and deadfall traps, in order to lure the
average player into doing everything wrong.
The amateurs who play so carelessly and who fall into all the wrong switches do not stop
to consider the percentages of their rightful losses. When an amateur goes to the track
and loses nine bets (eight races and a daily double) and loses all his capital for the day,
he has lost many times what the percentage calls for. He has no right to lose so much. It's
almost as if he did it on purpose!
Any system is better than no system at all. But, of course, we are not studying here to
play any senseless systems or methods.
The player at the races can't grind or chisel because [that girl] is taken. The racetrack has
all grind and chisel privileges!
The mutuel grinding only goes one way — against the bettor. But any percentage can be
overcome by enough winners at fat enough prices!
Fortune favors the speculator over the grinder because of the plain old arithmetical
percentages. The speculator has a percentage chance to win. The grinder has no chance.
The mutuel take and the breakage add up to a percentage that continually grinds and
chisels the betting money... The grind privileges are spoken for and taken, so the
professional bettor must speculate.
Roy Neuberger Fall in love with people... the last thing to fall in love with is a particular security. It is, after
all, just a sheet of paper indicating a part ownership of a corporation. Its use is purely
mercenary.
Seth Klarman The single most crucial factor in trading is developing the appropriate reaction to price
fluctuations. Investors must learn to resist fear, the tendency to panic, when prices are
falling, and greed, the tendency to become overly enthusiastic when prices are rising.
Sometimes, when you can't figure out a good defense, the best thing to do is to go on
offense.


Sir Alec Cairncross A trend is a trend is a trend... But the question is, when will it bend? Will it alter its course,
through some unforeseen force, and come to a premature end?
Stan Druckenmiller You need to be decisive, open-minded, flexible and competitive.
I never use valuation to time the market. I use liquidity considerations and technical
analysis for timing. Valuation only tells me how far the market can go once a catalyst
enters the picture to change the market direction.
I've learned many things from [George Soros], but perhaps the most significant is that it's
not whether you're right or wrong that's important, but how much money you make when
you're right and how much you lose when you're wrong. The few times that Soros has
ever criticized me was when I was really right on a market and didn't maximize the
opportunity.
Steve Cohen If I am in a trade because of a catalyst, the first thing I check is whether the catalyst still
applies.
Stuart Walton To me, the successful stock is not one that I bought at 10 and held to a 100, but one
where I picked up 7 points here, 5 points here, another 8 here, and caught a major part of
the move.
The Invisible Hands The argument that equities outperform other asset classes in the long term often fails to
mention the risk undertaken to achieve that outperformance. Taking risk into account,
history offers an alternative answer to the claim that equities always outperform in the
long term.
the Rothschilds The few who can understand the system will be either so interested in its profits, or so
dependent on its favours, that there will be no opposition from that class, while, on the
other hand, that great body of people, mentally incapable of comprehending the
tremendous advantage that Capital derives from the system, will bear its burden without
complaint and, perhaps, without even suspecting that the system is inimical to their
interests.
Tom Petruno The market has no respect for your station in life or for how smart an investor you have
been until now. In fact, the market in this incarnation most prefers to humiliate those who
remain smug or who appear to be telling it what to do and when to do it.
It's heartening to know that some traditions survive on Wall Street. For example, the idea
that bad news for the economy is good news for financial markets.
Tony Boekh Conventional thinking, particularly around important turning points, is usually not very
helpful because it tends to focus on the extrapolation of past trends into the future.
Long wave forces are very powerful and operate slowly over time, making them hard to
recognize by most people. The long wave is like the tide in the ocean, powerful and
operating below the surface.
There have probably been more financial manias in the past 50 years than in any other
period in history. More recent experience shows that they seem to be getting more
extreme, as are the nasty consequences.
Trading proverb 'Get a hunch and bet a bunch.'
Victor Sperandeo In my opinion, the greatest misconception is the idea that if you buy and hold stocks for
long periods of time, you'll always make money.


Victor Sperandeo ...I have developed a unique approach that integrates knowledge of odds, the markets
and their instruments, technical analysis, statistical probability, economics, politics, and
human psychology. Most market players rely on one, two, or three of these areas, but I
combine all of them, assessing risk-reward from every possible dimension to keep the
odds in my favor.
Vince Farrell Counter trend rallies are euphoric. They are fast, big, and make you want to believe
again. Refer though, to the ancient rule of thumb that things reverse by about half of the
prior move.
Walter Bagehot One thing is certain, that at particular times a great deal of stupid people have a great
deal of stupid money... At intervals, the money of these people — the blind capital, as we
call it, of a country, is particularly large and craving; it seeks for someone to devour it, and
there is a 'plethora'; it finds someone, and there is speculation; it is devoured, and there is
'panic'.
Warren Buffett Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels
is likely to be more productive than energy devoted to patching leaks.
William Eckhardt The lack of intrinsic meaning of angles on a bar chart has significance even for chart-
oriented traders who do not employ angles. How sharply a trend slopes on a chart is often
a psychological consideration in making a trade. If you fall prey to this influence, you're
letting the chart maker's practical and aesthetic considerations impinge on your trading.
Any trend can be made to look either gentle or steep by adjusting the price scale.
Trading size is one aspect you don't want to optimize. The optimum comes just before the
precipice.
Anyone with average intelligence can learn to trade. This is not rocket science. However,
it's much easier to learn what you should do in trading than to do it. Good systems tend to
violate normal human tendencies. Of the people who can learn the basics, only a small
percentage will be successful traders.
Watch idly while profit-taking opportunities arise, but in adversity run like a jackrabbit.
The market behaves much like an opponent who is trying to teach you to trade poorly...
The market likes to lull you into the false security of high success rate techniques, which
often lose disastrously in the long run. The general idea is that what works most of the
time is nearly the opposite of what works in the long run.
The desire to maximize the number of winning trades (or minimize the number of losing
trades) works against the trader. The success rate of trades is the least important
performance statistic and may even be inversely related to performance.
William J. Bernstein Relying solely on your quantitative skills to invest successfully is like trying to fly an
airplane based only on an exquisite knowledge of aeronautical engineering, ignoring the
need of real-world flying experience and lacking a good sense of the fickleness of both
aircraft systems and the weather.
William O' Neill Just as a doctor would be foolish not to use X-rays and EKGs, investors would be foolish
not to use charts. Charts provide valuable information about what is going on that cannot
be obtained easily any other way. They allow you to follow a huge number of different
stocks in an organized manner.
High volume at a key point is an extraordinarily valuable tip-off that a stock is ready to
move. Volume can also be used in a reverse manner. When prices enter a consolidation
after an advance, volume should dry up very substantially. In other words, there should be
very little selling coming into the market. During a consolidation, declining volume is
generally constructive.



SKEPTICISM

Bill Fleckenstein Let's take a step back for a second. Who are these people? They're the same idiots that
never saw anything coming. So whatever they think they see or whatever they want to talk
about is meaningless because they are probably wrong about what they think.
Bill James When I started writing I thought if I proved X was a stupid thing to do that people would
stop doing X. I was wrong.
Bruce Kovner The Heisenberg principle in physics provides an analogy for the markets. If something is
closely observed, the odds are it is going to be altered in the process.
Damon Runyon Trust, but verify.
Eric Kraus When you pick up your morning paper, try to remind yourself that what you are getting is
largely manipulation / PR spin, and try to ask yourself not 'is what they are telling me
true?' but rather 'Why are they telling me this? – where is the spin coming from, and how
can I use this insight?'
Howard Marks The fact that we don't know where trouble will come from shouldn't allow us to feel
comfortable in times when prices are full. The higher prices are relative to intrinsic value,
the more we should allow for the unknown.
Investors generally overestimate their ability to see the future, and the worst of them act
as if they know exactly what lies ahead.
The tendency on the part of investors toward gullibility rather than skepticism is an
important reason styles go to extremes.
Jack Sparrow Wall Street is populated by conventional thinkers, serving compromised ends, in the
confines of a broken system.
When everyone 95% agrees on something — home prices will never decline, China can't
be stopped, commodities can't go down, etc. — there is real risk of 'everyone' taking a
frying pan to the face.
James Montier The Value at Risk model is kind of like buying a car with an airbag, where the airbag is
guaranteed to fail when you need it. Or alternatively putting on Kevlar body armor that will
stop 95% of bullets. It's really not any good. It's cutting off that part of the distribution that
we need to worry about -- the tails.
Jeffrey Laderman Wall Street research reports are more sales documents than disinterested analyses... the
tendency is for analysts to play up the good and sugar-coat the bad.
Jim Sweeney If I've learned one thing in this business, it's that the only thing that always goes higher is
the compensation of the investment pros.
John Hussman It's not always obvious to the listener when an analyst's argument is full of holes, but you
should always be on red alert when a single year of earnings is taken, at face value, as
the basis for market valuation.
In the absence of historical evidence, people can say anything they want without
accountability.
Jonathon Clements Nobody on Wall Street has a monopoly on truth. Market strategists don't. Money
managers and investment-newsletter writers don't. Brokers, financial planners and
insurance agents don't. Newpaper columnists don't. So treat all financial advice with
caution. Look at every investment and every investment strategy with profound
skepticism. Think long and hard about every financial myth.


Latin Motto of the Royal Society nullius in verba - "Take nobody's word for it"
Mark Skousen There is always free cheese in a mousetrap.
Mark Twain Whenever you find yourself on the side of the majority, it is time to pause and reflect.
Maverick74 Remember, the snakes always offer the best deal. That's the only card they can play.
Paul Tudor Jones These days, there are many more deep intellectuals in the business, and that, coupled
with the explosion of information on the internet, creates the illusion that there is an
explanation for everything and that the primary task is simply to find that explanation.
Reminiscences of a Stock The tyro knows nothing, and everybody, including himself, knows it. But the next, or
Operator second, grade thinks he knows a great deal and makes others feel that way too. He is the
experienced sucker, who has studied — not the market itself but a few remarks about the
market made by a still higher grade of suckers.
It is naturally the semisucker who is always quoting the famous trading aphorisms and the
various rules of the game. He knows all the don'ts that ever fell from the oracular lips of
the old sages — excepting the principal one, which is: Don't be a sucker!
It was very curious how, after suffering tremendous losses from a break of fifteen or
twenty points, people who were still hanging on, welcomed a three point rally and were
certain the bottom had been reached and complete recovery begun.
As far as my trading went, having a million merely meant more reserves. Money does not
give a trader more comfort, because, rich or poor, he can make mistakes and it is never
comfortable to be wrong. And when a millionaire is right his money is merely one of his
several servants.
The theory that most of the sudden declines or particular sharp breaks are the results of
some plunger's operations probably was invented as an easy way of supplying reasons to
those speculators who, being nothing but blind gamblers, will believe anything that is told
them rather than do a little thinking.
Richard Dennis The [Keynesian] theory is fine, it just doesn't work in the real world. Therefore, we
shouldn't use it.
Robert J. Shiller The situation reminds one of a Ouija board, in which players are encouraged to interpret
the meaning of movements in their trembling hands and to distill forecasts from them. Or
the stock market is seen as an oracle, issuing mysterious and meaningless
pronouncements, which we then ask our leaders to interpret, mistakenly investing their
interpretations with authority.
Economists who adhere to rational-expectations models of the world will never admit it,
but a lot of what happens in markets is driven by pure stupidity – or, rather, inattention,
misinformation about fundamentals, and an exaggerated focus on currently circulating
stories.
Scott Adams I've come to the conclusion that using a financial professional to help you invest is like
getting open-heart surgery from a starving lion...
Siddhartha Gautama Do not believe in anything simply because you have heard it. Do not believe in anything
simply because it is spoken and rumored by many. Do not believe in anything simply
because it is found written in your religious books. Do not believe in anything merely on
the authority of your teachers and elders. Do not believe in traditions because they have
been handed down for many generations. But after observation and analysis, when you
find that anything agrees with reason, and is conducive to the good and benefit of one and
all, then accept it and live up to it.


Steven Pinker The spooky part is that we have no reason to think that the baloney-generator in the
patient's left hemisphere is behaving any differently from ours as we make sense of the
inclinations emanating from the rest of our brains. The conscious mind -- the self or soul --
is a spin doctor, not the commander in chief.
Thomas Sowell It is hard to imagine a more stupid or more dangerous way of making decisions than by
putting those decisions in the hands of people who pay no price for being wrong.
Voltaire Doubt is not an agreeable condition, but certainty is an absurd one.
William Eckhardt As a general rule, be very skeptical of your results. The better a system looks, the more
adamant you should be in trying to disprove it. This idea goes very much against human
nature, which wants to make the historical performance of a system look as good as
possible.
The desire to find patterns is the same human quirk that convinces people that there is
validity in superstitions, or astrology, or fortune tellers. The successes are much more
startling than the failures. You remember the times when the oracle really hit the nail on
the head, and you tend to forget the cases in which the prediction was ambiguous or
wrong.

FOCUS

Al Weiss The essential element is that the markets are ultimately based on human psychology, and
by charting the markets you're merely converting human psychology into graphic
representations.
Alvin Toffler You've got to think about doing big things while you're doing small things, so all the small
things go in the right direction.
Arthur Sokoloff Imagine a boxer coming into the ring, expecting to meet his opponent face to face.
Instead, he finds himself in a ring filled only with fog. He swings wildly, but makes no
contact with anything. His force is dissipating, and there is little he can do.
Barry Ritholtz Most of the time, humans exist in a happy little bubble of self-created delusion. We lie to
ourselves constantly. We rationalize everything we do, past and present. We engage in
selective perception, seeing only the things that agree with us. Our selective retention
retains the good stuff and disregards the rest.
Barton Biggs Understanding the effect of emotion on your actions has never been more important than
it is now. In the midst of this great financial and economic crisis that grips the world,
Central Banks are printing money in one form or another. This makes our investment
world even more prone to bubbles and panics than it has been in the past. Either plague
can kill you.
Ben Goldacre Simple regression is confused with causation, and this is perhaps quite natural for animals
like humans, whose success in the world depends on our being able to spot causal
relationships rapidly and intuitively: we are inherently oversensitive to them.
Benjamin Disraeli The secret of success is constancy of purpose.
Bhagavad Gita Focus on the task on hand, be not motivated by the outcome; Be not driven by the results,
enjoy the process of getting there.
Bill Gates My success, part of it certainly, is that I have focused in on a few things.


Bill Lipschutz When you're in a losing streak, your ability to properly assimilate and analyze information
starts to become distorted because of the impairment of the confidence factor, which is a
by-product of a losing streak. You have to work very hard to restore that confidence, and
cutting back trading size helps achieve that goal.
Blair Hull The people who want to be recognized as the greatest traders are probably not the
greatest traders. Egos get in the way of the process. In my opinion, you never want to be
the largest player in the pit.
Brian Gelber I'm not picky about how I make my money. It doesn't matter if my opinion is right or wrong.
All that matters is whether I make money.
Brian Tracy A clear vision, backed by definite plans, gives you a tremendous sense of confidence and
power.
Bruce Cleland The mathematics are very important, but it's only one piece of the puzzle. The most
important thing overall is the total investment process, of which the signal generator is an
important part.
Portfolio structuring, risk management, execution strategies, capital management, and

leverage management may not be directly connected to the algorithm that generates the
buy and sell signals, but they are all hugely important.
Bruce Kovner To this day, when something happens to disturb my emotional equilibrium and my sense
of what the world is like, I close out all positions related to that event.
I almost always trade on a market view; I don't trade simply on technical information. I use
technical analysis a great deal and it is terrific, but I can't hold a position unless I
understand why the market should move.
Technical analysis, I think, has a great deal that is right and a great deal that is mumbo
jumbo.
There is a great deal of hype attached to technical analysis by some technicians who
claim that it predicts the future. Technical analysis tracks the past; it does not predict the
future. You have to use your own intelligence to draw conclusions about what the past
activity of some traders may say about the future activity of other traders.
It is very important for me to study the details of price action to see if I can observe
something about how everybody is voting. Studying the charts is absolutely critical and
alerts me to existing disequilibria and potential changes.
The emotional burden of trading is substantial; on any given day, I could lose millions of
dollars. If you personalize these losses, you can't trade.
The only thing that disturbs me is poor money management. Every so often, I take a loss
that is significantly too large. But I never had a lot of difficulty with the process of losing
money, as long as losses were the outcome of sound trading techniques.
A common mistake is to think of the market as a personal nemesis. The market, of

course, is totally impersonal; it doesn't care whether you make money or not.
Whenever a trader says 'I wish,' or 'I hope,' he is engaging in a destructive way of thinking
because it takes attention away from the diagnostic process.
Bruce Lee The successful warrior is the average man, with laser-like focus.
Charles Faulkner Management of one's emotional state is critical. The truly exceptional traders can stand
up to anything. Instead of getting emotional when things don't go their way, they remain
calm and act in accordance with their approach.


Charlie Munger People have always had this craving to have someone tell them the future. Long ago,
kings would hire people to read sheep guts. There's always been a market for people who
pretend to know the future. Listening to today's forecasters is just as crazy as when the
king hired the guy to look at the sheep guts.
If you get a lot of heavy ideology young -- and then you start expressing it -- you are really
locking your brain into a very unfortunate pattern.
Chin-Ning Chu Whenever your mind is totally absorbed in whatever activities you are performing, your
mind will remain calm and content.
Dan Harrington Hand reading works because most players play most hands in a relatively logical way
most of the time. By bringing logic to bear on their decisions, you can keep eliminating
hands that don't fit the observed data.
Dan Loeb A key rule in investing is that you don't necessarily need to understand a lot of different
things at any given time, but you need to understand the one thing that really matters.
Daniel Coyle Vision is the greatest of talents, because it looks so much like magic. We see it in sports,
when a basketball player surprises an entire arena by delivering a last-second pass to a
waiting teammate. Or in business when a smart investor spots a tiny, vital pattern and
leverages it to a massive advantage. Vision dwarfs other talents like accuracy,
persistence, and strength because it operates on a higher plane. It changes the game by
creating new opportunities where none existed.
Decision Traps Why don't people learn from their experience? For one, the data we receive can usually
be interpreted in more than one way. And even when the evidence is clear enough that
we should be able to learn from it, we are naturally biased to interpret it in a way that
preserves our positive self-image.
...only by recognizing the role of chance in successes can you realistically learn which of
your actions you should carefully repeat and which could be improved. Falsely claiming
credit is an important barrier to learning.
Ed Seykota Dramatic and emotional trading experiences tend to be negative. Pride is a great banana
peel, as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got
emotionally involved with positions.
I prefer not to dwell on past situations. I tend to cut bad trades as soon as possible, forget
them, and then move on to new opportunities.
Mostly I follow the rules. As I keep studying the markets, I sometimes find a new rule
which breaks and then replaces a previous rule. Sometimes I get to a personal
breakpoint. When that happens, I get out of the markets altogether and take a vacation
until I feel that I am ready to follow the rules again. Perhaps some day, I will have a more
explicit rule for breaking rules.
Gut feel is important. If ignored, it may come out in subtle ways by coloring your logic. It
can be dealt with through meditation and reflection to determine what's behind it. If it
persists, then it might be a valuable subconscious analysis of some subtle information.
Otherwise, it might be a dangerous sublimation of an inner desire for excitement and not
reflect market conditions.
Common patterns transcend individual market behavior. For example, bond prices have a
lot in common with the way cockroaches crawl up and down a wall. Unfortunately for
cockroach followers, there is usually no one around to take the other side of a trade.


Eric Kraus The world is a very complex place, and if taken as anything more than guideposts,
ideologies -- be them free-market, socialist, or theological -- are simply an impediment to
understanding, a convenient excuse for the refusal to think rationally about complex
questions.
Ernest Hemingway Develop a built-in bullshit detector.
Eugen Herrigel Everything that happens, and above all what happens to me, should be observed
impartially, as though on the deepest level it did not concern me.
You should not grieve over bad shots; learn now not to rejoice over the good ones. You
must free yourself from the buffetings of pleasure and pain, and learn to rise above them
in easy equanimity. This too, you must practice unceasingly — you cannot conceive how
important it is.
Friedrich Nietzsche The most basic form of human stupidity is forgetting what we are trying to accomplish.
Fyodor Dostoevsky Please don't think that I'm bragging about the fact that I didn't lose in saying that I know
the secret of not losing, but winning. I really do know the secret. It's very stupid and
simple and amounts to ceaseless self-control at all stages of the game and not getting
excited. That's all there is to it. That way you can't lose and are bound to win. But that's
not the point. The point is whether, once you know the secret, you are capable of
exploiting it.
Garry Kasparov In life there is no such obligation to move [as there is in chess]. If you can't find a useful
plan, you can watch television, stick with business as usual, and believe that no news is
good news. Human beings are brilliantly creative at finding ways to pass time in
unconstructive ways. At these times, a true strategist shines by finding the means to make
progress, to strengthen his position and prepare for the inevitable conflict. And conflict, we
cannot forget, is inevitable.
Gary Bielfeldt The best way I know to learn discipline and patience is to think through a trade thoroughly
before putting it on. You need to develop a plan of your strategies for various
contingencies. That way, you won't get swayed by every news item that hits the market
and causes prices to move up or down.
By having thought out your objective and having a strategy for getting out in case the
market trend changes, you greatly increase the potential for staying with your winning
positions.
George Bernard Shaw Life isn't about finding yourself. It's about creating yourself.
George Soros To others, being wrong is a source of shame; to me, recognizing my mistakes is a source
of pride. Once we realize that imperfect understanding is the human condition, there is no
shame in being wrong, only in failing to correct our mistakes.
I am outside. I am a thinking participant and thinking means putting yourself outside the
subject you think about. Perhaps it comes easier to me than to many others because I
have a very abstract mind and I actually enjoy looking at things, including myself, from the
outside.
[The danger in taking risks] stimulates me. But don't misunderstand what I am saying: I
don't like danger; I like to avoid it. That is what makes my juices flow.
I am good at riding the tide, but not the ripples of a swimming pool.
Markets tend to move in fits and starts, adopting a thesis and then abandoning it. We try
to catch them if we can, but if we can't, we are better off not trying.


George Soros It seems that we need to recognize more than two categories — true and false. The
logical positivists claimed that statements which are not true or false are meaningless. I
thoroughly disagree. Theories that can affect the subject matter to which they refer are the
opposite of meaningless. They can change the world. They exemplify the active role that
thinking can play in shaping reality. We need to adjust our concept of truth to account for
them.
Greg Norman When everything is in sync, you feel like you're gliding through space. Things happen in
slow motion. The wind feels different, the light is different, your eyesight is more acute.
Each blade of grass seems to pop out. You've pushed yourself to the very maximum of
your finely tuned ability to play.
Henepola Gunaratana You can't ever get everything you want. It is impossible. Luckily, there is another option.
You can learn to control your mind, to step outside of this endless cycle of desire and
aversion. You can learn to not want what you want, to recognize desires but not be
controlled by them. This does not mean that you lie down on the road and invite
everybody to walk all over you. It means that you continue to live a very normal-looking
life, but live from a whole new viewpoint. You do the things that a person must do, but you
are free from that obsessive, compulsive drivenness of your own desires. You want
something, but you don't need to chase after it. You fear something, but you don't need to
stand there quaking in your boots. This sort of mental culture is very difficult. It takes
years. But trying to control everything is impossible, and the difficult is preferable to the
impossible.
Henry Rollins To hate is to show you still care, who needs that, focus on what's really important.
Howard Marks That question — at what price? — isn't just the right question to ask about bonds versus
stocks today. It's the right question regarding every investment at every point in time.
Hugh Sidey A sense of humor... is needed armor. Joy in one's heart and some laughter on one's lips
is a sign that the person down deep has a pretty good grasp of life.
Jack Sparrow Patience is required most when one desires to apply it least.
Jeremy Grantham In investing Santayana is right: History repeats and repeats, and forget it at your peril.
Jim Rogers I just wait until there is money lying in the corner, and all I have to do is go over there and
pick it up. I do nothing in the meantime. Even people who lose money in the market say, 'I
just lost my money, now I have to do something to make it back.' No, you don't. You
should sit there until you find something.
John Carmack Focus is a matter of deciding what things you're not going to do.
John Cleese Now I suggest to you that a group of us could be sitting around, after dinner, discussing
matters that were extremely serious... and we could be laughing, and that would not make
what we were discussing one bit less serious. Solemnity, on the other hand -- I don't know
what it's for. What is the point of it?
John Mauldin It behooves those who are genetically predisposed to a bearish position to remember that
markets have a logic of their own.
John Palfrey ...the positive correlation between the amount of information and the quality of decision-
making has limitations. At some point, additional information cannot be processed and
integrated. In fact, the extra information may result in information overload, with
consequences that include confusion, frustration, panic, or even paralysis.
Jon Kabat-Zinn Tacit assumptions have sunk many boats in the world of science and engineering.


Jon Kabat-Zinn Our actions are all too frequently driven rather than undertaken in awareness, driven by
those perfectly ordinary thoughts and impulses that run through the mind like a coursing
river, if not a waterfall. We get caught up in the torrent and it winds up submerging our
lives as it carries us to places we may not wish to go and may not even realize we are
headed for.
Don't just do something, sit there.
Remind yourself that acceptance of the present moment has nothing to do with
resignation in the face of what is happening. It simply means a clear acknowledgment that
what is happening is happening. Acceptance doesn't tell you what to do, that has to come
out of your understanding of this moment. You might try acting out of a deep knowing of
"This is it."
Kevin Kelly The nature of life is to delight in all possible loopholes. Every creature is in some way
hacking a living by reinterpreting the rules.
Liu Ji In battle, momentum means riding on the force of the tide of events. If enemies are on the
way to destruction, then you follow up and press them.
Lord Samuel Do not choose to be wrong for the sake of being different.
Louis Moore Bacon [Paul Tudor Jones] taught me to think in points, not dollars, and he always used to say,
'It's just points, it is not money.' He gave me an ongoing tutorial in disassociating oneself
from the result of the trade, yet still having passion about it.
Ludwig Von Mises The class of those who have the ability to think their own thoughts is separated by an
unbridgeable gulf from the class of those who cannot.
M.C. Escher What I give form to in daylight is only one per cent of what I have seen in darkness.
Marcus Aurelius The secret of all victory lies in the organization of the non-obvious.
Mark Cook Hope should never be in your vocabulary. It is the worst four-letter word I know. As soon
as you say, 'Boy, I hope this position comes back,' you should reduce your size.
Mark Dow Clients, like traders, crave stories. They want to believe the people to whom they entrust
their money are genetically superior, multi-lingual polymaths. We managers want to
believe this about ourselves, too.
Mark Twain You can't depend on your eyes when your imagination is out of focus.
Mark Weinstein Although the cheetah is the fastest animal in the world and can catch any animal on the
plains, it will wait until it is absolutely sure it can catch its prey. It may hide in the bush for
a week, waiting for just the right moment. It will wait for a baby antelope, and not just any
baby antelope, but preferably one that is also sick or lame. Only then, when there is no
chance it can lose its prey, does it attack. That, to me, is the epitome of professional
trading.
I don't try to figure out where the market is going before the action; I let the market tell me
where it is going. Also, there is such a variety of technical input in the stock market... that
you will almost always get a signal before the market is about to do something.
Another item I would place under the category of misconceptions is the way the media
reports the reasons for the market being down. They are always saying the market is
down because of profit taking. I think it would be wonderful if everybody was always
taking profits. But, the truth is, most people lose money, and the reason markets go down
is because they take their losses.


Mark Weinstein You have to learn how to lose; it is more important than learning how to win. If you think
you are always going to be a winner, when you lose, you will develop feelings of hostility
and end up blaming the market instead of trying to learn why you lost.
I know educated people who watch the news and wonder why the hell they lost money
when everyone else is taking profits. The media owes it to the public to report that the
market goes down not only on profit taking, but on a lot of loss taking as well.
Marty Schwartz That's the basic difference between an investor and a trader. A trader looks at the market
as one living, breathing organism instead of a collection of individual stocks.
Because we make and lose thousands of dollars every day, big-time traders often give the
appearance of treating money with an 'easy come, easy go' attitude. That's not right. Just
because we don't do the mashed potatoes over our wins or whine about our losses
doesn't mean that we take them casually.
What most people fail to understand is that while you're losing your money, you're also
losing your objectivity. It's like being at the craps table in Vegas, and the fat bleached
blonde in the sequined dress is rolling the dice, and you're losing, and you're determined
that you're not going to let her beat you. What you've forgotten is that she doesn't care
about you, she's just rolling the dice.
A stop automatically takes your brain out of reverse and puts it into neutral. Your money's
not back to neutral, but your mind's back to the point where you can regroup and try to
think up a fresh idea without the pressure of a losing position hanging over your head.
Trading must be addressed as a profession, because if you do not treat it as such, those
who do will separate you from your money very quickly.
You will never be more objective than before you execute a trade. Once you are in a
trade, emotions take over, so your plan must be in place beforehand.
When you're in a losing position and you're brainlocked, do whatever's necessary to help
clear your head. Whether you're a pro or an amateur, you cannot lose your objectivity.
Trading is a psychological game. Most people think that they're playing against the
market, but the market doesn't care. You're really playing against yourself.
Matthew Flickstein Choiceless awareness is a quality of mind that is free from making judgments, decisions
or generating commentary as it meets with sense experiences. It is a mind that responds
to each new moment without the burden of its past history or making future projections.
Michael Marcus ...it hurt to realize what a fool I had been, but I have learned not to be as attached to
material things. I accepted it as a life lesson. I learned I don't have to own a house in
every beautiful place in the world; I can stay at a hotel and walk on the beach or climb a
trail there. Or, if I really feel like spoiling myself, I can charter a plane; I don't have to own
one.
When I talk to other traders, I try to keep very conscious of the idea that I have to listen to
myself. I try to take their information without getting overly influenced by their opinion.
If trading is your life, it is a torturous kind of excitement. But if you are keeping your life in
balance, then it is fun. All the successful traders I've seen that lasted in the business
sooner or later got to that point. They have a balanced life; they have fun outside of
trading.
Michael Steinhardt There should be a respect for the person on the other side of the trade. Always ask
yourself: Why does he want to sell? What does he know that I don't? Finally, you have to
be intellectually honest with yourself and others. In my judgment, all great traders are
seekers of truth.


Mike Caro Play your best game all the time. You're thinking, everybody knows that! But apparently
everybody doesn't know that, otherwise top players wouldn't take turns going on tilt or
playing extra creatively when straightforward decisions are more profitable. You see,
that's really poker's most important winning secret, because moderately skilled players
who practice playing their best game all the time make more money than world-class
players who don't.
Mike McDermott They're trying to goad me, trying to own me. But this isn't a gunfight. It's not about pride or
ego. It's only about money.
Napoleon He who fears being conquered is sure of defeat.
Nassim Taleb Noise is what you are supposed to ignore; signal what you need to heed.
Just as we are not likely to mistake a bear for a stone (but likely to mistake a stone for a
bear), it is almost impossible for someone rational with a clear, uninfected mind, one who
is not drowning in data, to mistake a vital signal, one that matters for his survival, for
noise. Significant signals have a way to reach you.
Neil Weintraub You will run out of money before a guru runs out of indicators.
Nicholas Carr ...we've replaced our natural environment with a digital environment that is incredibly rich
with information and data, and unfortunately, our brains aren't all that good at processing
the amount and the speed of data coming at us all the time now, and we literally overload
our short-term working memory. As a result, I think we become even more superficial
thinkers, even as we have access to more and more information opened up to us.
Orison Swett Marden One of the secrets of a successful life is to be able to hold all of our energies upon one
point, to focus all of the scattered rays of the mind upon one place or thing.
The man of iron will is cool in the hour of danger.
Paul Tudor Jones I see the younger generation hampered by the need to understand and rationalize why
something should go up or down. Usually, by the time that becomes self-evident, the
move is already over. When I got into the business, there was so little information on
fundamentals, and what little information one could get was largely imperfect. We learned
just to go with the chart.
...technical analysis is at the bottom of the study list for many of the younger generation,
particularly since the skill often requires them to close their eyes and trust the price action.
While I'm a staunch advocate of higher education, there is no training — classroom or

otherwise — that can prepare for trading the last third of a move, whether it's the end of a
bull market or the end of a bear market. There's typically no logic to it; irrationality reigns
supreme, and no class can teach what to do during that brief, volatile reign.
It doesn't make any difference whether it's pork bellies or Yahoo. At the end of the day, it's
all the same. You need to understand what factors you need to have at your disposal to
develop a core competency to make a legitimate investment decision in that particular
asset class.
The crash was something that was imminently forecastable to somebody that understood
the measure of derivatives and how large they had grown in such a relatively short period
of time and the impact that it would have on a relatively unknowing and naïve market.
Now I spend my day trying to make myself as happy and relaxed as I can be. If I have
positions going against me, I get right out; if they are going for me, I keep them.


Paul Tudor Jones The idea that you can't beat the markets is a frightening prospect. That is why my guiding
trading philosophy is playing great defense. If you make a good trade, don't think it is
because you have some uncanny foresight. Always maintain your sense of confidence,
but keep it in check.
I think one of my strengths is that I view anything that has happened up to the present
point in time as history. I really don't care about the mistake I made three seconds ago in
the market. What I care about is what I am going to do from the next moment on.
I never apologize to anybody, because I don't get paid unless I win.
Peter Brandt Money just seems to have emotion-attracting velcro on it. I have to find ways to cut the
velcro off. I have to view my capital as just part of the game.
Oftentimes the emotional hit from a trade is tied to an earlier expectation for the trade.
Peter Drucker The important and difficult job is never to find the right answers, it is to find the right
question.
Phil Jackson Become more acutely aware of what's happening right now, this very moment.
Primo Levi Patience was still needed, in unforeseeable doses; yet more patience.
Ralph Waldo Emerson Adopt the pace of nature; her secret is patience.
Ray Dalio More than anything else, what differentiates people who live up to their potential from
those who don't is a willingness to look at themselves and others objectively.
Reminiscences of a Stock They say there are two sides to everything. But there is only one side to the stock market;
Operator and it is not the bull side or the bear side, but the right side.
My old shotgun and BB shot could not do the work of a high power repeating rifle against
big game.
It is literally true that millions come easier to a trader after he knows how to trade than
hundreds did in the days of his ignorance.
Disregarding the big swing and trying to jump in and out was fatal to me. Nobody can
catch all the fluctuations. In a bull market your game is to buy and hold until you believe
that the bull market is near its end. To do this you must study general conditions and not
tips or special factors affecting individual stocks.
I have told some of these stories to friends, and some of them tell me it isn't a hunch but
the subconscious mind, which is the creative mind, at work. That is the mind which makes
artists do things without their knowing how they came to do them. Perhaps with me it was
the cumulative effect of a lot of little things individually insignificant but collectively
powerful.
The next day we got news of the San Francisco earthquake. It was an awful disaster. But
the market opened down only a couple of points. The bull forces were at work, and the
public is never independently responsive to news.
My one steadfast prejudice is against being wrong.
To be angry at the market because it unexpectedly or even illogically goes against you is
like getting mad at your lungs because you have pneumonia.


Reminiscences of a Stock I still had much to learn but I knew what to do. No more floundering, no more half-right
Operator methods. Tape reading was an important part of the game; so was beginning at the right
time; so was sticking to your position. But my greatest discovery was that a man must
study general conditions, to size them so as to be able to anticipate probabilities.
I have found that experience is apt to be a steady dividend payer in this game and that
observation gives you the best tips of all.
It is enough for the experienced trader to perceive that something is wrong. He must not
expect the tape to become a lecturer. His job is to listen for it to say 'Get out!' and not wait
for it to submit a legal brief for approval.
A trader gets to play the game as the professional billiard player does — that is, he looks
far ahead instead of considering the particular shot before him. It gets to be an instinct to
play for position.
The speculator's chief enemies are always boring from within. It is inseparable from
human nature to hope and to fear... The successful trader has to fight these two deep-
seated instincts. He has to reverse what you might call his natural impulses. Instead of
hoping he must fear; instead of fearing he must hope. He must fear that his loss may
develop into a much bigger loss, and hope that his profit may become a big profit.
A man ought not to be led into trading by tokens. He should wait until the tape tells him
that the time is ripe.
The trend is evident to a man who has an open mind and reasonably clear sight, for it is
never wise for a speculator to fit his facts to his theories. Such a man will, or ought to,
know whether it is a bull or a bear market, and if he knows that he knows whether to buy
or to sell.
Richard Dennis The correct approach is to say: This structure means up, and this structure means up no
more, but never that this structure means up this much and no more.
It is totally counter productive to get wrapped up in the results. Trading decisions should
be made as unemotionally as possible.
It is a little bit like playing golf: You can throw your clubs around after making a bad shot,
but while you are making the next shot you keep your head down and your eye on the
ball.
Learn from your mistakes. Don't be misled by the day-to-day fluctuations in your equity.
Focus on whether what you are doing is right, not on the random nature of any single
trade's outcome.
The trading experience is so intense that there is a natural tendency to want to avoid
thinking about it once the day is over. I am that way when things are working. But, when
they are not, it spurs me to want to think about what I'm doing and how I might do better.
When things go bad, traders shouldn't stick their heads in the sand and just hope it gets
better.
Richard Feynman It was a brilliant idea: You have no responsibility to live up to what other people think you
ought to accomplish. I have no responsibility to be like they expect me to be. It's their
mistake, not my failing.
Robert J. Shiller There is no shortage of media accounts that try to answer our questions about the market
today, but there is a shortage within these accounts of relevant facts or considered
interpretations of them. Many news stories in fact seem to have been written under a
deadline to produce something — anything — to go along with the numbers from the
market.


Samuel Smiles It will generally be found that men who are constantly lamenting their ill luck are only
reaping the consequences of their own neglect, mismanagement and improvidence, or
want of application.
Sherlock Holmes It is of the highest importance, therefore, not to have useless facts elbowing out the useful
ones.
Simone Weil Attachment is the great fabricator of illusions; reality can be attained only by someone
who is detached.
Sir Arthur Conan Doyle It is a capital mistake to theorize before one has data.
Stan Druckenmiller Frankly, even today, many analysts still don't know what makes their stocks go up or
down.
Steve Cohen [Wharton] taught you that 40 percent of a stock's price movement was due to the market,
30 percent to the sector, and only 30 percent to the stock itself, which is something that I
believe is true. I don't know if the percentages are exactly correct, but conceptually the
idea makes sense.
I have friends who get emotional about the market. They fight it. Why put yourself in that
position?
Sun Tzu Now the general who wins a battle makes many calculations in his temple ere the battle is
fought. The general who loses a battle makes few calculations beforehand. Thus do many
calculations lead to victory, and few calculations to defeat.
What causes opponents to come of their own accord is the prospect of gain. What
discourages opponents from coming is the prospect of harm.
The Art of Learning I learned at sea that virtually all situations can be handled as long as presence of mind is
maintained. On the other hand, if you lose your calm when crisis hits seventy miles from
land, or while swimming with big sharks, there is no safety net to catch you.
I started calculating, putting things together. Slowly the plan crystallized in my mind...
While a fixation on results is certainly unhealthy, short-term goals can be useful

developmental tools if they are balanced within a nurturing long-term philosophy. Too
much sheltering from results can be stunting.
If, through incremental training... your unconscious understanding of your discipline of

choice has become sufficiently advanced, and you have learned how to trust your
physical and intuitive intelligence to handle the technical components of your moment,
then your conscious mind can zoom in on very small amounts of data...
In every discipline, the ability to be clearheaded, present, cool under fire is much of what
separates the best from the mediocre. In competition, the dynamic is often painfully
transparent. If one player is serenely present while the other is being ripped apart by
internal issues, the outcome is already clear. The prey is no longer objective, makes
compounding mistakes, and the predator moves in for the kill.
Not only do we have to be good at waiting, we have to love it. Because waiting is not
waiting, it is life.
...considering the issue of performance state, it is important to avoid focusing on those

rare climactic moments of high-stakes competitive mayhem. If you get into a frenzy
anticipating the moment that will decide your destiny, then when it arrives you will be over-
wrought with excitement and tension. To have success in crunch time, you need to
integrate certain healthy patterns into your day-to-day life so that they are completely
natural to you when the pressure is on.


The Art of Learning ...then there are those elite performers who use emotion, observing their moment and
then channeling everything into a deeper focus that generates a uniquely flavored
creativity. This is an interesting, resilient approach based on flexibility and subtle
introspective awareness. Instead of being bullied by or denying their unconscious, these
players let their internal movements flavor their fires.
The only way to succeed is to acknowledge reality and funnel it, take the nerves and use
them. We must be prepared for imperfection. If we rely on having no nerves, on not being
thrown off by a big miss, or on the exact replication of a certain mindset, then when the
pressure is high enough, or when the pain is too piercing to ignore, our ideal state will
shatter.
It is more about sweeping away the cobwebs than about learning anything new. We are
built to be sharpest when in danger, but protected lives have distanced us from our
natural abilities to channel our energies. Instead of running from our emotions or being
swept away by their initial gusts, we should learn to sit with them, become at peace with
their unique flavors, and ultimately discover deep pools of inspiration.
Thomas Carlyle Our main business is not to see what lies dimly in the distance, but to do what lies clearly
at hand.
Tom Baldwin ...the best traders have no ego. To be a great trader, you have to have a big enough ego
only in the sense that you have confidence in yourself. You cannot let ego get in the way
of a trade that is a loser; you have to swallow your pride and get out.
Tom Basso I liken emotions in trading to a spring, with emotions being stretched up and down, up and
down. While it's going up and down, it's kind of thrilling, but eventually the spring wears
out. Burnout sets in, and you realize that maybe it isn't so much fun to be on this
emotional roller coaster. You find that if you can just keep your emotions in balance in the
middle, it's actually a whole lot more fun.
I think investment psychology is by far the most important element, followed by risk
control, with the least important consideration being the question of where you buy and
sell.
Tony Robbins Your current conditions do not reflect your ultimate potential, but rather the size and
quality of goals upon which you currently are focusing.
One reason so few of us achieve what we truly want is that we never direct our focus; we
never concentrate our power.
Tony Saliba Always respect the marketplace. Never take anything for granted. Do your homework.
Recap the day. Figure out what you did right and what you did wrong. That is one part of
the homework; the other part is projective. What do I want to happen tomorrow? What
happens if the opposite occurs? What happens if nothing happens? Think through all the
'what-ifs.' Anticipate and plan, rather than react.
Training Day The sooner you match what's in your head with what's in the real world, the better you'll
feel.
Tyrion Lannister, Game of Thrones Never forget what you are, for surely the world will not. Make it your strength. Then it can
never be your weakness. Armour yourself in it, and it will never be used to hurt you.
Victor Sperandeo The key to trading success is emotional discipline. Making money has nothing to do with
intelligence. Think of all the bright people that choose careers on Wall Street. If
intelligence were the key, there would be a lot more people making money trading.
Walter Benjamin He who asks fortune-tellers the future unwittingly forfeits an inner intimation of coming
events that is a thousand times more exact than anything they may say.


Walter Updegrave It's almost as if we've seen the emergence of a new life form, the Robo-Trader, a mutant
strain of investor who grazes on information from CNBC and regurgitates it in the form of
online trades.
Wikipedia (Mushin) Mushin is achieved when a person's mind is free from thoughts of anger, fear, or ego
during combat or everyday life. There is an absence of discursive thought and judgment,
so the person is totally free to act and react towards an opponent without hesitation and
without disturbance from such thoughts. At this point, a person relies not on what they
think should be the next move, but what is their trained natural reaction or what is felt
intuitively.
William Eckhardt In general, the delicate tests that statisticians use to squeeze significance out of marginal
data have no place in trading. We need blunt statistical instruments, robust techniques.
The human mind was made to create patterns. It will see patterns in random data. A turn-
of-the-century statistics book put it this way: 'Too fine an eye for pattern will find it
everywhere.'
Zen and the Art of Poker Develop a readiness to participate — that is, to explode into action — which is separate
from the relaxed state you are in at the times in between.
Many gray areas exist, many borderline decisions. Superheated emotions can tip all these
borderline decisions the wrong way, like dominoes, until they add up to disaster. Skill at
detachment (and rebounding from losses) is important: the ability to dismiss the previous
hand from mind is crucial.
This is the point you want to get to: a detachment so complete that it almost borders on
disinterest. (Cautionary note: it is important to have a large enough bankroll to allow you
to play like this.)
When we are focused exclusively on our own emotions (as we often are), the emotions of
others tend to be obscured. When we make ourselves neutral, however, we find that the
canvas suddenly becomes blank and the emotions of others begin to appear.
Like an Olympic runner who learns to run 'within himself,' you will eventually become
comfortable inside your knowledge of the game. You will cease striving; the clouds will
disperse, the sun comes out.
Zen proverb The way of the wise man is to act and not compete.

ADAPTABILITY

38 Special Hold on loosely, but don't let go... if you cling too tightly, you're gonna lose control...
Aaron Brown, Red-Blooded Risk The rocket scientists came together on Wall Street in the 1980s and began the process
that eventually explained the modern concept of probabilities and reconstructed the global
financial system. We were not individually ambitious. All we wanted was to make more
money than any rational person could possibly spend, without ever putting on a tie or being
polite to anyone we didn't like. We didn't have any use for the money, except maybe for
some books and cool computer equipment. We didn't want to throw (or go to) fancy parties
or buy political power -- and we didn't spend it on cars, jewelry, or places to live, and least
of all on clothes. We'd probably give the money away, but until then, it gave us the power
to say "fuck you" to anyone, except that we were mostly pretty soft-spoken and civil in our
expressions.


Albert Einstein Few people are capable of expressing with equanimity opinions which differ from the
prejudices of their social environment. Most people are even incapable of forming such
opinions.
Alexander Graham Bell When one door closes, another opens; but we often look so long and so regretfully upon
the closed door that we do not see the one which has opened for us.
Alexis de Tocqueville When the reality of power has been surrendered, it's playing a dangerous game to seek to
retain the appearance of it.
Alvin Toffler The illiterate of the 21st century will not be those who cannot read and write, but those who
cannot learn, unlearn, and relearn.
Atul Gawande What the best may have, above all, is a capacity to learn and change — and to do so
faster than everyone else.
Barton Biggs A fresh, opportunity-minded mind, uncluttered by prejudice, is crucial for superior investing
in an environment where the one constant, the one inevitability is change and industry
group rotation. By definition, there can be no uninvestable industries.
There are no relationships or equations that always work. Quantitatively based solutions
and asset-allocation equations invariably fail as they are designed to capture what would
have worked in the previous cycle whereas the next one remains a riddle wrapped in an
enigma.
As investors, we also always have to be aware of our innate and very human tendency to
be fighting the last war. We forget that Mr. Market is an ingenious sadist, and that he
delights in torturing us in different ways.
Bill Lipschutz Not everyone is going to interpret things in the same way, at the same time, as you do, and
it's important to understand that. You need to be plugged into the news and to know what
the market is looking at. For example, one day the foreign exchange market may be
focusing on interest rate differentials; the next day the market may be looking at potential
for capital appreciation, which is exactly the opposite.
...playing out scenarios is something that I do all the time. That is a process a fundamental
trader goes through constantly. What if this happens? What if this doesn't happen? How
will the market respond? What levels will the market move to?
[Superior] traders have tremendous commitment to the markets — to their craft, so to

speak. They develop scenarios, reevaluate scenarios, collect information, and reevaluate
that information. They constantly ask themselves: What am I doing right? What am I doing
wrong? How can I do what I am doing better? How can I get more information? It's
obsessive.
Brian Greene Some discoveries provide answers to questions. Other discoveries are so deep that they
cast questions in a whole new light, showing that previous mysteries were misperceived
through a lack of knowledge. You could spend a lifetime -- in antiquity, some did --
wondering what happens when you reach the earth's edge, or trying to figure out who or
what lives on the earth's underbelly. But when you learn that the earth is round, you see
that the previous mysteries are not solved; instead they're rendered irrelevant.
Bruce Kovner Nowadays, everybody is a chartist, and there are a huge number of technical trading
systems. I think that change has made it much harder for the technical trader.
Bruce Lee A good fight should be like a small play, but played seriously. A good martial artist does not
become tense, but ready; not thinking, yet not dreaming—ready for whatever may come.
When the opponent expands I contract and when he contracts I expand, and when there is
a moment to strike, I do not hit—it hits all by itself.


Bruce Lee You and your opponent are one. There is a coexisting relationship between you. You
coexist with your opponent and become his complement, absorbing his attack and using
his force to overcome him.
Charles Darwin It's not the strongest species that survive, nor the most intelligent, but those most able to
adapt.
Dan Millman The essence of talent is not so much a presence of certain qualities, but rather an absence
of the mental, physical, and emotional obstructions most adults experience.
Dickson G. Watts Many men have the 'courage of their opinions,' few the courage to abandon opinions.
Ed Catmull (President of Pixar) I don't like hard rules at all. I think they're all bullshit.
Ed Seykota Psychologically, I tend to alter my activity depending on performance. I tend to be more

aggressive after I have been winning, and less so after losses. These tendencies seem
OK. In contrast, a costly tendency is to get emotional over a loss and then try to get even
with an overly large position.
I set protective stops at the same time I enter a trade. I normally move these stops in to
lock in a profit as the trend continues. Sometimes, I take profits when a market gets wild.
This usually doesn't get me out any better than waiting for my stops to close in, but it does
cut down on the volatility of the portfolio, which helps calm my nerves.
The stock market behaves differently from itself in that easily identifiable patterns seldom
exactly repeat.
Emanuel Derman In physics you're playing against God, and he doesn't change his laws very often. In
finance you're playing against God's creatures, agents who value assets based on their
ephemeral opinions. They don't know when they've lost, so they keep trying.
F. Scott Fitzgerald The test of a first-rate intelligence is the ability to hold two opposite ideas in mind at the
same time and still retain the ability to function.
Francis Crick The dangerous man is the one who only has one idea, because then he'll fight and die for
it. The way real science goes is that you come up with lots of ideas, and most of them will
be wrong.
Friedrich Nietzsche That which does not kill me, makes me stronger.
Garry Kasparov What separates a winner from a loser at the grandmaster level is the willingness to do the
unthinkable. A brilliant strategy is, certainly, a matter of intelligence, but intelligence without
audaciousness is not enough. I must have the guts to explode the game, to upend my
opponent's thinking and, in so doing, unnerve him.
Gary Bielfeldt The most important thing is to have a method for staying with your winners and getting rid
of your losers.
George J. Church Every generation has its characteristic folly, but the basic cause is the same: People
persist in believing that what has happened in the recent past will go on happening into the
indefinite future, even while the ground is shifting under their feet.
George Soros I was prepared for a regime change, whereas other people were acting within a prevailing
regime. And that is where I think my awareness that conditions can undergo revolutionary
change was useful.
I would put it this way: I do not play according to a given set of rules; I look for changes in
the rules of the game.


George Soros Being so critical, I am often considered a contrarian. But I am very cautious about going
against the herd; I am liable to be trampled on... Most of the time I am a trend follower, but
all the time I am aware that I am a member of the herd and I am on the lookout for
inflection points.
Most of the time we are punished if we go against the trend. Only at inflection points are
we rewarded.
I am not knocking economics; I think it is a very elegant theoretical construct. I do question

its applicability to the real world; and I question whether it survives testing in the financial
markets. I believe that the performance of Quantum Fund alone falsifies the random walk
theory.
There are two kinds of disequilibrium: static disequilibrium, where both the prevailing
dogma and the prevailing social conditions are rigidly fixed but quite far removed from each
other; and dynamic disequilibrium, where both the real world and the participant's views
are changing so rapidly that they cannot help but be far apart.
The whole thrust of my approach is that the course of events is indeterminate.
Economics is a social science and there is a fundamental difference between the natural
and social sciences. Social phenomena have thinking participants who base their decisions
on imperfect knowledge. That is what economic theory has tried to ignore.
Heat Do not have any attachments, do not have anything in your life you are not willing to walk
out on in 30 seconds flat if you spot the heat around the corner.
Henry de Monfreid How could men whose every instinct held them to the warmth and motion of the herd,
understand that just as instinctively I preferred solitude — solitude peopled with the ever-
changing moods of the elements?
Howard Marks Most people view the future as likely to repeat past patterns, which it may or may not do.
They tend to think of the future in terms of a single scenario, whereas it really consists of a
wide range of possibilities.
Basically, I think equity investors had their hearts broken, as happens from time to time in
the investment world. The promise of easy money turned out to be empty — as usual —
and investors who had adopted overblown expectations promised 'never again.'
Jack Schwager Being a great trader is a process. It's a race with no finish line. The markets are not static.
No single style or approach can provide superior results over long periods of time. To
continue to outperform, the great traders continue to learn and adapt.
Even great traders sometimes have completely wrongheaded ideas when they start. They
ultimately succeed, however, because they have the flexibility to change their approach.
Jack Sparrow This is an excellent time to be a flexible, fleet-footed, go-both-ways trader who knows how
to scale up low-risk positions. Conversely, for hidebound, stubborn, "set in their ways" long
only investors, it is almost the worst environment imaginable.
Perpetual pessimists are fools, as are perpetual optimists. There are times for both in
proper measure... an inflexibility of perspective is a sign of ideological distortion and / or
mental weakness.
The truly skilled poker player — and all the more so the truly skilled trader — is not just a
fighter. He is also an artist, a statistician, and a student of human nature, all rolled into one.
The beating heart of creativity is a passionate commitment to exploring, testing and

discarding new ideas.


Jack Sparrow In secular bear markets, fighting general conditions is an expensive habit. Wall Street is
addicted to this habit by design.
Jan Houtema Change breaks the brittle.
Jeff Yass We actually use poker strategy in training our option traders, because we feel the parallels
are very strong. I believe that if I can teach our trainees the correct way to think about
poker, I can teach them the right way to trade options.
Jimmy Ray Dean I can't change the direction of the wind, but I can adjust my sails to always reach my
destination.
Johann Wolfgang von Goethe Everyone holds his fortune in his own hands, like a sculptor the raw material he will fashion
into a figure. But it's the same with that type of artistic ability as with all others: We are
merely born with the capability to do it. The skill to mold the material into what we want
must be learned and attentively cultivated.
John Bender It's not a matter of coming up with a one-size-fits-all model that is better than the standard
Black-Scholes model. The key point is that the correct probability distribution is different for
every market and every time period. The probability distribution has to be estimated on a
case-by-case basis.
John Locke Things of this world are in so constant a flux, that nothing remains long in the same state.
Jon Kabat-Zinn You can't stop the waves, but you can learn to surf.
Joseph Schumpeter Capitalism, then, is by nature a form or method of economic change and not only never is
but never can be stationary...The opening up of new markets, foreign or domestic, and the
organizational development from the craft shop and factory to such concerns as US Steel
illustrate the same process of industrial mutation — if I may use that biological term — that
incessantly revolutionizes the economic structure from within, incessantly destroying the
old one, incessantly creating a new one. This process of Creative Destruction is the
essential fact about capitalism.
Juan Manuel Fangio I learned to approach racing like a game of billiards. If you bash the ball too hard, you get
nowhere. As you handle the cue properly, you drive with more finesse.
Kevin Kelly The work of managing a natural environment is inescapably a work of local knowledge.
Lao Tzu Do you have the patience to wait... til your mud settles and the water is clear? Can you
remain unmoving... til the right action arises by itself?
The world is ruled by letting things take their course. It cannot be ruled by interfering.
Larry Hite When I was a kid and got my first motorcycle, I had an older friend who would always get
into fights. He told me, 'Larry, when you are on a motorcycle, never argue with a car. You
will lose.' The same lesson applies to trading: If you argue with the market, you will lose.
Liu Ji In war, when adversaries are orderly in their movements and are at their sharpest, it is not
yet time to fight with them; it is best to fortify your position and wait. Watch for their energy
to wane after being on alert for a long time; then rise and strike them.
Louis Moore Bacon We run a laissez-faire, entrepreneurial shop. I started my career in futures, and the rallying
cry was always free markets for free men, so I've tried to create an open architecture here
for traders to test their ideas and thrive.
Ludwig Von Mises Education rears disciples, imitators, and routinists, not pioneers of new ideas and creative
geniuses. The schools are not nurseries of progress and improvement, but conservatories
of tradition and unvarying modes of thought.


Ludwig Von Mises Speculation [is] dealing with the uncertain conditions of the unknown future. Every human
action is a speculation in that it is embedded in the flux of time.
Reason's biological function is to preserve and promote life and to postpone its extinction
as long as possible. Thinking and acting are not contrary to nature; they are, rather, the
foremost features of man's nature.
The most appropriate description of man as differentiated from nonhuman beings is: a
being purposively struggling against the forces adverse to his life.
Mark Douglas When you really believe that trading is simply a probability game, concepts like 'right' and
'wrong' or 'win' and 'lose' no longer have the same significance. As a result, your
expectations will be in harmony with the possibilities.
Mark Minervini You have all these people trying to come up with formulas to beat the market. The market
is not a science. The science may help increase the probabilities, but to excel you need to
master the art of trading.
I think that anyone who wants to be a trader should learn how to play poker.
Normal human tendencies are traits that cause you to do poorly. Therefore, to be
successful as a trader you need to condition abnormal responses. You hear many traders
say that you have to do the opposite of your gut response — when you feel good about a
position you should sell, and when you feel terrible about it, you should buy more. In the
beginning that's true, but as you condition yourself for abnormal responses, somewhere
along the line you become skilled. Then your gut becomes right.
Mark Mobius Things change... You know, that's it in a nutshell.
Mark Shuttleworth The truth is that we constantly acquire and discard sets of tools. So we should not be
fixated on one specific set of tools for all of life. Society, technology and the times change
so fast that any fact, process or algorithm we learn at school is by definition not going to be
useful for any length of time. The real skills that serve us are the ability to adapt, learn,
apply the products of that learning, and participate in the discussions and challenges of the
day. That doesn't mean that facts are useless, nor that specific tools don’t matter. Unless
you can demonstrate an ability to absorb and apply both, fast, you haven't actually gained
the knack of becoming effective in a given environment.
Mark Twight We address each problem with a degree of flexibility. We understand that everything which
has come and gone, or been done before may be useful but it may be a distraction.
We often see experts apply a rigid 'solution' to particular and similar problems while being
closed-minded to other possibilities. Expert knowledge can be the finest weapon or the
worst sort of prison. Mired in details, we are blind to the principle. Too focused on
individual steps of the path we lose sight of the fundamental values and lose also the Way.
Mark Weinstein When I trade at home, I often watch the sparrows in my garden. When I feed them bread,
they take just a little piece at a time and fly away. They keep on flying back and forth,
taking small bits of bread. They may have to make a hundred stabs at a piece of bread to
get what a pigeon gets at one time, but that is why a pigeon is a pigeon. You will never be
able to shoot a sparrow, it is just too fast.
Your strategy has to be flexible enough to change when the environment changes. The
mistake most people make is they keep the same strategy all the time. They say, 'Damn,
the market didn't behave the way I thought it would.' Why should it? Life and the markets
just don't work that way.
Marty Schwartz By living the philosophy that my winners are always in front of me, it is not so painful to
take a loss. If I make a mistake, so what!


Marty Schwartz When you're trading real time, and things start popping, you're challenged to make
immediate decisions. You can't stand still, there's no time to think. It's attack or retreat,
increase the position or get out.
When you're a market timer, you have to be equally good at going short and going long,
and when the market changes sides, you can't hold your position and hope it turns around.
If you're not a natural like Mickey Mantle, you've got to be a student of the game like Rod
Carew. Practice, practice, practice.
The best way to stop a losing streak is to stop! Stop the losses, stop the bleeding. Take
time off and let your intellect take charge of your emotions; the market will be there when
you return.
You can never shift from reverse to first gear without going through neutral. You must
change the direction of bad trading by first shifting to neutral. You must stop.
Taking a loss is hard to do because it's an admission that you've been wrong. But in the
market, being wrong some of the time is part of the game. On each trade, you have to
establish your 'uncle point,' the point where you'll get out of a losing position, and you have
to have the mental discipline to pull the trigger at that point.
You have to stop trying to will things to happen in order to prove that you're right. Listen
only to what the market is telling you now. Forget what you thought it was telling you five
minutes ago. The sole objective of trading is not to prove you're right, but to hear the cash
register ring.
Michael Marcus Another thing is that if a position doesn't feel right as soon as you put it on, don't be
embarrassed to change your mind and get right out.
Michael Steinhardt As soon as a formula is right for any length of time, its own success carries the weight of its
inevitable failure.
Mihaly Csikszentmihalyi We are still a multimedia organism. If we want to push the envelope of complexity further,
we have to use all of our devices for accessing information — not all of which are rational.
Niccolo Machiavelli There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain
in its success, than to take the lead in the introduction of a new order of things.
Niels Jensen Stability breeds instability for several reasons - key amongst them is our inclination to look
in the rear mirror for clues about the future. Portfolio managers, risk managers and
regulators all tend to do so when looking for clues as to where the system is vulnerable.
Oliver Wendell Holmes In times of drastic change, it is the learners who inherit the future. The learned usually find
themselves equipped to live in a world that no longer exists.
Paul Graham We delighted in forcing bigger, slower competitors to follow us over difficult ground. Like
guerillas, startups prefer the difficult terrain of the mountains, where the troops of the
central government can't follow.
Paul Saffo The point of forecasting is not to attempt illusory certainty, but to identify the full range of
possible outcomes.
Instead of withholding judgment until an exhaustive search for data is complete, I will force
myself to make a tentative forecast based on the information available, and then
systematically tear it apart, using the insights gained to guide my search for further
indicators and information.


Paul Saffo Since the mid-1980s, my mantra for this process is 'strong opinions, weakly held.' Allow
your intuition to guide you to a conclusion, no matter how imperfect — this is the 'strong
opinion' part. Then — and this is the 'weakly held' part — prove yourself wrong. Engage in
creative doubt.
Eventually your intuition will kick in and a new hypothesis will emerge out of the rubble,
ready to be ruthlessly torn apart once again. You will be surprised by how quickly the
sequence of faulty forecasts will deliver you to a useful result.
Paul Tudor Jones Don't be a hero. Don't have an ego.
When it comes to trading macro, you cannot rely solely on fundamentals; you have to be a
tape reader, which is something of a lost art form.
It's very hard to find a pure fundamentalist who's also a very successful macro trader...
...the inefficiencies that existed in the '70s and '80s and even the '90s are not as readily
seen. But in this business there will also always be that upper tier — that top 10 or 20
percent of managers who will outperform everyone else.
I'll never forget the day the New Orleans Junior League board came to visit [Eli Tullis]
during lunch. He was getting absolutely massacred in the cotton market that day, but he
charmed those little old ladies like he was a movie star. It put everything in perspective for
me.
My grandfather told me at a very early age that you are only worth what you can write a
check for tomorrow... that's one reason that I've always liked the futures market so much,
because you can generally get liquid and be in cash in literally the space of a few minutes.
The one thing I learned from Eli [Tullis] is that, ultimately, the market is going to go where it
is going to go.
I have very strong views of the long-run direction of all markets. I also have a very short-
term horizon for pain.
I try to avoid any emotional attachment to a market. I avoid letting my trading opinions be
influenced by comments I may have made on the record about a market.
[No loyalty to positions] is important because it gives you a wide open intellectual horizon
to figure out what is really happening. It allows you to come in with a completely clean slate
in choosing the correct forecast for that particular market.
Peter Abelard By doubting, we come to examine, and by examining, so we perceive the truth.
Ray Dalio Your ability to see the changing landscape and adapt is more a function of your perceptive
and reasoning abilities than your ability to learn and process quickly.
Recognize that you will certainly make mistakes; so will those around you and those who
work for you. And what matters is how you deal with them. If you treat mistakes as learning
opportunities that can yield rapid improvement if handled well, you will be excited by them.
Reminiscences of a Stock No man can always have adequate reasons for buying or selling stocks daily — or
Operator sufficient knowledge to make his play an intelligent play.
If the unusual never happened there would be no difference in people and then there
wouldn't be any fun in life. The game would become merely a matter of addition and
subtraction. It would make of us a race of bookkeepers with plodding minds.
It's the guessing that develops a man's brain power. Just consider what you have to do to
guess right.


Reminiscences of a Stock The average ticker hound — or, as they used to call him, tape-worm — goes wrong, I
Operator suspect, as much from overspecialization as from anything else. It means a highly
expensive inelasticity.
You have to use your brains and your vision to do this; otherwise my advice would be as
idiotic as to tell you to buy cheap and sell dear.
I do not allow my possessions — or my prepossessions either — to do my thinking for me.

That is why I repeat that I never argue with the tape.
Thus I eventually discovered that it was all very well not to lose your bear position in a bear
market, but that at all times the tape should be read to determine the propitiousness of the
time for operating.
In short, I had learned that I had to work for my money. I was no longer betting blindly or
concerned with mastering the technique of the game, but with earning my successes by
hard study and clear thinking.
Of course, it often happens that an experienced trader acts so quickly that he hasn't time to
give all his reasons in advance—but nevertheless they are good and sufficient reasons,
because they are based on facts collected by him in his years of working and thinking and
seeing things from the angle of the professional, to whom everything that comes to his mill
is grist.
Observation, experience, memory and mathematics—these are what the successful trader
must depend on. He must not only observe accurately but remember at all times what he
has observed.
Years of practice at the game, of constant study, of always remembering, enable the trader
to act on the instant when the unexpected happens as well as when the expected comes to
pass.
You can transmit knowledge—that is, your particular collection of card-indexed facts—but
not your experience. A man may know what to do and lose money—if he doesn't do it
quickly enough.
I admit that I do get irresistible impulses at times to do certain things in the market. It
doesn't matter whether I am long or short of stocks. I must get out. I am uncomfortable until
I do. I myself think that what happens is that I see a lot of warning-signals. Perhaps not a
single one may be sufficiently clear or powerful to afford me a positive, definite reason for
doing what I suddenly feel like doing.
I was not, and I never have felt that I was, wedded indissolubly to one or the other side of
the market. That a bull market has added to my bank account or a bear market has been
particularly generous I do not consider sufficient reason for sticking to the bull or the bear
side after I receive the get-out warning.
A man does not swear eternal allegiance to either the bull or the bear side. His concern lies
with being right.
A man can't spend years at one thing and not acquire a habitual attitude towards it quite
unlike that of the average beginner. The difference distinguishes the professional from the
amateur. It is the way a man looks at things that makes or loses money for him in the
speculative markets.
I sometimes think that speculation must be an unnatural sort of business, because I find
that the average speculator has arrayed against him his own nature.


Reminiscences of a Stock When a man makes his play in a commodity market he must not permit himself set
Operator opinions. He must have an open mind and flexibility. It is not wise to disregard the
message of the tape, no matter what your opinion of crop conditions or of the probable
demand may be.
Richard Dennis There are a lot of people who get imprinted like ducks. You can teach them that a warship
is their mother if you get them young enough. For a lot of traders, it doesn't matter so much
whether their first big trade is successful or not, but whether their first big profit is on the
long or short side. Those people tend to be perennial bulls or bears, and that is very bad.
Both sides have to be equally OK.
Richard Russell In this business, you never stop learning. Let me put it another way. If you stop learning,
you're on your way to going out of business.
Robert L. Bacon Few players take into consideration the principle of ever-changing cycles of results. The
would-be professional player must always understand that the form moves away from the
public's knowledge.
There is no danger of the public ever finding any key to the secret of winning. The crazy
gambling urge and speculative hysteria that overcomes most players at the track makes
that fact a certainty. But, if the public play ever did get wise to the facts of life, the principle
of ever-changing cycles of results would move the form away from the public immediately.
The principle of ever-changing trends works to force quick and drastic changes of results
sequences when the public happens to get wise to a winning idea.
The public can never catch up to the form — or the game ceases.
If the average player — the public play — kept out of all these switches and traps, then the
powers-than-be would have to make the game far more complicated in order to insure the
fact that the majority of players continue to lose and thus continue to furnish money to keep
up the game.
But there is no use kidding: The professionals keep out of switches by waiting for the
sound overlay spots. They don't play the bad races at both ends of the daily programs.
They don't play bad races -- period! When they feel the least bit of doubt, they walk away
from the mutuel windows and step into the bar for a leisurely drink that will last until a
better spot comes along.
To beat the percentage of the mutuels, the player must ALWAYS have an overlay. He
must always have an extra percentage in his favor, to counteract the 'take' percentage.
You Must Speculate — You CAN'T GRIND!
Stan Druckenmiller The wonderful thing about our business is that it's liquid, and you can wipe the slate clean
on any day. As long as I'm in control of the situation — that is, as long as I can cover my
positions — there's no reason to be nervous.
Steve Cohen The thing is to start moving your feet. I find that too many traders just stand there and let
the truck roll over them.
Steve Fox If a player is not in a normal rhythm or in balance with the game, that is a signal that
something is wrong. Good players spot this rhythm shift as quickly as a musician hears a
note out of tune.
Steve Perlman I don't have much formal education in these things, but you learn. You build enough stuff;
after a while, you see it. And if you reverse-engineer enough things, you see what other
people have done.


Stuart Walton My philosophy is to float like a jellyfish and let the market push me where it wants to go. I
don't draw a line in the sand and say this is my strategy and I'm going to wait for the
market to come to me. I try to figure out what strategies are working in the market.
Sun Tzu Induce others to construct a formation while you yourself are formless.
He who is skilled in attack flashes forth from the topmost heights of heaven, making it
impossible for the enemy to guard against him.
Therefore good warriors cause others to come to them, and do not go to others.
So when opponents are at ease, it is possible to tire them. When they are well fed, it is
possible to starve them. When they are at rest, it is possible to move them.
Appear where they cannot go, head for where they least expect you.
Everyone knows the form by which I am victorious, but no one knows the form by which I
ensure victory.
As a military force has no constant formation, water has no constant shape: the ability to
gain victory by changing and adapting according to the opponent is called genius.
The Art of Learning Living on the water requires constant presence, and the release of control. A boat is
always moving with the sea, lurching beneath your feet, and the only way to survive is to
sink into rhythm with the waves and be ready for anything.
People speak about momentum as if it were an entity of its own, an unpredictable player
on the field, and from my own competitive experience I can vouch for it seeming that way.
The key is to bring the player onto your team by riding the psychological wave when it is
behind you, and snapping back into a fresh presence when your clarity of mind begins to
be swept away.
Chess players are constantly calculating variations and either accepting or dismissing them
based on a comparison of how they evaluate the visualized position vs. the original
position. So if you have an advantage, make an error, and then still cling to the notion that
you have an advantage, then when you calculate a variation that looks equal, you will
reject that line of thought because you incorrectly believe it is moving you in the wrong
direction. What results is a downward spiral where the foundering player rejects variations
he should accept, pushing, with hollow overconfidence, for more than there is. At a high
level, pressing for wins in equal positions often results in losing.
If both players are aware of a tell, then it will be neutralized, made ineffective, and others
will have to be unearthed and exploited. The game goes on.
The physiologists at LGE had discovered that in virtually every discipline, one of the most
telling features of a dominant performer is the routine use of recovery periods. Players who
are able to relax in brief moments of inactivity are almost always the ones who end up
coming through when the game is on the line.
First, we learn to flow with distraction, like that blade of grass bending to the wind. Then we
learn to use distraction, inspiring ourselves with what initially would have thrown us off our
games. Finally we learn to re-create the inspiring settings internally.
The only thing we can really count on is getting surprised. No matter how much preparation
we do, in the real tests of our lives, we'll be in unfamiliar terrain. Conditions might not be
calm or reasonable. It may feel as though the whole world is stacked against us. This is
when we have to perform better than we ever conceived of performing. I believe the key is
to have prepared in a manner that allows for inspiration, to have laid the foundation for us
to create under the wildest pressures we ever imagined.


Theodore Roosevelt Perhaps we must always advance a little by zig-zags.
Tom Baldwin Trading is like any other job. You work hard, put in the time and effort, and make your own
luck. I was lucky that the first 100-lot I sold was a winner. But why was I lucky? Because I
stood there all day for over six months, developing and honing market feeling. When the
opportunity occurred, I didn't hesitate.
Tom Basso After my years of experience in the markets, I now try to keep my models as flexible as I
possibly can. I try to imagine scenarios that would almost make good movie plots.
Tommy Angelo A good anticipator foresees all pertinent paths without attaching to any of them.
If you have an inflexible image in your mind of an opponent, then whenever he changes,
your evaluation of him will be wrong. If you have an inflexible image in your mind of
yourself, then whenever you change, your evaluation of yourself will be wrong. For up-to-
date evaluation, there is no time but the present.
Tony Boekh The economy never has been a mechanical phenomenon, nor will it ever be. It is not like a
pendulum or the orbiting of bodies in the solar system. Changes in technology, innovation,
economic structure, regulations, financial institutions, and social and political attitudes are
ongoing and an essential part of the flow. The economy is subject to all these and many
more interconnected influences.
Tony Saliba Discipline is number one: Take a theory and stick with it. But you also have to be open-
minded enough to switch tracks if you feel that your theory has been proven wrong. You
have to be able to say, 'My method worked for this type of market, but we are not in that
type of market anymore.'
unknown A smooth sea never made a skilled mariner.
Victor Frankl A human being is a deciding being. Between stimulus and response there is a space. In
that space is our power to choose our response. In our response lies our growth and our
freedom.
Winston L. King Fixity is death; fluidity is life.
Zen and the Art of Poker Remain dispassionate. Make it your goal to achieve a cool and calm demeanor. This is
necessary in order to 'keep the airwaves clear' in order to read incoming signals correctly.
Zen master Takuan The mind must always be in the state of 'flowing,' for when it stops anywhere that means
the flow is interrupted and it is this interruption that is injurious to the well-being of the
mind. In the case of the swordsman, it means death. When the swordsman stands against
his opponent, he is not to think of the opponent, nor of himself, nor of his enemy's sword
movements. He just stands there with his sword which, forgetful of all technique, is ready
only to follow the dictates of the subconscious. The man has effaced himself as the wielder
of the sword. When he strikes, it is not the man but the sword in the hand of the man's
subconscious that strikes.
Zen master Yangshan There is interaction if there is a call for it, no interaction if there is no call for it.
Zhuge Liang Withdraw like a mountain in movement, advance like a rainstorm. Strike and crush with
shattering force; go into battle like a tiger.

MISTAKES

Aldous Huxley That men do not learn very much from the lessons of history is the most important of all
the lessons history has to teach.


Bernard Baruch Whatever failures I have known, whatever errors I have committed, whatever follies I have
witnessed in public and private life, have been the consequences of action without
thought.
Bruce Kovner [Michael Marcus] also taught me one other thing that is absolutely critical: You have to be
willing to make mistakes regularly; there is nothing wrong with it. [He] taught me about
making your best judgment, being wrong, making your next best judgment, being wrong,
making your third best judgment, and then doubling your money.
Confucius A man who has committed a mistake, and doesn't correct it, is committing another
mistake.
David Ryan If you try to learn from every single trade that you make, you are only going to get better
and better as time goes on.
George Soros I'm only rich because I know when I'm wrong... I basically have survived by recognizing
my mistakes.
George Washington We should not look back unless it is to derive useful lessons from past errors, and for the
purpose of profiting by dearly bought experience.
Henry Petroski Everything relates to failure. We grow up experiencing failure as children and then we go
through it as adults. The key is understanding that failure is how we improve. You do this
not by ignoring the failure, but by recognizing it, examining it thoroughly and not making
any changes until you truly understand it.
Howard Marks In the end, superior investing is all about mistakes... and about being the person who
profits from them, not the one who commits them.
Risk control – and consistent success in investing – requires an understanding of the fact
that high returns don't just come along for the picking; others must create them for us by
making mistakes. And looked at that way, we'll do a better job if we force ourselves to
understand the mistake we think is being made, and why.
Jack Sparrow Today's mistake is tomorrow's insight.
Joey Knish I'm giving you the playbook I put together off my own beats.
Kevin Kelly A network nurtures small failures in order that large failures don't happen as often.
Ludwig Van Beethoven I make many changes, and reject and try again, until I am satisfied.
Mark Minervini First and foremost, understand that you will always make mistakes. The only way to
prevent mistakes from turning into disasters is to accept losses while they are small and
then move on.
Marty Schwartz The great thing about being a trader is that you can always do a much better job. No
matter how successful you are, you know how many times you screw up. Most people, in
most careers, are busy trying to cover up their mistakes. As a trader, you are forced to
confront your mistakes because the numbers don't lie.
Michael Marcus I think that, in the end, losing begets losing. When you start losing, it touches off negative
elements in your psychology; it leads to pessimism.
Michael Steinhardt There is a very good investor I speak to frequently who said, 'All I bring to the party is
twenty-eight years of mistakes.' I really believe he is right. When you make a mistake,
there is some subconscious phenomenon that makes it less likely for you to make that
same mistake again.


Michael Steinhardt One of the advantages of trading the way I do — being a long-term investor, short-term
trader, individual stock selector, market timer, sector analyst — is that I have made so
many decisions and mistakes that it has made me wise beyond my years as an investor.
Minna Antrim Experience is a good teacher, but she sends in terrific bills.
Patrik Antonius The feelings you get when you lose, they give you a lot, teach you a lot of things.
Paul Tudor Jones I know that to be successful, I have to be frightened. My biggest hits have always come
after I have had a great period and I started to think that I knew something.
Ray Dalio If you don't mind being wrong on the way to being right, you will learn a lot.
Intelligent people who are open to recognizing and learning from their mistakes
substantially outperform people with the same abilities who aren't open in the same way.
Yet it is far more common for people to let their egos stand in the way of learning.
An excellent decision maker and a bad decision maker will both make mistakes. The
difference is what causes them to make mistakes and the frequency of their mistakes.
Reminiscences of a Stock Following the dictates of experience may possibly fool you, now and then. But not
Operator following them invariably makes an ass out of you.
It takes a man a long time to learn all the lessons of his mistakes.
It took me five years to learn to play the game intelligently enough to make big money
when I was right.
The ticker beat me by lagging so far behind the market… it seems so obvious now that
tape reading is not enough, irrespective of the brokers' execution, that I wonder why I
didn't then see both my trouble and the remedy for it.
He figured that I was a permanent sucker, the ticker-hound kind that always plays and
always loses; a steady-income provider for brokers, whether they were the kind that
bucket your orders or modestly content themselves with the commissions.
There is nothing like losing all you have in the world for teaching you what not to do. And
when you know what not to do in order not to lose money, you begin to learn what to do in
order to win. Did you get that? You begin to learn!
I know now what I did not know then, and I think of the mistakes of my ignorance because
those are the very mistakes that the average stock speculator makes year in and year out.
There was as much to learn from partial victory as there was from defeat.
I found when I got my reports that Ed Harding's kindly intentional interference cost me
forty thousand dollars. A low price for a man to pay for not having the courage of his own
convictions! It was a cheap lesson.
It was a perfectly natural oversight. I had to pay the usual tuition — a good whack per
each step forward.
I have always found it profitable to study my mistakes.
If a man didn't make mistakes he'd own the world in a month. But if he didn't profit by his
mistakes he wouldn't own a blessed thing.
I also had found out that nobody was immune from the danger of making sucker plays.
And for a sucker play a man gets sucker pay; for the paymaster is on the job and never
loses the pay envelope that is coming to you.


Reminiscences of a Stock The recognition of our own mistakes should not benefit us any more than the study of our
Operator successes. But there is a natural tendency in all men to avoid punishment. When you
associate certain mistakes with a licking, you do not hanker for a second dose, and, of
course, all stock market mistakes wound you in two tender spots — your pocketbook and
your vanity.
Of course, if a man is wise and lucky, he will not make the same mistake twice. But he will
make any one of the ten thousand brothers or cousins of the original. The Mistake family
is so large that there is always one of them around when you want to see what you can do
in the fool-play line.
The loss of the money didn't bother me. Whenever I have lost money in the stock market I
have always considered that I have learned something; that if I have lost money I have
gained experience, so that the money really went for a tuition fee. A man has to have
experience and he has to pay for it.
But Fate does not always let you fix the tuition fee. She delivers the educational wallop
and presents her own bill, knowing you have to pay it, no matter what amount it may be.
Richard D. Wyckoff In the present generation Jesse Livermore's operations are the most spectacular, but he
is not by any means always right. Like all other traders, big or little, he makes serious
mistakes at times. He has personally described to me his methods in detail. They provide
for mistakes, accidents, errors in judgment and those unexpected happenings which
every big or little operator must allow for.
Richard Russell Wall Street is a tough teacher but also a good teacher. If you have any weakness —
arrogance, laziness, stinginess, cowardice, procrastination — the market will zero in on
that weakness and make you pay dearly.
Robert Downey Jr. I'm a very good troubleshooter for why something is unlikely to work. And most everything
is unlikely to work... I have done more movies that don't work than anyone. I could open a
cottage industry telling you why your shit doesn't work.
Robert G. Ingersoll In nature there are neither rewards nor punishments; there are only consequences.
Stuart Walton When I talk to potential new investors I focus on my mistakes. Because if you are going to
invest with someone, you want that person to have made mistakes on his own tab and not
to make them on yours. Someone who has never made a mistake is dangerous, because
mistakes will happen. If you've made mistakes, you realize they can recur, and it makes
you more careful.
The Art of Learning In the long run, painful losses may prove much more valuable than wins — those who are
armed with a healthy attitude and are able to draw wisdom from every experience, 'good'
or 'bad', are the ones who make it down the road. They are also the ones who are happier
along the way. Of course the real challenge is to stay in range of this long-term
perspective when you are under fire and hurting in the middle of the war. This, maybe our
biggest hurdle, is at the core of the art of learning.
Regaining presence and clarity of mind after making a serious error... is a hard lesson for
all competitors and performers. The first mistake rarely proves disastrous, but the
downward spiral of the second, third, and fourth error creates a devastating chain
reaction. Any sports fan has seen professional football, basketball, and baseball games
won and lost because of a shift in psychological advantage.
Tim Harford You show me a successful complex system, and I will show you a system that has
evolved through trial and error.
unknown Every time history repeats itself, the price goes up.


INTELLECTUAL HONESTY

Albert Einstein Whoever undertakes to set himself up as a judge of Truth and Knowledge is shipwrecked
by the laughter of the gods.
Alice Schroeder People who are psychologically and financially invested in a stock work very hard to
resolve any newly arisen cognitive dissonance in favor of their vested interests.
Aristotle It is the mark of an educated mind to be able to entertain a thought without accepting it.
Chinese proverb Who knows this morning what will happen tonight?
Dale Carnegie Be more concerned with your character than your reputation, because your character is
what you really are, while your reputation is merely what others think you are.
Dan Ariely We are pawns in a game whose forces we largely fail to comprehend. We usually think of
ourselves as sitting in the driver's seat, with ultimate control over the decisions we make
and the direction our life takes; but, alas, this perception has more to do with our desires -
with how we want to view ourselves - than with reality.
David Foster Wallace A huge percentage of the stuff that I tend to be automatically certain of is, it turns out,
totally wrong and deluded. Here's one example of something I tend to be automatically
sure of: Everything in my own immediate experience supports my deep belief that I am
the absolute center of the universe, the realest, most vivid and important person in
existence. We rarely talk about this natural, basic self-centeredness, because it's so
socially repulsive, but it's pretty much the same for all of us, deep down. It is our default-
setting, hard-wired into our boards at birth.
David Hume A wise man proportions his belief to the evidence.
Decision Traps Our minds are not filing cabinets that store information the way it came in. Instead, we edit
the information heavily, cut it up into pieces, and file the edited extracts in multiple parts of
our minds, depending on what they are associated with.
We synthesize and integrate new information into old knowledge. Like a glass of red wine
poured into a bowl of clear water, the new blends with the old. Thus, it becomes
impossible to reverse the process.
To learn consistently, most people need not only to understand their own biases, but also
to improve the quality of the feedback they receive.
Dickson G. Watts Fools try to prove that they are right. Wise men try to find when they are wrong.
Ed Seykota If I am bullish, I neither buy on a reaction, nor wait for strength; I am already in. I turn
bullish at the instant my buy stop is hit, and stay bullish until my sell stop is hit. Being
bullish and not being long is illogical.
I think that if people look deeply enough into their trading patterns, they find that, on
balance, including all their goals, they are really getting what they want, even though they
may not understand it or want to admit it.
Epic D If your world view depends on believing everyone you disagree with is either corrupt or
incompetent, you are not clever. You are a fool.
Friedrich Nietzsche All things are subject to interpretation... whichever interpretation prevails at a given time is
a function of power and not truth.


George Soros If we accept that our understanding is inherently imperfect, we can build a value system
on that insight. That is what I have done with my belief in my own fallibility.
Howard Marks Given the uncertain nature of the future, and thus the difficulty of being confident your
position is the right one—especially as price moves against you—it's challenging to be a
lonely contrarian.
Jack Sparrow The best traders and mentors are humble on a profound level, because they understand
what an awesome force of nature the market is. Thinking you can "conquer" the market,
or that you are somehow bigger than the market, is like a mountain climber thinking he is
bigger than Mt. Everest. True practitioners laugh at such notions - which are actually not
funny, in a way, because they get a lot of folks killed.
Great traders can afford to be humble. In the face of ever present uncertainty, their huge
profits give them comfort.
Jason Zweig People don’t like having their preconceived notions jolted, and doubt and ambiguity are
alien to the way most investors think.
John Liscio Forecasters, by definition, are biased and untrustworthy recorders of current economic
events. In other words, they tend to uncover evidence that supports their forecasts, and
they ignore or analytically dismiss anything that challenges it.
Larry Hite There are really four kinds of trades or bets: good bets, bad bets, winning bets, and losing
bets. Most people think that a losing trade was a bad bet. That is absolutely wrong. You
can lose money even on a good bet. If the odds on a bet are 50/50 and the payoff is $2
versus a $1 risk, that is a good bet even if you lose. The important point is that if you do
enough of those trades or bets, eventually you have to come out ahead.
Leonardo da Vinci Anyone who conducts an argument by appealing to authority is not using his intelligence;
he is just using his memory.
The greatest deception men suffer is from their own opinions.
Ludwig Van Beethoven Nothing is more intolerable than to have to admit to yourself your own errors.
Ludwig Von Mises Reason is the main resource of man in his struggle for survival.
M.C. Escher I don't grow up. In me is the small child of my early days.
Mark Hulbert Investors often develop a cultlike devotion to one investment guru or another. And when
they do so, objectivity goes out the window.
Mark Weinstein Don't be arrogant. When you get arrogant, you forsake risk control. The best traders are
the most humble.
Marty Schwartz Before, admitting I was wrong was more upsetting than losing the money. I used to try to
will things to happen. I figured it out, therefore it can't be wrong. When I became a winner,
I said, 'I figured it out, but if I'm wrong, I'm getting the hell out, because I want to save my
money and go on to the next trade.
Michael Marcus I am very open-minded. I am willing to take in information that is difficult to accept
emotionally, but which I still recognize to be true.
Michael Steinhardt The term professionally managed implies a credit I am not sure I would give the average
professional in this business.


Michael Steinhardt Good trading is a peculiar balance between the conviction to follow your ideas and the
flexibility to recognize when you have made a mistake. You need to believe in something,
but at the same time, you are going to be wrong a considerable number of times. The
balance between confidence and humility is best learned through extensive experience
and mistakes.
Nassim Taleb The mind can be a wonderful tool for self-delusion - it was not designed to deal with
complexity and nonlinear uncertainties. Counter to the common discourse, more
information means more delusions: our detection of false patterns is growing faster and
faster as a side effect of modernity and the information age: there is this mismatch
between the messy randomness of the information-rich current world with complex
interactions and our intuitions of events, derived in a simpler ancestral habitat - our mental
architecture is at an increased mismatch with the world in which we live.
Niccolo Machiavelli ...the great majority of mankind are satisfied with appearances, as though they were
realities, and are often more influenced by the things that seem than by those that are.
Niels Jensen Most investors have a remarkable and deeply fascinating ability to blame others for their
mistakes whilst giving themselves credit for all the correct investment decisions.
Norman Cousins Hope is independent of the apparatus of logic.
Oliver Cromwell, to the General I beseech thee, in the bowels of Christ, think it possible you may be mistaken.
Assembly of Kirk
Paul Buchheit People have a narrow concept of what's possible, and we're limited more by our own
ideas of what's possible than what really is possible. So they just get uncomfortable, and
they kind of tend to attack it for whatever reason.
…they are taking risks all the time, but they don't want to acknowledge that they are
taking risks. They want to pretend everything is risk-free.
Paul Saffo Never mistake a clear view for a short distance.
Try as one might, when one looks into the future, there is no such thing as 'complete'
information, much less a 'complete' forecast. As a consequence, I have found that the
fastest way to an effective forecast is often through a sequence of lousy forecasts.
[Strong opinions weakly held] is equally useful for evaluating an already-final forecast in
the face of new information. It sensitizes one to the weak signals of changes coming over
the horizon and keeps the hapless forecaster from becoming so attached to their model
that reality intrudes too late to make a difference.
Peter Brandt The real opponent of a trader is himself. Not the markets, not other traders down the
street, not some commercial house – my opponent in the market is Peter Brandt.
Peter L. Bernstein Even the most brilliant mathematical geniuses will never be able to tell us what the future
holds. In the end, what matters is the quality of our decisions in the face of uncertainty.
Ray Dalio Our greatest power is that we know that we don't know and we are open to being wrong
and learning.
I believe the biggest problem humanity faces is an ego sensitivity to finding out whether
one is right or wrong and identifying what one's strengths and weaknesses are.
Reminiscences of a Stock It struck me at once that if my dope didn't work in practice there was nothing in the theory
Operator of it to interest anybody.


Reminiscences of a Stock I have noticed that there is quite a difference between talking and trading. Some of these
Operator chaps remind you of the bold clerk who talks to his cantankerous employer as to a yellow
dog — when he tells you about it.
The big men of the Street are as prone to be wishful thinkers as the politicians or the plain
suckers. I myself can't work that way. In a speculator such an attitude is fatal. Perhaps a
manufacturer of securities or a promoter of new enterprises can afford to indulge in hope-
jags.
The belief in miracles that all men cherish is born of immoderate indulgence in hope.
There are people who go on hope sprees periodically and we all know the chronic hope
drunkard that is held up before us as an exemplary optimist.
Richard D. Wyckoff Success in trading means an excess of profits over losses. Success in the investment
field means more good than bad investments. If any one tells you he can be almost
invariably successful, put him down as trying to impose on your credulity.
Richard Feynman For a sucessful technology, honesty must take precedence over public relations—for
nature cannot be fooled.
Robert J. Shiller Conventional wisdom interprets the stock market as reacting to new era theories. In fact, it
appears that the stock market often creates new era theories, as reporters scramble to
justify stock market price moves.
Rudolph Steiner Thinking… is no more and no less an organ of perception than the eye or ear. Just as the
eye perceives colors and the ear sounds, so thinking perceives ideas.
The Art of Learning Confidence is critical for a great competitor, but overconfidence is brittle. We are too
smart for ourselves in such moments. We sense our mortality like a cancer beneath the
bravado, and when things start to go out of control, there is little real resilience to fall back
on.
Tommy Angelo If we carry in our mind a false image of ourselves, and that image gives us confidence,
and the confidence itself increases the probability that we will procreate, then it doesn't
matter that the image is false. Delusion will be naturally selected.
Van Tharp We typically trade our beliefs about the market and once we've made up our minds about
those beliefs, we're not likely to change them. And when we play the markets, we assume
that we are considering all of the available information. Instead, our beliefs, through
selective perception, may have eliminated the most useful information.
Victor Sperandeo In trading, you can't hide your failures. Your equity provides a daily reflection of your
performance. The trader who tries to blame his losses on external events will never learn
from his mistakes.
William Eckhardt I haven't seen much correlation between good trading and intelligence. Some outstanding
traders are quite intelligent, but a few aren't. Many outstandingly intelligent people are
horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more
important.
William James Many people think they are thinking when they are merely rearranging their prejudices.
Winston Churchill There is no worse course in leadership than to hold out false hopes soon to be swept
away.
DEEP WISDOM

Abraham Lincoln It's not the years in your life that count. It's the life in your years.


Alan Watts You are an aperture through which the universe is looking at and exploring itself.
Albert Einstein The intuitive mind is a sacred gift and the rational mind is a faithful servant. We have
created a society that honors the servant and has forgotten the gift.
Alfred North Whitehead There are no whole truths; all truths are half-truths. It is trying to treat them as whole
truths that plays the devil.
Aristotle Men become builders by building houses, and harpists by playing the harp. Similarly, we
grow just by the practice of just actions, self-controlled by exercising our self-control, and
courageous by performing acts of courage.
It is not the function of the poet to relate what has happened, but what may
happen...poetry, therefore, is a more philosophical and a higher thing than history: For
poetry tends to express the universal, history the particular.
Arthur Schopenhauer All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed.
Third, it is accepted as being self-evident.
...and boredom is nothing other than the sensation of the emptiness of existence...
Change alone is perpetual, eternal, immortal.
Ayn Rand Wealth is the product of man's capacity to think.
Benjamin Franklin They who can give up essential liberty to obtain a little temporary safety, deserve neither
liberty nor safety.
Bertrand de Jouvenel A society of sheep must in time beget a government of wolves.
Bo Fowler It is entirely possible that the universe is contained in a small green box on a shelf in the
back of God's camper van, but does this help? Does it alleviate any need? Is it in the
slightest way helpful or constructive?
Bruce Lee Be formless… shapeless, like water. If you put water into a cup, it becomes the cup. You
put water into a bottle; it becomes the bottle. You put it into a teapot; it becomes the
teapot. Water can flow, and it can crash. Be like water my friend.
Carl Sagan If you want to make a birthday cake from scratch, you must first create the universe.
We are a way for the cosmos to know itself.
Carl von Clausewitz There are very few men — and they are the exceptions — who are able to think and feel
beyond the present moment.
Chairman Mao The enemy advances, we retreat; the enemy camps, we harass; the enemy tires, we
attack; the enemy retreats, we pursue.
Chairman Mao There is great disorder under heaven... the situation is excellent.
Charles MacKay Of all the offspring of Time, Error is the most ancient, and is so old and familiar an
acquaintance, that Truth, when discovered, comes upon most of us like an intruder, and
meets the intruder's welcome.
Chinese proverb A mind all logic is like a knife all blade.
Chinese proverb Fish see the bait, but not the hook; men see the profit, but not the peril.
Clifford Geertz Man is an animal suspended in webs of significance that he himself has spun.


Confucius To know that we know what we know, and that we do not know what we do not know, that
is true knowledge.
Cyril Connolly Only by avoiding the beginning of things can we escape their ending.
Dickson G. Watts Genius consists of seeing instantly the vital point.
Donald Rumsfeld Everyone's entitled to their own opinion, but they're not entitled to their own facts.
E.B. White Creation is in part merely the business of forgoing the great and small distractions.
E.O. Wilson In a purely technical sense, each species of higher organism is richer in information than
a Caravaggio painting, Bach fugue, or any other great work of art.
Epicurus The wealth required by nature is limited and is easy to procure; but the wealth required by
vain ideals extends to infinity.
Eric Hoffer To be aware how fruitful the playful mood can be is to be immune to the propaganda of
the alienated, which extols resentment as a fuel of achievement.
Erica Jong Take your life in your own hands and what happens? A terrible thing: no one to blame.
Ernest Hemingway Never mistake motion for action.
Eugen Herrigel The way goes onward and contains its own correction.
Francis Bacon If money be not thy servant, it will be thy master.
Friedrich Nietzsche Necessity is not an established fact, but an interpretation.
Galileo Galilei Measure what is measurable, and make measurable what is not so.
General George S. Patton Most battles are won before they are ever fought.
General Kurt von Hammerstein- I divide my officers into four classes; the clever, the lazy, the industrious, and the stupid.
Equord (1933) Each officer possesses at least two of these qualities. Those who are clever and
industrious are fitted for the highest staff appointments. Use can be made of those who
are stupid and lazy. The man who is clever and lazy however is for the very highest
command; he has the temperament and nerves to deal with all situations. But whoever is
stupid and industrious is a menace and must be removed immediately!
Georg Wilhelm Friedrich Hegel Because such a thing is, it is, and as it is, so ought it to be. Here there is no contrast to be
seen, and therefore no sense of bondage, no pain, and no sorrow.
George Bernard Shaw There is the true joy of life, to be used by a purpose recognized by yourself as a mighty
one; to be thoroughly worn out before being thrown on the scrap heap; to be a force of
nature instead of a feverish, selfish little clod of ailments and grievances complaining that
life will not devote itself to making you happy.
George Soros I am in favor of competing, but I am also in favor of preserving the system that permits
competition. Where I am at odds with the latter-day apostles of laissez faire is that I don't
believe markets are perfect. In my opinion, they are just as likely to lead to unsustainable
excesses as to equilibrium.
George Soros If you consider our position as human beings trying to understand the world in which we
live, you will find that we cannot confine our thinking to subjects that are independent of
our thinking. We must make decisions about our lives and in order to do so we must hold
views that do not qualify as knowledge, whether we recognize this or not. We must have
recourse to beliefs. That is the human condition.


Natural science deals with events that occur independently of what anybody thinks about
them; therefore, it can treat events as a succession of facts. When events have thinking
participants, the chain of causation does not lead directly from one set of facts to the next;
insofar as the participant's thinking plays a role, it leads from facts to perceptions, from
perceptions to decisions and from decisions to the next set of facts. There is also the
direct link between one set of facts and the next which is characteristic of all natural
phenomena. But the more circuitous link cannot be left out of account without introducing
a distortion. The distortion is negligible when people's thinking is close to reality: it
becomes significant when perception and reality are far apart.
I propose that we need three categories — true, false, and reflexive. The truth value of
reflexive statements is indeterminate. It is possible to find other statements with an
indeterminate truth value, but we can live without them. We cannot live without reflexive
statements. I hardly need to emphasize the profound significance of this proposition.
Nothing is more fundamental to our thinking than our concept of truth.
The market mechanism is better than other arrangements only because it provides
feedback and allows mistakes to be corrected. This is the equivalent of Churchill's dictum
about democracy: It is the worst system, except all the others.
Ever since the Crash of 2008 there has been a widespread recognition, both among
economists and the general public, that economic theory has failed. But there is no similar
consensus... on the nature and implications of that failure... I believe that the failure is
more profound than generally recognized. It goes back to the foundations of economic
theory.
Economics tried to model itself on Newtonian physics. It sought to establish universally

and timelessly valid laws that govern reality. But economics is a social science and there
is a fundamental difference between the natural and social sciences. Social phenomena
have thinking participants who base their decisions on imperfect knowledge. That is what
economic theory has tried to ignore.
Goethe It's easier to perceive error than to find truth, for error lies on the surface and is easily
seen, while truth lies in the depths, where few are willing to search for it.
Gravity's Rainbow A screaming came across the sky.
Gustave Le Bon Crowds are somewhat like the sphinx of ancient fable: It is necessary to arrive at a
solution of the problems offered by their psychology or to resign ourselves to being
devoured by them.
Hamlet There are more things in heaven and earth, Horatio, than are dreamt of in your
philosophy.
Henrik Ibsen Castles in the air — they are so easy to take refuge in.
Henry David Thoreau Only that day dawns to which we are awake.
Heraclitus All things come into being by conflict of opposites.
All is flux, nothing stays still.
Nothing endures but change.
Heraclitus Everything flows.
Homer's Iliad Victory shifts from man to man.
House of Leaves This is not for you.


Hunter S. Thompson History is hard to know, because of all the hired bullshit, but even without being sure of
'history' it seems entirely reasonable to think that every now and then the energy of a
whole generation comes to a head in a long fine flash, for reasons that nobody really
understands at the time—and which never explain, in retrospect, what actually
happened...
Immanuel Kant Intuition and concepts constitute... the elements of all our knowledge, so that neither
concepts without an intuition in some way corresponding to them, nor intuition without
concepts, can yield knowledge.
Indira Gandhi Learn to be still in the midst of activity and to be vibrantly alive in repose.
Jack Sparrow Theory without practice only survives in the suspended animation chambers of academia
and government, where political survival skill, ideological purity, and self-perpetuating
mediocrity (plodders promoting plodders) outweigh actual usefulness or merit.
Every path chosen precludes an infinite number of alternative paths.
'Know your own strength' can be taken as a pessimistic warning or a lofty aspiration. It all
depends on how you look at it. But then that's pretty much true of everything.
The universe is a perfect machine. It cannot put a foot wrong.
Japanese proverb The reverse side also has a reverse side.
One inch ahead all is darkness.
Jim Morrison The future's uncertain and the end is always near...
John Maynard Keynes By a continuing process of inflation, government can confiscate, secretly and unobserved,
an important part of the wealth of their citizens.
John Muir This grand show is eternal. It is always sunrise somewhere; the dew is never dried all at
once; a shower is forever falling; vapor ever rising. Eternal sunrise, eternal sunset, eternal
dawn and gloaming, on seas and continents and islands, each in its turn, as the round
earth rolls.
Jon Kabat-Zinn It is all too easy to remain on something of a fog-enshrouded, slippery slope right into our
graves; or, in the fog-dispelling clarity which on occasion precedes the moment of death,
to wake up and realize that what we had thought all those years about how life was to be
lived and what was important were at best unexamined half-truths based on fear or
ignorance, only our own life-limiting ideas, and not the truth or the way our life had to be at
all.
When it comes down to it, wherever you go, there you are. It's your life that is unfolding.
Jonathan Haidt Only by knowing the kinds of being that we actually are, with the complex mental and
emotional architecture that we happen to possess, can anyone even begin to ask about
what would count as a meaningful life.
People gain a sense of meaning when their lives cohere across the three levels of their
existence [physical, psychological, social].
Joseph Conrad You shall judge a man by his foes as well as his friends.
Julius Caesar Men willingly believe what they wish.
Keith Campbell Government regulation and intervention have been, are, and will continue to be present
for as long as society needs rules by which to live. Today's governmental intervention or
decree is tomorrow's opportunity.


Free markets will always find their own means of price discovery.
Kevin Kelly Complexity must be grown from simple systems that already work.
There is nothing to be found in a beehive that is not submerged in a bee. And yet you can
search a bee forever with cyclotron and fluoroscope, and you will never find a hive.
'It works, why worry?' is life's deepest philosophy.
In turbulence is the preservation of the world.
When everything happens at once, wide and fast moving problems simply route around
any central authority. Therefore overall governance must arise from the most humble
interdependent acts done locally in parallel, and not from a central command.
Lao Tzu Man must accept motion.
Lee Humphries Within their areas of competence, experts have many more categories of awareness than
novices. The perception of subtleties is what Michael Jordan, Warren Buffett, and Yo-Yo
Ma have in common.
Leonardo da Vinci In rivers, the water that you touch is the last of what has passed and the first of that which
comes; so with present time.
Iron rusts from disuse; water loses its purity from stagnation... even so does inaction sap
the vigor of the mind.
Liu Ji Whenever you pursue people on the run, chasing beaten soldiers, you must make sure
whether they are really fleeing or just feigning.
Louis David Brandeis The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well-
meaning but without understanding.
Ludwig Borne Losing an illusion makes you wiser than finding a truth.
M.C. Escher We adore chaos because we love to produce order.
There has to be a certain enigma in it, which does not immediately catch the eye.
Mike McDermott We can't run from who we are. Our destiny chooses us.
Mikhail Bakunin The supreme law of the State is self-preservation at any cost. All States, ever since they
came to exist upon the earth, have been condemned to perpetual struggle — a struggle
against their own populations, whom they oppress and ruin. A struggle against all foreign
States, every one of which can be strong only if the others are weak. And since the States
cannot hold their own in this struggle unless they constantly keep on augmenting their
power against their own subjects as well as against other States, it follows that the
supreme law of the State is the augmentation of its power to the detriment of internal
liberty and external justice.
Nassim Taleb You don't become completely free by just avoiding to be a slave; you also need to avoid
becoming a master.
Nassim Taleb Mathematics is to knowledge what an artificial hand is to the real one; some amputate to
replace.
Since Plato, Western thought and the theory of knowledge have focused on the notions of
True-False; as commendable as it was, it is high time to shift the concern to Robust-
Fragile, and social epistemology to the more serious problem of Sucker-Nonsucker.


Knowledge is subtractive, not additive — what we subtract, not what we add.
Suckers think that you cure greed with money, addiction with substance, expert problems
with experts, banking with bankers, economics with economists, and debt crises with debt
spending.
Navy SEAL credo The more you sweat in training, the less you bleed in war.
Niccolo Machiavelli For the great majority of mankind are satisfied with appearances, as though they were
realities.
Nisargadatta Maharaj The search for Reality is the most dangerous of all undertakings for it will destroy the
world in which you live.
Oliver Wendell Holmes Truth is tough. It will not break, like a bubble, at a touch. Nay, you may kick it about all
day, and it will be round and full at evening.
P.T. Barnum Money is a terrible master but an excellent servant.
Paul Graham A big company is like a giant galley driven by a thousand rowers. Two things keep the
speed of the galley down. One is that individual rowers don't see any result from working
harder. The other is that, in a group of a thousand people, the average rower is likely to
be pretty average.
Paul Kennedy ...it simply has not been given to any one society to remain permanently ahead of all the
others, because that would imply a freezing of the differential pattern of growth rates,
technological advance, and military developments which has existed since time
immemorial.
Paul Simon And God only knows... and God makes his plan... the information's unavailable to the
mortal man...
Plato The beginning is the most important part of the work.
Primo Levi To watch the behavior of a man who acts not according to reason, but according to his
own deep impulses, is a spectacle of extreme interest, similar to that which the naturalist
enjoys when he studies the activities of an animal of complex instincts.
Hazarding guesses (extremely rough ones, for that matter) about the behavior of a
population has some meaning. It is, however, almost impossible to foresee the behavior
of an individual, even on a day-to-day basis. In the same way, the physicist can
prognosticate with great exactitude the time a gram of radium will need to halve its activity
but is totally unable to say when a single atom of that same radium will disintegrate.
Richard Bookstaber Evolution is not a conscious process. It is a winnowing out of the poorly designed and
emergence of the better designed on the basis of the process of natural selection. In
contrast, in finance the process is conscious and intelligent.
Richard Feynman Our imagination is stretched to the utmost not, as in fiction, to imagine things which are
not really there, but just to comprehend those which are.
Richard Feynman So Nick the Greek was really an educated character. He was a very nice and engaging
man. I thanked him for the explanation; now I understood it. I have to understand the
world, you see.


Robert Pirsig To live only for some future goal is shallow. It's the sides of the mountain which sustain
life, not the top. Here's where things grow. But of course, without the top you can't have
any sides. It's the top that defines the sides.
Seng-ts'an The perfect way is only difficult for those who pick and choose; do not like, do not dislike;
all will then be clear.
Seth Klarman [Last year] felt like we were playing a great hand of cards in the basement of a
condemned building filled with explosives during an earthquake.
Shakespeare Fortune brings in some boats that are not steered.
Siddhartha Gautama All that we are is the result of what we have thought.
Socrates How many things I have no need of!
Sun Tzu The supreme art of war is to subdue the enemy without fighting.
When the speed of rushing water reaches the point where it can move boulders, this is
the force of momentum. When the speed of a hawk is such that it can strike and kill, this is
precision. So it is with skillful warriors — their force is swift, their precision is close.
So in the case of those who are skilled in attack, their opponents do not know where to
defend. In the case of those skilled in defense, their opponents do not know where to
attack.
Good warriors prevail when it is easy to prevail.
The rule is: When the enemy is far away but tries to promote hostilities, he wants you to
move forward.
Whoever has form can be defined, and whoever can be defined can be overcome.
If you sit by the river long enough, you will see the bodies of your enemies float by.
Those who are first on the battlefield and await the opponents are at ease; those who are
last on the battlefield and head into battle get worn out.
To unfailingly take what you attack, attack where there is no defense. For unfailingly
secure defense, defend where there is no attack.
Be extremely subtle, even to the point of formlessness.
To advance irresistibly, push through their gaps. To retreat elusively, outspeed them.
Therefore victory in war is not repetitious, but adapts its form endlessly.
Talking Heads Same as it ever was, same as it ever was. Same as it ever was, and look where my hand
was. Time isn't holding us, and time isn't after us. Same as it ever was, same as it ever
was...
The Art of Learning Who knows water like a man dying of thirst? The human mind defines things in relation to
one another — without light the notion of darkness would be unintelligible.
The Art of Learning The similarity is that a life-or-death scenario kicks the human mind into a very narrow area
of focus. Time feels slowed down because we instinctively zero in on a tiny amount of
critical information that our processor can then break down as if it is in a huge font. The
trained version of this state of mind shares that tiny area of conscious focus. The


difference is that, in our disciplines of choice, we cultivate this experience by converting all
the other surrounding information into unconsciously integrated data instead of ignoring it.
The Call of Cthulhu The most merciful thing in the world, I think, is the inability of the human mind to correlate
all its contents. We live on a placid island of ignorance in the midst of black seas of
infinity, and it was not meant that we should voyage far. The sciences, each straining in its
own direction, have hitherto harmed us little; but some day the piecing together of
dissociated knowledge will open up such terrifying vistas of reality, and of our frightful
position therein, that we shall either go mad from the revelation or flee from the light into
the peace and safety of a new dark age.
The Toadies I come from the water, that weren't no easy thing... It's more than nature, it's like my
destiny...
Thucydides The society that separates its scholars from its warriors will have its thinking done by
cowards and its fighting by fools.
V.S. Ramachandran The brain is a 1.5 kilogram mass of jelly, the consistency of tofu, you can hold it in the
palm of your hand, yet it can contemplate the vastness of space and time, the meaning of
infinity and the meaning of existence. It can ask questions about who am I, where do I
come from, questions about love and beauty, aesthetics, and art, and all these questions
arising from this lump of jelly. It is truly the greatest of mysteries.
Virgil Happy the man who has been able to learn the causes of things.
Walter Bagehot Life is a school of probability.
William Blake Without Contraries is no progression. Attraction and Repulsion, Reason and Energy, Love
and Hate, are necessary to Human existence.
William Cowper Existence is a strange bargain. Life owes us little; we owe it everything. The only true
happiness comes from squandering ourselves for a purpose.
Winston Churchill The empires of the future are the empires of the mind.
Zen and the Art of Poker ...over the long run the hands you fold make the hands you do play stand out more
sharply and give them more power.
Zen proverb Everything is true just as it is: Why dislike it? Why hate it?
Sitting quiet, doing nothing, spring comes, and grass grows by itself.
Zhuge Liang When you see the enemy to be empty, proceed; where you see the enemy to be full, stop.
To overcome the intelligent by folly is contrary to the natural order of things; to overcome
the foolish by intelligence is in accord with the natural order. To overcome the intelligent
by intelligence, however, is a matter of opportunity.

IRONY

Aaron Levenstein Statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital.
Absalon Uyawayaska We sell ourselves to be able to buy that which doesn't serve us, and when what we really
need comes before us, we no longer have the means left to acquire it.


Adam Smith When national debts have once been accumulated to a certain degree, there is scarce, I
believe, a single instance of their having been fairly and completely paid.
Aesop We hang the petty thieves and appoint the great ones to office.
Albert Einstein Human beings must have action; and they will make it if they cannot find it.
In order to be an immaculate member of a flock of sheep, one must above all be a sheep
oneself.
Memory is deceptive because it is colored by today's events.
Anais Nin We don't see things as they are, we see things as we are.
Andrew Tobias People who buy stocks when they get bonuses and sell them when the roof starts to leak
are entrusting their investment decisions to their roofs.
Aristotle No great genius has ever existed without some touch of madness.
Arturo Albergati People don't change their minds. They die, and are replaced by people with different
opinions.
Barry Ritholtz The tenacity of bad ideas is quite astounding. Just because something is wrong, and
verifiably so, does not seem to have much immediate impact. It remains a stable of
academia, as well as the actual practice of investing — despite its questionable truth. We
should not be surprised at this. Recall what Max Planck — who won a Nobel Prize for
Physics in 1918 for originating quantum theory — famously said: "Truth never triumphs —
its opponents just die out. Science advances one funeral at a time."
Most of the time, people exist in a happy little bubble of self-created delusion. We engage
in selective perception, seeing only the things that agree with us. Our selective retention
retains the good stuff and disregards most of the rest... In short, we construct a reality that
bears only passing resemblance to the objective universe.
Barton Biggs Nations, institutions, and individuals always have had and still have a powerful tendency
to prepare themselves to fight the last war.
Benjamin Disraeli What we learn from history is that we do not learn from history.
Benjamin Franklin One of the greatest tragedies of life is the murder of a beautiful theory by a gang of brutal
facts.
Bertrand Russell The biggest cause of trouble in the world today is that the stupid people are so sure about
things and the intelligent folks are so full of doubts.
Bil Dries If all it took to beat the markets was a P.h.D in mathematics, there'd be a hell of a lot of
rich mathematicians out there.
Bo Fowler Some say you cannot sit on the fence forever. What they fail to realize is that the fence is
very wide, has everything one could need and has the best of all views.
Boss Tweed The appearance of law must be upheld, especially when it's being broken.
Carl Jung You meet your destiny on the road you take to avoid it.
Carl Richards Buy greed at tops; Sell fear at bottoms; Repeat until broke.
Carl von Clausewitz The greatest enemy of a good plan is the dream of a perfect plan.


Charles Bukowski How in the hell could a man enjoy being awakened at 6:30 by an alarm clock, leap out of
bed, dress, force-feed, shit, piss, brush teeth and hair, and fight traffic to get to a place
where essentially you made lots of money for somebody else and were asked to be
grateful for the opportunity to do so?
Charles H. Dow The public rarely sees values until they are pointed out.
Charles P. Kindleberger When the government produces one quantity of the public good, money, the public will
proceed to make more, just as lawyers find new loopholes in tax laws as fast as
legislation closes up old ones.
Charlie Munger A man does not deserve huge amounts of pay for creating tiny spreads on huge amounts
of money. Any idiot can do it. And, as a matter of fact, many idiots do do it.
Very-high-IQ people can be completely useless. And many of them are.
Cicero A bureaucrat is the most despicable of men, though he is needed as vultures are needed,
but one hardly admires vultures whom bureaucrats so strangely resemble. I have yet to
meet a bureaucrat who was not petty, dull, almost witless, crafty or stupid, an oppressor
or a thief, a holder of little authority in which he delights, as a boy delights in possessing a
vicious dog. Who can trust such creatures?
Cliff Asness If you can get savage capitalists to rationally act like a team, then you have a beautiful
thing.
Confucius And remember — wherever you go, there you are.
Count Axel Gustaffson Thou dost not know, my son, with how little wisdom the world is governed.
Oxenstierna
Credit Cycles and the Origins of Panics do not destroy capital — they merely reveal the extent to which it has previously
Commercial Panics, 1867 been destroyed by its betrayal in hopelessly unproductive works.
Damon Runyon The race is not always to the swift, nor the battle to the strong... but that's the way to bet.
David Eagleman Brains are in the business of gathering information and steering behavior appropriately. It
doesn't matter whether consciousness is involved in the decision making. And most of the
time it's not. Whether we're talking about dilated eyes, jealousy, attraction, the love of fatty
foods, or the great idea you had last week, consciousness is the smallest player in the
operations of the brain... most of what we do and think and feel is not under conscious
control. Our brains run mostly on autopilot, and the conscious mind has little access to the
giant and mysterious factory that runs below it.
Decision Traps To a large extent the world seems to conspire against learning.
Don Colacho Nothing is more irritating than the certainty with which a man who has had success at one
thing gives his opinion on everything.
Doug Fabian Wall Street dumps so much BS on the public, you need a shovel to clear yourself a path.
Douglas Adams The major difference between a thing that might go wrong and a thing that cannot
possibly go wrong is that, when a thing that cannot possibly go wrong goes wrong, it
usually turns out to be impossible to get at or repair.
The fact that we live at the bottom of a deep gravity well, on the surface of a gas-covered
planet going around a nuclear fireball 90 million miles away, and think this to be normal, is
obviously some indication of how skewed our perspective tends to be.
Dubner and Levitt, Monkey But these facts remain: When taught to use money, a group of capuchin monkeys
Business NYT June 2005 responded quite rationally to simple incentives; responded irrationally to risky gambles;


failed to save; stole when they could; used money for food and, on occasion, sex. In other
words, they behaved a good bit like the creature that most of Chen's more traditional
colleagues study: Homo sapiens.
Ed Seykota The markets are the same now as they were five to ten years ago because they keep
changing — just like they did then.
A lot of people would rather understand the market than make money.
Inflation is part of the way societies sweep away the old order. All currencies eventually
get debased — like it or not. Compute one penny invested at the time of Christ,
compounded at 3 percent per year. Then consider why nobody has anywhere near that
amount these days.
Luck plays an enormous role in trading success. Some people were lucky enough to be
born smart, while others were even smarter and got born lucky.
The joy of winning and the pain of losing are right up there with the pain of winning and
the joy of losing. Also to consider are the joy and pain of not participating. The relative
strengths of these feelings tend to increase with the distance of the trader from his
commitment to being a trader.
[Traders fail] for the same reason that most baby turtles fail to reach maturity: Many are
called and few are chosen. Society works by the attraction of the many. As they are culled
out, the good ones are left, and the others are released to go try something else until they
find their calling. The same is true for other fields of pursuit.
Win or lose, everybody gets what they want out of the market. Some people like to lose,
so they win by losing money.
It is a happy coincidence that when nature gives us true burning desires, she also gives
us the means to satisfy them. Those who want to win and lack skill can get someone with
skill to help them.
Elbert Hubbard Genius may have its limitations, but stupidity is not thus handicapped.
Ellen Goodman Normal is getting dressed in clothes that you buy for work and driving through traffic in a
car that you are still paying for — in order to get to the job you need to pay for the clothes
and the car, and the house you leave vacant all day so you can afford to live in it.
Emanuel Derman The success of options valuation is the story of a simple, asymptotically correct idea,
taken more serious than it deserved, and then used extravagantly, with hubris, as a crutch
to human thinking.
Eric Hoffer When people are free to do as they please, they usually imitate each other.
In times of change learners inherit the earth; while the learned find themselves beautifully
equipped to deal with a world that no longer exists.
There are many who find a good alibi far more attractive than an achievement. For an
achievement does not settle anything permanently. We still have to prove our worth anew
each day; we have to prove that we are as good today as we were yesterday. But when
we have a valid alibi for not achieving anything we are fixed, so to speak, for life.
Frank Underwood (House of Nobody can hear you. Nobody cares about you. Nothing will come of this.
Cards)
Fred Schwed Where are the customers' yachts?
Friedrich Schiller Against stupidity the gods themselves contend in vain.



Anyone taken as an individual is tolerably sensible and reasonable — as a member of a

crowd, he at once becomes a blockhead.
George Bernard Shaw If all the economists were laid end to end, they would never reach a conclusion.
George Santayana The world is perpetual caricature of itself; at every moment it is the mockery of what it is
pretending to be.
Those who forget history are condemned to repeat it.
George Soros Classical economic theory assumes that market participants act on the basis of perfect
knowledge. That assumption is false. The participant's perceptions influence the market in
which they participate, but the market action also influences the participant's perceptions.
They cannot obtain perfect knowledge of the market because their thinking is always
affecting the market and the market is affecting their thinking.
When speculators profit, the authorities have failed in some way or another. But they don't
like to admit failure; they would rather call for speculators to be hung from lampposts than
to engage in a little bit of soul-searching to see what they did wrong.
Economics theory tried to imitate physics. Classical economists took Newton as their
model — forgetting that Newton lost a fortune in the South Sea Bubble. The only way they
could imitate physics was by eliminating reflexivity from their subject. Hence the
assumption of perfect knowledge, which was later amended to perfect information.
I am not well qualified to criticize the theory of rational expectations and the efficient
market hypothesis because as a market participant I considered them so unrealistic that I
never bothered to study them.
Groucho Marx Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and
applying the wrong remedies.
H.L. Mencken A newspaper is a device for making the ignorant more ignorant and the crazy crazier.
Every decent man is ashamed of the government he lives under.
Democracy is the theory that the common people know what they want and deserve to
get it good and hard.
The world always makes the assumption that the exposure of an error is identical with the
discovery of truth—that the error and truth are simply opposite. They are nothing of the
sort. What the world turns to, when it is cured on one error, is usually simply another error,
and maybe one worse than the first one.
Harvey Houtkin There is no magic wand that anyone can wave to make you successful, independently
wealthy, and completely happy.
Henry Howard Harper, The When once caught in the maelstrom of stock speculation the average man becomes more
Psychology of Speculation or less mesmerized, and at critical moments his conservatism, his resolutions and his
theories all take flight. Under the discomposing influence of a rapid succession of
changing values and alternating impulses he loses his perspective, is incapable of calm
reasoning, and is likely to do precisely the opposite of what he had intended to do.
Herbert Spencer The ultimate result of shielding men from the effects of folly is to fill the world with fools.
Hisashi Shinto, chairman of One day people engaged in the money game are going to incur the wrath of God.
Japan's NTT, circa 1987


Howard Marks If no one underestimated risk and thus overloaded capital structures with debt, there
wouldn't be many defaults and bankruptcies. We call these lending decisions "the unwise
extension of credit" or, alternatively, "stacking wood for the bonfire."
Everyone knows that if you reach into a bag containing both black and white balls and pull
out ten white ones in a row, the probability has increased that the next one will be black.
But in the investment world, events like that serve to convince people that there are only
white balls - favorable outcomes - in the bag. That's part of the illogical, emotional thinking
that makes for bull markets and bubbles.
Howard Marks Turning conservative after a crisis smacks of closing the barn door after the horse has left,
but it's a regular feature of investor psychology.
Hunter S. Thompson When the going gets weird, the weird turn pro.
The Edge... there is no honest way to explain it because the only people who really know
where it is are the ones who have gone over.
The TV business is uglier than most things. It is normally perceived as some kind of cruel
and shallow money trench through the heart of the journalism industry, a long plastic
hallway where thieves and pimps run free and good men die like dogs, for no good
reason.
Myths and legends die hard in America. We love them for the extra dimension they
provide, the illusion of near-infinite possibility to erase the narrow confines of most men's
reality. Weird heroes and mould-breaking champions exist as living proof to those who
need it that the tyranny of 'the rat race' is not yet final.
J.K. Galbraith The world of finance hails the invention of the wheel over and over again, often in a
slightly more unstable version.
Politics is not the art of the possible. It consists in choosing between the disastrous and
the unpalatable.
Jack Sparrow Typical "contrarianism:" Pointing to one's pathetically conventional target of choice and
saying "LOL u guyz r dum so I'm goin 2 do the opposite LMFAO"...
Cloaking one's statements in mysterious impenetrable gibberish, instead of speaking

clearly and plainly, is a classic device of oracles, shamans, gnostic seers, and other such
shepherds in search of gullible sheep. The trick is in getting your acolyte to misinterpret
complexity and opacity as hallmarks of a secret knowledge. Then, once hooked, said
acolyte can be exploited, perhaps indefinitely, as he strains and struggles to understand
the secrets for himself. The more gibberish that the shepherd speaks, the more entranced
the sheep becomes.
Funny old world innit?
Rare is the blessing that bears no resemblance to curse.
Financial commentators who don't actually invest are like sex therapists who don't have
sex.
In their worship of logic and rationality, economists are amusingly short-sighted and
irrational.
Government is to efficiency as Britney Spears is to gravitas.


Jack Sparrow Some assert that the government is "not operationally constrained." This is pedantically
true in the sense that a man standing at the edge of a cliff is not operationally constrained.
He can throw himself off, but that doesn't mean he can fly.
Trading is easy, same as poker is easy -- just hit your flushes and straights on the turn.
James Montier Economists are probably the one group who make astrologers look like professionals
when it comes to telling the future.
Jeremy Grantham Big investment firms love big, hairy bull markets and delicious crashes so they can design
and sell more instruments.
Jiddu Krishnamurti It is no measure of health to be well-adjusted to a sick society.
Joe D'Amico I have friends who run sports books. I got to tell you, none are without stomach problems.
John Dorfman What do head-and-shoulders formations, bases and pornography have in common? They
are all very difficult to define, even though some stock-market technical analysts (and
judges) are sure they know them when they see them.
John Locke It is one thing to show a man that he is in an error, and another to put him in possession
of the truth.
John Masters That warm sense of everything going well is usually the body temperature at the center of
the herd.
John Maynard Keynes Professional investment may be likened to those newspaper competitions in which the
competitors have to pick out the six prettiest faces from a hundred photographs, the prize
being awarded to the competitor whose choice most nearly corresponds to the average
preferences of the competitors as a whole; so that each competitor has to pick, not those
faces which he himself finds prettiest, but those which he thinks likeliest to catch the fancy
of the other competitors, all of whom are looking at the problem from the same point of
view.
John Steinbeck Man is the only kind of varmint sets his own trap, baits it, then steps in it.
John Templeton The four most dangerous words in investing are This time its different.
Jon Stewart I'm beginning to think these are not perfect storms. I'm beginning to think these are
regular storms and we have a shitty boat.
Jonathon Clements If you ask five experts where to invest, there will be six answers; the five expert opinions,
plus the right one.
Jose Ortega Y Gasset Tell me to what you pay attention and I will tell you who you are.
Joseph Conrad It is the mark of an inexperienced man not to believe in luck.
Joseph Goebbels Think of the press as a great keyboard on which the government can play.
Larry Hite I have a friend who is an economist. He would try to explain to me, as if talking to a child,
why what I was trying to do was futile, because 'the markets are efficient.' I have noticed
that everyone who has ever told me that the markets are efficient is poor.
Lenin There are decades when nothing happens and there are weeks when decades happen.
Lex (FT) Frank Zappa once said that rock journalism is people who can't write, interviewing people
who can't talk, for people who can't read. Something similar can be said for stock markets.
They are mostly myopic, unpredictable, crazily mispriced and followed by equally clueless
investors.


Liar's Poker Most of the time when markets move, no one has any idea why. A man who can tell a
good story can make a good living as a broker. It was the job of people like me to make
up reasons, to spin a plausible yarn. And it's amazing what people will believe.
Louis C.K. We were both in our early twenties then. At that age all bets are off. Everyone is dumb in
their twenties. God bless 'em.
Ludwig Von Mises They promise the blessings of the Garden of Eden, but they plan to transform the world
into a gigantic post office. Every man but a subordinate clerk in a bureau. What an alluring
utopia! What a noble cause to fight!
M.C. Escher He who wonders discovers that this, in itself, is wonder.
Marcus Tullius Cicero, 55 BC The Budget should be balanced, the Treasury should be refilled, public debt should be
reduced, the arrogance of officialdom should be tempered and controlled, and the
assistance of foreign lands should be curtailed lest the Republic become bankrupt. People
must again learn to work, instead of living on public assistance.
Mark Twain History doesn't repeat, but sometimes it rhymes.
Marty Schwartz Wall Street doesn't want to see the emperor naked. He may be old and fat and flabby, but
they don't want to know it. They want to see him regal and royal in all his majesty. And as
long as they see him that way, that's the way he is, because they keep on buying. Big ball
keep on rolling.
Marty Whitman The gutters of Wall Street are strewn with the bodies of people who looked good for five
years.
Meir Statman The lure of online trading seems to be that here is something you can do with no skill, no
knowledge, and yet you can make tons of money.
Michael Steinhardt The stock market is an inexact phenomenon. Laypersons' opinions often seem as worthy
as professionals', and shoeshine men and brokers compete for genius.
One of the allures of this business is that sometimes the greatest ignoramus can do very
well. That is unfortunate because it creates the impression that you don't necessarily need
any professionalism to do well, and that is a great trap.
Michel de Montaigne In their beginnings it is we who guide affairs and hold them in our power; but so often
once they are set in motion, it is they which guide us and sweep us along.
Napoleon Nothing is more difficult, and therefore more precious, than to be able to decide.
Napoleon Bonaparte, 1815 When a government is dependent upon bankers for money, they and not the leaders of
the government control the situation, since the hand that gives is above the hand that
takes… Money has no motherland; financiers are without patriotism and without decency;
their sole object is gain.
Nassim Taleb If you want to accelerate someone's death, give him a personal doctor.
The three most harmful addictions are heroin, carbohydrates, and a monthly salary.
Asking science to explain life and vital matters is equivalent to asking a grammarian to
explain poetry.


Nassim Taleb They are born, then put in a box; they go home to live in a box; they study by ticking
boxes; they go to what is called 'work' in a box, where they sit in their cubicle box; they
drive to the grocery store in a box to buy food in a box; they go to the gym in a box to sit in
a box; they talk about thinking 'outside the box'; and when they die they are put in a box.
All boxes, Euclidian, geometrically smooth boxes.
I wonder if a lion (or a cannibal) would pay a high premium for free-range humans.
Skills that transfer: street fights, off-path hiking, seduction, broad erudition. Skills that
don't: school, games, sports, laboratory — what's reduced and organized.
The exponential information age is like a verbally incontinent person: he talks more and
more as fewer and fewer people listen.
You want to be yourself, idiosyncratic; the collective (schools, rules, jobs, technology)
wants you generic to the point of castration.
For soldiers, we use the term 'mercenary,' but we absolve employees of responsibility with
'everybody needs to make a living.'
The imagination of the genius vastly surpasses his intellect; the intellect of the academic
vastly surpasses his imagination.
The left holds that because markets are stupid models should be smart; the right believes
that because models are stupid markets should be smart. Alas, it never hit both sides that
both markets and models are very stupid.
You can be certain that the head of a corporation has a lot to worry about when he
announces publicly that 'there is nothing to worry about.'
The stock market, in brief: participants are calmly waiting in line to be slaughtered while
thinking it is for a Broadway show.
The curious mind embraces science; the gifted and sensitive, the arts; the practical,
business; the leftover becomes an economist.
Public companies, like human cells, are programmed for apoptosis, suicide through debt
and hidden risks. Bailouts invest the process with a historical dimension.
New York Times, 1932 The bearish speculator is not often reviled in healthy markets; it is when prices are
declining that opprobrium is heaped upon him.
Oliver Wendell Holmes All life is an experiment.
Paul Graham The larger a group, the closer its average member will be to the average for the
population as a whole. So all other things being equal, a very able person in a big
company is probably getting a bad deal, because his performance is dragged down by the
overall lower performance of the others.
Paul Troop Beliefs have a function that is not linked to their truth.
Peter Drucker What everybody 'knows' is frequently wrong.
Picasso When art critics get together they talk about Form and Structure and Meaning. When
artists get together they talk about where you can buy cheap turpentine.
Ralph Waldo Emerson A foolish consistency is the hobgoblin of little minds.


Ralph Wanger Zebras have the same problem as institutional portfolio managers. First, both seek profits.
For portfolio managers, above average performance; for zebras, fresh grass. Secondly,
both dislike risk. Portfolio managers can get fired; zebras can get eaten by lions. Third,
both move in herds. They look alike, think alike and stick close together. If you are a
zebra, and live in a herd, the key decision you have to make is where to stand in relation
to the rest of the herd. When you think that conditions are safe, the outside of the herd is
the best, for there the grass is fresh, while the middle see only grass which is half-eaten
or trampled down. The aggressive zebras, on the outside of the herd, eat much better. On
the other hand – or other hoof – there comes a time when lions approach. The outside
zebras end up as lion lunch, and the skinny zebras in the middle of the pack may eat less
well but they are still alive.
Reminiscences of a Stock The average American is from Missouri everywhere and at all times except when he goes
Operator to the brokers' offices and looks at the tape... He will risk half his fortune in the stock
market with less reflection than he devotes to the selection of a medium-priced
automobile.
Richard Dennis Being a trader is like being a boxer. Every now and then, the market gives you a good
wallop.
Richard Feynman The imagination of nature is far, far greater than the imagination of man.
Ordinary fools are all right; you can talk to them, and try to help them out. But pompous
fools - guys who are fools and are covering it all over and impressing people as to how
wonderful they are with all this hocus pocus - that I cannot stand! An ordinary fool isn't a
faker; an honest fool is all right. But a dishonest fool is terrible!
Robert A. Heinlein Specialization is for insects.
Everything is theoretically impossible, until it is done. One could write a history of science
in reverse by assembling the solemn pronouncements of highest authority about what
could not be done and could never happen.
Seneca That is never too often repeated, which is never sufficiently learned.
Shakespeare When sorrows come, they come not in single spies but in battalions.
Steve Jobs It's more fun to be a pirate than to join the navy.
The Art of Learning From one perspective the opponent is the enemy. On the other hand there is no one who
knows you more intimately, no one who challenges you so profoundly or pushes you to
excellence and growth so relentlessly.
The Art of Short Selling Wall Street ices the inefficient cake with compulsive conformity. Everyone gets on the
bandwagon and stays until the evidence is too compelling, then they all fall off with a jolt.
the Duke of Wellington Victory has a thousand fathers; defeat is an orphan.
They Live Life's a bitch... and she's back in heat.
Tom Wolfe The problem with fiction, it has to be plausible. That's not true with non-fiction.
Tony Boekh Paradoxically, the more that governments try to protect us against financial disasters, the
more likely they are to occur.
Ulysses Everett McGill Pete, it's a fool that looks for logic in the chambers of the human heart.
unknown Mediocre people are always at their best; they climb molehills without breaking a sweat.
Wall Street proverb A rolling loan gathers no loss.



Wall Street proverb Bad traders don't make profits — they only take out short-term loans from the market.
Walter Bagehot The whole history of civilization is strewn with creeds and institutions which were
invaluable at first and deadly afterwards.
John Bull can stand many things, but he cannot stand 2 percent.
Will Durant One of the lessons of history is that nothing is often a good thing to do and always a
clever thing to say.
William Eckhardt When you're on a big winning streak, there's a temptation to think that you're doing
something special, which will allow you to continue to propel yourself upward. You start to
think that you can afford to make shoddy decisions. You can imagine what happens next.
As a general rule, losses make you strong and profits make you weak.
William J. Bernstein The reason that 'guru' is such a popular word is because 'charlatan' is so hard to spell.
William S. Burroughs This is a war universe. War all the time. There may be other universes, but ours seems to
be based on war and games.
Winston Churchill Nothing in life is so exhilarating as to be shot at without result.
A lie gets halfway around the world before the truth has a chance to get its pants on.
People sometimes stumble over the truth, but usually they pick themselves up and hurry
about their business.
Yogi Berra In theory there's no difference between theory and practice, but in practice there is.
Yojimbo There's no cure for fools.

SIMPLICITY

Abraham Lincoln If I had six hours to chop down a tree, I would spend the first four hours sharpening the
axe.
Alan Watts When you get the message, hang up the phone.
Albert Einstein Things should be made as simple as possible, but not simpler.
Any intelligent fool can make things bigger and more complex. It takes a touch of genius --
and a lot of courage -- to move in the opposite direction.
I believe that a simple and unassuming manner of life is best for everyone, best both for
the body and the mind.
If you can't explain it simply, you don't understand it well enough.
The grand aim of all science is to cover the greatest number of empirical facts by logical
deduction from the smallest number of hypotheses or axioms.
There is no logical way to the discovery of these elemental laws. There is only the way of
intuition, which is helped by a feeling for the order lying behind the appearance.
Alfred North Whitehead Seek simplicity, then distrust it.


An Wang Success is more a function of consistent common sense than it is of genius.
Andre Gide Believe those who are seeking the truth. Doubt those who find it.
Arthur Sokoloff From the moment we cease trying to swim upstream and begin to flow with the current,
something changes within us.
Benjamin Disraeli The more extensive a man's knowledge of what has been done, the greater will be his
power of knowing what to do.
Benoit Mandelbrot Clouds are not spheres, mountains are not cones, coastlines are not circles, and bark is
not smooth — nor does lightning travel in a straight line.
Bo Fowler Life is the moving from the simple to the complex to the simple again - a train ride from
the countryside into a great city and out once more into the countryside.
Brian Tracy A major stimulant to creative thinking is focused questions. There is something about a
well-worded question that often penetrates to the heart of the matter and triggers new
ideas and insights.
Bruce Lee The height of cultivation is really nothing special. It is merely simplicity; the ability to
express the utmost with the minimum. It is the halfway cultivation that leads to
ornamentation.
It's not the daily increase but daily decrease. Hack away at the unessential.
Cat's Cradle Tiger got to hunt, bird got to fly; Man got to sit and wonder, 'Why, why, why?' Tiger got to
sleep, bird got to land; Man got to tell himself he understand.
Charles Bukowski An intellectual is a man who says a simple thing in a difficult way; an artist is a man who
says a difficult thing in a simple way.
Charles Kettering A problem well stated is a problem half-solved.
Chinese proverb Pick the flower when it is ready to be picked.
Chinn Ho Wait long, then move fast.
Chuang-tzu As regards the quietude of the sage, he is not quiet because quietness is said to be good.
He is quiet because the multitude of things cannot disturb his quietude.
Cicero No one can give you better advice than yourself.
Dan Harrington As humans, our brains aren't really wired to make good probabilistic decisions. (Actually,
this is a huge understatement; many of us never fully grasp the ideas of probability and
expectation at all.)
David Mamet Opportunity may knock, but it seldom nags.
Decision Traps Everyone, from the greatest genius to the most ordinary clerk, has to adopt mental
frameworks that simplify and structure the information encountered in the world.
Dickson G. Watts Wisdom consists of seeing many things and concentrating on one thing.
Seeing things in their right relation to each other is the highest vision.
Man begins in simplicity, advances to complexity, returns to simplicity. The last is

complexity reduced to the fewer terms.
Learn principles. Facts will then fall into their relations and connections.


E.O. Wilson Sometimes a concept is baffling not because it is profound, but because it is wrong.
Ed Seykota A losing trader can do little to transform himself into a winning trader. A losing trader is not
going to want to transform himself. That's the kind of thing winning traders do.
I know several people who claim to have market insights during dreams. I think one of the
functions of dreams is to reconcile information and feelings which the conscious mind
finds intractable.
Eugen Herrigel You must not be astonished at anything that comes up... Accept it all calmly, as if you
were a mere spectator, uninterested, and were observing a process for which you need
not feel responsible... The result, in the end, is perfect stillness.
Galileo Galilei All truths are easy to understand once they are discovered — the point is to discover
them.
Gary Klein Another aspect of tacit knowledge is our mental models of how things work. Mental
models are just the stories, the frames that we have to explain causal relationships: if this
happens, that will happen, and that will happen, and we build these kinds of internal
representations, these mental models about how things work.
George Santayana Well-bred instinct meets reason halfway.
George Soros The market is a mathematical hypothesis. The best solutions to it are the elegant and the
simple.
H.L. Mencken It is the dull man who is always sure, and the sure man who is always dull.
For every complex problem, there is a solution that is neat, simple, and wrong.
The most costly of all follies is to believe passionately in the palpably not true. It is the
chief occupation of mankind.
Hans Hoffman The ability to simplify means to eliminate the unnecessary so that the necessary may
speak.
Henry David Thoreau Simplify, simplify, simplify.
Henry Ward Beecher I don't do more, but less, than other people. They do all their work three times over: once
in anticipation, once in actuality, once in rumination. I do mine in actuality alone, doing it
once instead of three times.
J.J. Cale Sometimes it's easy and sometimes it's not – sometimes you get it and sometimes you're
got...
Jack Sparrow Every time we clash I get the impression we're on different floors of a building. You're first
level, I'm fourth level, and I keep urging you to use the stairs.
You don't have to be a genius in this business, but you can't be a moron.
The only rules that really matter are these: What a man can do and what a man can't do.
As a general rule of thumb, simplicity beats complexity because simplicity travels light.
Being contrarian at the wrong time is akin to arguing with a herd of cattle.
There are few activities so enlightening as to read old books with new eyes.
Japanese proverb There is an uphill road and there is a downhill road.



Fallen blossoms do not return to trees; a broken mirror does not reflect again.
Jeb Corliss That's what life is. You have a bunch of dreams, and then you do what you can to try to
make them come true.
Jiddu Krishnamurti There is an art of seeing things as they are: without naming, without being caught in a
network of words, without thinking interfering with perception.
Jon Kabat-Zinn If what happens now does influence what happens next, then doesn't it make sense to
look around a bit from time to time so that you are more in touch with what is happening
now, so that you can take your inner and outer bearings and perceive with clarity the path
that you are actually on and the direction in which you are going?
The funny thing about stopping is that as soon as you do it, here you are. Things get
simpler.
Jonathan Haidt Controlled processing requires language. You can have bits and pieces of thought
through images, but to plan something complex, to weigh the pros and cons of different
paths, or to analyze the causes of past successes and failures, you need words.
Jony Ive (design chief at Apple) Our goal is to try to bring a calm and simplicity to what are incredibly complex problems
so that you're not aware really of the solution, you're not aware of how hard the problem
was that was eventually solved.
Karl Marx History repeats itself - first as tragedy, second as farce.
Ken Bradshaw It's weird how a single wave can seem so important, when it's all the waves it took to get
there, and all the waves since, that actually count.
Lao Tzu If you do not change direction, you may end up where you are heading.
Led Zeppelin When the levee breaks, momma you got to move...
Leonardo da Vinci Human subtlety will never devise an invention more beautiful, more simple, or more direct
than does nature… in her inventions nothing is lacking, and nothing is superfluous.
Simplicity is the ultimate sophistication.
M.C. Escher I try in my prints to testify that we live in a beautiful and orderly world, not in a chaos
without norms, even though that is how it sometimes appears.
Mark Twight Use the mirror to cut to the heart of things and uncover your true self. Use the razor to cut
away what you don't need. The life you want to live has no recipe.
Merchant of Venice My ventures are not in one bottom trusted, nor to one place; nor is my whole estate upon
the fortune of this present year: Therefore my merchandise makes me not sad.
Michel de Montaigne To know much is often the cause of doubting more.
Get a purge for your brain. It will do better than for your stomach.
Miguel de Cervantes Time ripens all things; no man is born wise.
Miyamoto Musashi Whatever attitude you are in, do not be conscious of making the attitude; think only of
cutting.
Napoleon Never ascribe to malice that which is adequately explained by incompetence.
Nassim Taleb It is as difficult to change someone's opinions as it is to change his tastes.



Saying 'the mathematics of uncertainty' is like saying 'the chastity of sex' — what is
mathematized is no longer uncertain, and vice versa.
Niklaus Wirth Increasingly, people seem to misinterpret complexity as sophistication, which is baffling —
the incomprehensible should cause suspicion rather than admiration. Possibly this trend
results from a mistaken belief that using a somewhat mysterious device confers an aura
of power on the user.
Oliver Wendell Holmes I would not give a fig for the simplicity this side of complexity, but I would give my life for
the simplicity on the other side of complexity.
Paul Buchheit I think, in general, people are uncomfortable with things that are different.
Paul Graham If you try to act like something you're not, you'll just end up in an uncanny valley. You'll
depart from sincere, but never arrive at convincing.
Rashi Receive with simplicity all that happens to you.
Reminiscences of a Stock Speculation in stocks will never disappear. It isn't desirable that it should. It cannot be
Operator checked by warnings as to its dangers. You cannot prevent people from guessing wrong
no matter how able or how experienced they may be.
Richard Feynman If it disagrees with experiment, it's wrong. And that simple statement is the key to science.
It doesn't make a difference how beautiful your guess is, it doesn't matter how smart you
are, who made the guess, or what his name is. If it disagrees with experiment, it's wrong.
That’s all there is to it.
If you can't explain it to a six year old, you don't really understand it.
Richard Leakey For three million years we were hunter-gatherers, and it was through evolutionary
pressures of that way of life that a brain so adaptable and creative eventually emerged.
Today we stand with the brains of hunter-gatherers in our heads.
Rigo Durazo Hope is not a strategy.
Roberto Mignone If you could sum up the masterpieces of all time in a single sentence, you should be able
to present a compelling research idea in one sentence, too... a Hemingway-like sentence.
Seth Klarman All investors must come to terms with the relentless continuity of the investment process.
Socrates Remember that there is nothing stable in human affairs; therefore avoid undue elation in
prosperity, and undue depression in adversity.
Steve Cohen You can't have everybody on one side of the fence. The world doesn't work that way.
Steve Jobs That's been one of my mantras — focus and simplicity. Simple can be harder than
complex: You have to work hard to get your thinking clean to make it simple. But it's worth
it in the end because once you get there, you can move mountains.
Steven Pinker I find a naturalistic understanding of human nature to be indispensable to leading a wise
and mature life, and it is often exhilarating. Wisdom consists in appreciating the
preciousness and finiteness of our own existence, and therefore not squandering it; of
being cognizant of what makes people everywhere tick, and therefore enhancing
happiness and minimizing suffering; of being alert to limitations and flaws in our own
judgments and decisions and passions, and thereby doing our best to circumvent them.
The exhilaration comes from understanding that we are a part of [the] natural world; that
deep mysteries can be explained; and that the world -- including our own mental lives --
can be intelligible, rather than a source of superstition and ignorance...


Stuart Wilde Discovering what you want saves you endless confusion and wasted energy.
T.S. Eliot Teach us to care and not to care... teach us to sit still.
The Art of Learning Rainwater streaming on a city pavement will teach a pianist how to flow. A leaf gliding
easily with the wind will teach a controller how to let go. A housecat will teach me how to
move.
Thomas Fuller Get the facts, or the facts will get you.
Tony Boekh Sophisticated institutions use complex, computer-driven models, but it remains far from
clear that their results are better than those achieved using a simplified approach. Lack of
discipline and a strong tendency of most people to feel more comfortable running with the
herd are the real enemies of good investment performance, not the lack of complex
models.
unknown When your outgo exceeds your income, your upkeep becomes your downfall.
W.H. Auden The most exciting rhythms seem unexpected and complex, the most beautiful melodies
simple and inevitable.
Warren Buffett Good jockeys will do well on good horses, but not on broken-down nags.
The truly big investment idea can usually be explained in a short paragraph.
Wayne Gretzky I skate to where the puck is going to be, not where it has been.
Wikipedia (Mushin) The mind could be said to be working at a very high speed, but with no intentions, plans
or direction. In analogy a clear mind is compared to a still pond, which is able to clearly
reflect the moon and trees. But just as waves in the pond will distort the picture of reality,
so will the thoughts we hold onto disrupt the true perception of reality.
William O' Neill The stock market is neither efficient nor random. It is not efficient because there are too
many poorly conceived opinions; it is not random because strong investor emotions can
create trends.
William Penn Time is what we want most, but what we use worst.
Winston Churchill Out of intense complexities, intense simplicities emerge.
The farther backward you can look, the farther forward you are likely to see.
Zen and the Art of Poker Players sometimes think that great things are called for — sophisticated plays, plays that
go beyond the ordinary, into the extraordinary, where some other realm of effort is
required. In fact, once skill is achieved, ordinary levels of calm are sufficient.
Zen master Ying-An It's just like learning archery; eventually you reach a point where ideas are ended and
feelings forgotten, and then you suddenly hit the target.
Zen proverb When the pools of perception are cleansed, everything appears as it is.
Before enlightenment: Chop wood, carry water. After enlightenment: Chop wood, carry
water.



AGGRESSION

Admiral Horatio Nelson When I don't know whether to fight or not, I always fight.
Adrift: 76 Days Lost At Sea The freedom of the sea lures men, yet freedom does not come free. Its cost is the loss of
the security of life on land. When a storm is brewing, the sailor cannot simply park his ship
and walk away from it. He cannot hide within stone walls until the whole thing blows over.
There is no freedom from nature, the power that binds even the dead together. Sailors are
exposed to nature's beauty and her ugliness more intensely than most men ashore. I
have chosen the sailor's life to escape society's restrictions and I have sacrificed its
protection. I have chosen freedom and I have paid the price.
Ayn Rand The question isn't who is going to let me; it's who is going to stop me.
Brian Gelber I'm not afraid to lose. When you start being afraid to lose, you're finished.
Bruce Kovner Michael [Marcus] taught me one thing that was incredibly important... He taught me that
you could make a million dollars. He showed me that if you applied yourself, great things
could happen. It is very easy to miss the point that you really can do it. He showed me
that if you take a position and use discipline, you can actually make it.
[Successful traders] are strong, independent, and contrary in the extreme. They are able
to take positions others are unwilling to take. They are disciplined enough to take the right
size positions.
Charlie Munger Being prepared, on a few occasions in a lifetime, to act promptly in scale in doing some
simple and logical thing will often dramatically improve the financial results of that lifetime.
A few major opportunities, clearly recognizable as such, will usually come to one who
continuously searches and waits, with a curious mind, loving diagnosis involving multiple
variables. And then all that is required is a willingness to bet heavily when the odds are
extremely favorable, using resources available as a result of prudence and patience in the
past.
Colonel Kilgore I love the smell of napalm in the morning.
Davy Crockett Make sure you're right, then go ahead.
Dickson G. Watts To conquer fate, go ahead and meet it.
Elon Musk Optimism, pessimism, fuck that; we're going to make it happen. As God is my bloody
witness, I'm hell-bent on making it work.
Gary Bielfeldt If a 260-pound fullback is running through the line and a 175-pound linebacker has to stop
him, he has to have the courage to go into him. You need that kind of courage to be able
to participate in the markets.
When more of the cards are on the table and you have a very strong hand — in other
words, when you feel the percentages are skewed in your favor — you raise and play that
hand to the hilt.
George Soros There is no way one could produce results like ours without ups and downs.
When you're sure you are right, no trade is too big.
Howard Marks There are times when it is important to invest cautiously, and there are times when it's
important to invest aggressively. A big part of the job is knowing where we are and
choosing between those two.


Ira Glass It's time to be vicious. It's time to kill, and enjoy the killing, so something better can live.
Not enough is said about the importance of abandoning crap.
Jack Sparrow The best "plungers" will not be those inclined to plunge by dint of gambling nature, but
rather those with a calculated risk taker's soul and a deep and passionate desire to win -
even a ferocious desire to win - with the understanding that excellent opportunities do not
grow on trees and should be played to the hilt (while limiting risk) when such comes
available.
Take what you can... give nothin' back.
...the one big problem of over-aggressive players is this: They don't know how to use it
sparingly. The beauty of aggression is how powerful it can be when judiciously applied.
Selective use of aggression, at supremely appropriate moments, is what makes the value
stand out.
Jeff Yass ...the poker world is so competitive that if you don't fully capitalize on every advantage,
you're not going to survive. I absolutely understood that concept by the time I got down to
the options floor. I learned more about options trading strategy by playing poker than I did
in all my college economics courses combined.
Julian Robertson There are not a whole lot of people equipped to pull the trigger.
Leonardo da Vinci It had long since come to my attention that people of accomplishment rarely sat back and
let things happen to them. They went out and happened to things.
Lieutenant Colonel 'Mad Jack' Any officer who goes into action without his sword is improperly dressed.
Churchill
Mark Minervini My results were transformed when I understood that what counts isn't how often you're
right, but how much you profit on your winning trades versus how much you lose on your
losing trades. On average, I'm only profitable about 50 percent of the time, but I make
much more when I'm right than I lose when I'm wrong.
Mark Ritchie If you get too careful about not risking your gains, you're not going to be able to extract a
large profit.
Mark Twain It's not the size of the dog in the fight, it's the size of the fight in the dog.
Michael Marcus At key intraday chart points, I could take much larger positions than I could afford to hold,
and if it didn't work immediately, I would get out quickly. For example, at a critical intraday
point, I would take a twenty-contract position, instead of the three to five contracts I could
afford to hold, using an extremely close stop. The market either took off and ran, or I was
out.
Muad'Dib Caution is the path to mediocrity. Gliding, passionless mediocrity is all that most people
think they can achieve.
Nathan Rothschild It requires a great deal of boldness, and a great deal of caution, to make a great fortune.
Paul Graham If you're in a job that feels safe, you are not going to get rich, because if there is no
danger there is almost certainly no leverage.
Reminiscences of a Stock There are men whose gait is far quicker than the mob's. They are bound to lead—no
Operator matter how much the mob changes.
If all I have is ten dollars and I risk it, I am much braver than when I risk a million, if I have
another million salted away.


Reminiscences of a Stock Among the hazards of speculation the happening of the unexpected—I might even say of
Operator the unexpectable—ranks high. There are certain chances that the most prudent man is
justified in taking—chances that he must take if he wishes to be more than a mercantile
mollusk.
Richard D. Wyckoff It is poor policy, I find, to wait for Opportunity to knock at your door. I train my ear so that I
can hear Opportunity coming down the street long before it reaches my door. When
Opportunity knocks, I try to reach out, grab Opportunity by the collar and yank it in.
Robert L. Bacon Forget about this idea of 'grinding out a day's pay.' If you want to make a day's pay at the
races, get a job watering horses, or pitching manure into trucks.
Stan Druckenmiller George Soros has a philosophy that I have also adopted: The way to build long-term
returns is through preservation of capital and home runs. You can be far more aggressive
when you're making good profits.
The way to attain truly superior long-term returns is to grind it out until you're up 30 or 40
percent, and then if you have the convictions, go for a 100 percent year. If you can put
together a few near-100 percent years and avoid down years, then you can achieve really
outstanding long-term returns.
Soros has taught me that when you have tremendous conviction on a trade, you have to
go for the jugular. It takes courage to be a pig. It takes courage to ride a profit with huge
leverage. As far as Soros is concerned, when you're right on something, you can't own
enough.
Stuart Walton I would attribute my own success to having both conviction about my gut feelings and the
ability to act on them quickly. That is so critical.
Sun Tzu When you are concentrated into one while the opponent is divided into ten, you are
attacking at a concentration of ten to one, so you outnumber the opponent.
T. Boone Pickens, whose BP I don't want to be gummed to death by a rubber duck. I'd rather be eaten by a man-eating
Capital commodities fund lost 98 tiger.
percent in 2008
The Art of Short Selling ...for a certain group of cynics with a penchant for quality, the sound of a stock crashing
nicely will evoke a knowing and whimsical smile.
They Live I've come here to chew bubblegum and kick ass... and I'm all out of bubblegum.
Victor Sperandeo Successful speculation implies taking risk when the odds are in your favor. Just like in
poker, where you have to know which hands to bet on, in trading you have to know when
the odds are in your favor.
Virgil Fortune sides with him who dares.
The wolf careth not, how many the sheep be.
William Eckhardt One common adage on this subject that is completely wrongheaded is: You can't go
broke taking profits. That's precisely how many traders do go broke.
While amateurs go broke by taking large losses, professionals go broke by taking small
profits. The problem in a nutshell is that human nature does not operate to maximize gain
but rather to maximize the chance of a gain.


Zen and the Art of Poker Aggression exists in nature. What may look like a harmless bumble bee is a highly
aggressive force on its own level, engaged in a life-and-death struggle. What appears to
be a delicate flower is in fact an organism violently struggling and forcing itself into life.
These and other delicacies (at least as they appear to the human eye) could easily be
mistaken for some form of passivity, when in fact there is a very different paradigm
present.

INTROSPECTION

Barton Biggs The investment process is only half the battle. The other weighty component is struggling
with yourself, and immunizing yourself from the psychological effects of the swings of
markets, career risk, the pressure of benchmarks, competition, and the loneliness of the
long distance runner.
What's the moral of this story? Know thyself and know thy foibles. Study the history of
your emotions and your actions.
Boris Johnson Dark forces dragged me away from the keyboard, swirling forces of irresistible intensity
and power.
Brian Gelber Most traders who fail have large egos and can't admit that they are wrong. Even those
who are willing to admit that they are wrong early in their career can't admit it later on.
Also, some traders fail because they are too worried about losing.
Charles Faulkner People need to have a perceptual filter that matches the way they think. The appropriate
perceptual filter for a trader has more to do with how well it fits a trader's mental strategy,
his mode of thinking and decision making, than how well it accounts for market activity.
When a person gets to know any perceptual filter deeply, it helps develop his or her
intuition. There's no substitute for experience.
Decision Traps The illusion of control and accompanying false claims of credit for good outcomes are
firmly rooted biases to allay our deepest fears about an uncontrollable world.
Because we like to believe that we caused successful outcomes and we like to rationalize
that we weren't responsible when things turned out badly, most people suffer from an
attribution bias that can destroy useful feedback.
Ed Seykota I am a self-taught trader who is continually studying both myself and other traders.
Losing a position is aggravating, whereas losing your nerve is devastating.
I don't think traders can follow rules very long unless they reflect their own trading style.
Eventually, a breaking point is reached and the trader has to quit or change, or find a new
set of rules he can follow. This seems to be part of the process of evolution and growth as
a trader.
Be sensitive to the subtle differences between 'intuition' and 'into wishing.'
George Soros The real-time experiment turned out to be a very good idea because it stimulated my
thinking. Having to explain my reasons for making decisions forced me to become more
coherent; it imposed a certain discipline on me, which was very helpful.
H.L. Mencken It is not materialism that is the chief curse of the world, as pastors teach, but idealism.
Men get into trouble by taking their visions and hallucinations too seriously.
Henry de Monfreid But perhaps what separated us more than all else was that they were of the land, while I
belonged to the sea.


Jack Sparrow I think we've all arrived at a very special place. Spiritually, ecumenically, grammatically.
Fear is an impediment to clarity. So is greed.
Johann Wolfgang von Goethe For a man to achieve all that is demanded of him, he must regard himself as greater than
he is.
John von Neumann There's no sense being exact about something if you don't even know what you're talking
about.
Joseph Conrad To have his path made clear for him is the aspiration of every human being in our
beclouded and tempestuous existence.
Lao Tzu He who conquers others is strong; He who conquers himself is mighty.
He who controls others may be powerful, but he who has mastered himself is more
powerful still.
He who knows others is wise. He who knows himself is enlightened.
M.C. Escher My work is a game, a very serious game.
Mark Minervini If you are a beginner, trade with an amount of money that is small enough so that you can
afford to lose it, but large enough so that you will feel the pain if you do. Otherwise, you're
fooling yourself.
Marty Schwartz The best way to end a losing streak is to cut your losses and divorce your ego from the
game... You have to manage your resources and not lose too much of your stake. Many
people when they're losing increase their bets; they double up hoping to win it all back on
one roll of the dice. That strategy can be devastating.
Your trading methodology has to fit your personality. You have to understand your
strengths and your weaknesses. It took me nine years to figure myself out.
Michael Marcus Every trader has strengths and weaknesses. Some are good holders of winners, but may
hold their losers a little too long. Others may cut their winners a little short, but are quick to
take their losses. As long as you stick to your own style, you get the good and bad in your
own approach.
Gut feel is very important. I don't know of any great professional trader that doesn't have
it. Being a successful trader also takes courage: the courage to try, the courage to fail, the
courage to succeed, and the courage to keep on going when the going gets tough.
Mike McDermott Listen, here's the thing. If you can't spot the sucker in the first half hour at the table, then
you ARE the sucker.
Napoleon In war one sees one's own difficulties, and does not take into account those of the enemy;
one must have confidence in one's self.
Nassim Taleb It takes extraordinary wisdom and self-control to accept that many things have a logic we
do not understand that is smarter than our own.
Peter Brandt You have to know what areas of your character, your temperament and your personality
are likely to be net negative contributors to your bottom line over time. Those are the
personality traits you are going to have to battle with.
Randy McKay One of the things I did that worked in those early years was analyzing every single trade I
made. Every day, I made copies of my cards and reviewed them at home. Every trader is
going to have tons of winners and losers. You need to determine why the winners are


winners and the losers are losers. Once you can figure that out, you can become more
selective in your trading and avoid those trades that are more likely to be losers.
One very interesting thing I've found is that virtually every successful trader I know
ultimately ended up with a trading style suited to his personality.
Reminiscences of a Stock A stock operator has to fight a lot of expensive enemies within himself.
Operator
I have come to feel that it is as necessary to know how to read myself as to know how to
read the tape. I have studied and reckoned on my own reactions to given impulses or to
the inevitable temptations of an active market, quite in the same mood and spirit as I have
considered crop conditions or analyzed reports of earnings.
I knew that unless I had sufficient trading capital I would not be able to use good
judgment. Without adequate margins it would be impossible to take the cold-blooded,
dispassionate attitude toward the game that comes from the ability to afford a few minor
losses such as I often incurred in testing the market before putting down the big bet.
It sounds very easy to say that all you have to do is to watch the tape, establish your
resistance points and be ready to trade along the line of least resistance as soon as you
have determined it. But in actual practice a man has to guard against many things, and
most of all against himself — that is, against human nature.
Richard Driehaus A trading philosophy is something that cannot just be transferred from one person to
another, it's something that you have to acquire yourself through time and effort.
Richard Feynman The first principle is that you must not fool yourself, and you are the easiest person to fool.
Steve Cohen You can't control what the market does, but you can control your reaction to the market. I
examine what I do all the time. That's what trading is all about.
The Art of Learning In my experience the greatest of artists and competitors are masters of navigating their
own psychologies, playing on their strengths, controlling the tone of battle so that it fits
with their personalities.
Trading proverb If you really want to know yourself, just become a speculator.
Van Tharp I'm not saying that controlling your mental state is the magic solution to trading success.
It's just part of the answer. But when you admit that the answer is within yourself, you've
come a long way.
The realization that you are responsible for the results you get is the key to successful
investing. Winners know they are responsible for their results; losers think they are not.
Zen and the Art of Poker It is important to come to the table with the goal of mastering yourself, not just the game.
In many ways, this is more important than mastering the game. The reason is simple: For
the most part, you already know the game. This mastering of yourself, however, is the
work of a lifetime.
Years of experience eventually teach you that your main battle, always, is with yourself —
your propensity for errors, for rationalizing marginal hands into good hands, lack of
concentration, misreading other players, emotional eruptions, impatience, and so on. Your
opponents are merely dim outlines that come and go. Few of them ever reach the exalted
heights of damage that you can inflict on yourself.



HUMOR

Albert Einstein Only two things are infinite, the universe and human stupidity, and I'm not sure about the
former.
Amos Hostetter Never mind the cheese -- let me out of the trap!
Animal House Fat, drunk and stupid is no way to go through life, son.
Bernard Baruch The main purpose of the stock market is to make fools of as many men as possible.
Big Trouble in Little China Like I told my last wife, I says, "Honey, I never drive faster than I can see. Besides that,
it's all in the reflexes."
When some wild-eyed, eight-foot-tall maniac grabs your neck, taps the back of your
favorite head up against the barroom wall, and he looks you crooked in the eye and he
asks you if ya paid your dues, you just stare that big sucker right back in the eye, and you
remember what ol' Jack Burton always says at a time like that: "Have ya paid your dues,
Jack?" "Yessir, the check is in the mail."
I'm a reasonable guy. But, I've just experienced some very unreasonable things.
This is gonna take crackerjack timing, Wang.
That's why the bottle didn't slice. My mind and my spirit are goin' north and south.
Bilbo Baggins I don't know half of you half as well as I should like; and I like less than half of you half as
well as you deserve.
Bo Fowler The Evangelist drives deep into the jungle looking for an undiscovered tribe to bestow his
'truth' on and with it - as if by sheer coincidence - his language.
Boris Johnson My friends, as I have discovered myself, there are no disasters, only opportunities. And,
indeed, opportunities for fresh disasters.
Breakfast at Tiffany's You're wrong. She is a phony. But on the other hand you're right. She isn't a phony
because she's a real phony. She really believes all this crap she believes. You can't talk
her out of it… She’s nuts.
Caddyshack So I got that goin' for me, which is nice.
Be the ball.
Canada Bill Jones A Smith and Wesson beats four aces.
Nobody ever went bowlegged carrying away the money they won from me.
Cliff Clavin Well ya see, Norm, it's like this. A herd of buffalo can only move as fast as the slowest
buffalo. And when the herd is hunted, it is the slowest and weakest ones at the back that
are killed first. This natural selection is good for the herd as a whole, because the general
speed and health of the whole group keeps improving by the regular killing of the weakest
members. In much the same way, the human brain can only operate as fast as the
slowest brain cells. Excessive intake of alcohol, as we know, kills brain cells. But naturally,
it attacks the slowest and weakest brain cells first. In this way, regular consumption of
beer eliminates the weaker brain cells, making the brain a faster and more efficient
machine. That's why you always feel smarter after a few beers.
Colonel Kilgore If I say it's safe to surf this beach, Captain, then it's safe to surf this beach!


Cool Hand Luke What we've got here is... failure to communicate. Some men, you just can't reach. So you
get what we had here last week. Which is the way he wants it. Well, he gets it. And I don't
like it any more than you men.
Damon Runyon One of these days in your travels, a guy is going to come up to you and show you a nice
brand-new deck of cards on which the seal is not yet broken, and this guy is going to offer
to bet you that he can make the Jack of Spades jump out of the deck and squirt cider in
your ear. But, son, do not bet this man, for as sure as you are standing there, you are
going to end up with an earful of cider.
Dan Culloton It was a Fred Flintstone kind of quarter. At times, it seemed like many stocks and funds
were just spinning their feet and wheels like Fred does whenever he peels out in his
Stone-Age sedan.
Douglas Adams A common mistake that people make when trying to design something completely
foolproof is to underestimate the ingenuity of complete fools.
Fahrenheit 451 It was a pleasure to burn.
Ferris Bueller Life moves pretty fast. If you don't stop and look around once in a while, you could miss it.
Frederic Townsend It seems LTCM could have survived one Nobel prize-winner, but with two, they were
doomed.
George W. Bush This sucker could go down.
Heat I do what I do best, I take scores. You do what you do best, try to stop guys like me.
Hitchhiker's Guide to the Galaxy Far out in the uncharted backwaters of the unfashionable end of the Western Spiral arm
of the Galaxy lies a small unregarded yellow sun. Orbiting this at a distance of roughly
ninety-eight million miles is an utterly insignificant little blue-green planet whose ape-
descended life forms are so amazingly primitive that they still think digital watches are a
pretty neat idea.
Homer J. Simpson Maybe, just once, someone will call me 'Sir' without adding, 'You're making a scene.'
Not a bear in sight. The bear patrol is working like a charm.
Kids, you tried your best, and you failed miserably. The lesson is: never try.
Hunter S. Thompson Yesterday's weirdness is tomorrow's reason why.
Jack Sparrow Drink up me hearties, yo ho...
This is not my vessel. My vessel is magnificent, and fierce and huge-ish and gone. Why is
it gone?
When you marooned me on that god forsaken spit of land, you forgot one very important
thing mate: I’m Captain Jack Sparrow.
My tremendous intuitive sense of the female creature informs me that you are troubled.
Jeremy Denk Imagine that you are scrubbing the grout in your bathroom and are told that removing
every last particle of mildew will somehow enable you to deliver the Gettysburg Address.
Jim Morrison The movie will begin in five moments, the mindless voice announced. All those unseated
will await the next show.
John J. Raskob, Ladies Home Everyone ought to be rich.

Journal, 1929


King of Queens We are long term investors. We are in this thing for three or four weeks.
Lenny Dykstra I'm a lightning rod for money; after we're done talking today when you're walking to your
car you'll probably find 100 bucks.
Louis Rukeyser The tribe has spoken, and in accordance with the island's long-standing tradition, the
bears have again been banished.
A funny thing happened on the way to the mortuary. The bull got well.
Mark Twain Suppose you were an idiot. And suppose you were a member of Congress. But I repeat
myself.
Marlo Stanfield You want it to be one way. But it's the other way.
Mike McDermott You were lookin' for that third three, but you forgot that Professor Green folded on Fourth
Street and now you're representing that you have it. The DA made his two pair, but he
knows they're no good. Judge Kaplan was trying to squeeze out a diamond flush but he
came up short and Mr. Eisen is futilely hoping that his queens are going to stand up. So
like I said, the Dean's bet is $20.
Monty Python And that, my liege, is how we know the earth to be banana-shaped.
Nassim Taleb Engineers can compute but not define, mathematicians can define but not compute,
economists can neither define nor compute.
Oscar Gamble They don't think it be like it is, but it do.
Peter Di Teresa After-hours trading is like sex in high school: There's a lot of interest in it, but probably not
that many people actually doing it.
Pink Floyd I'm in the high-fidelity, first-class traveling section, I think I need a lear jet...
Reminiscences of a Stock The manager was a chap who looked as if he had been an actor or a stump speaker. He
Operator was very impressive. He'd say good morning as though he had discovered the morning's
goodness after ten years of searching for it with a microscope and was making you a
present of the discovery as well as of the sky, the sun and the firm's bank roll.
Reservoir Dogs Are you gonna bark all day, little doggie, or are you gonna bite?
Sam Zell Grave dancing is an art that has many potential benefits. But one must be careful while
prancing around not to fall into the open pit and join the cadaver. There is often a thin line
between the dancer and the danced upon.
Snatch Do you know what "nemesis" means?
Steven Wright If one synchronised swimmer drowns, do all the rest have to drown too?
Teddy KGB He beet me... Straight up. Pay heem... pay that man his money.
Want a cookie?
The A-Team I love it when a plan comes together.
The Big Lebowski This aggression will not stand, man!
...that's just, like, your opinion, man.


The Big Lebowski Obviously you're not a golfer.
I'll tell you what I'm blathering about... I've got information, man! New shit has come to
light!
The Dude abides. I don't know about you but I take comfort in that. It's good knowin' he's
out there. The Dude. Takin' 'er easy for all us sinners...
The Most Interesting Man In The Stay thirsty my friends.

World
They Live You... You look like your face fell in the cheese dip back in 1957.
Training Day This is chess, not checkers!
He's a high roller, dog.
Vanessa Selbst Flip well, young Jedi.
Wall Street quip I went to a fight the other day and wound up trading futures in Chicago.


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I am not a man, I am dynamite.

General Anthony McAuliffe Nuts!

Inception You mustn't hesitate to dream a little bigger darling.

Jack Sparrow Now... bring me that horizon.

John Facenda Give me a horse I can ride!

Katawa Shoujo Do something you can't, simply because you can.

Patton Rommel, you magnificent bastard. I read your book!

Training Day I walk a higher path, son.

Open your eyes, son. Can't you see?

Vince Lombardi Winning is habit. Unfortunately, so is losing.

Zombieland Time to nut up or shut up.

Hadrian Brick by brick, my citizens, brick by brick.

Hannibal I will either find a way, or make one.

Japanese Proverb Fall down seven times, stand up eight.

Jim Valvano Survive and advance.

It is not so much brilliancy of intellect, or fertility of resource, as persistency of effort,

Predator I ain't got time to bleed.

Russell Kirsch Nothing is withheld from us which we have conceived to do.

Seneca It is a rough road that leads to the heights of greatness.

Initiative is the hardest and most important lesson of all.

Everything comes to him who hustles while he waits.

William Blake He who desires but acts not, breeds pestilence.

Bill Dunn Money management is the true survival key.

Manro Haydan motto Risk not thy whole wad.

Miguel de Cervantes There is nothing so subject to the inconstancy of fortune as war.

Losers average losers.

I have a mental stop. If it hits that number, I am out no matter what.

Risk control is the most important thing in trading.

A market downturn is the true test of an investment philosophy.

Albert Einstein The important thing is to never stop questioning.

Aristotle All men by nature desire to know.

Benjamin Franklin An investment in knowledge always pays the best interest.

I used to do a lot of philosophical speculation as a young man. I wasted a large part of my

Progressing forward as a trader is a matter of filling in knowledge gaps and connecting

Karl Popper How would you disprove your viewpoint?

The truth of things is the chief nutriment of superior intellects.

The noblest pleasure is the joy of understanding.

Michelangelo Genius is infinite patience.

We have found it of paramount importance that, in order to progress, we must recognize

Musicians, actors, athletes, philosophers, scientists, writers understand that brilliant

William James Wisdom is learning what to overlook.

Let our advance worrying become advance thinking and planning.

I have no special talents. I am only passionately curious.

Bruce Lee A man must constantly exceed his level.

In the pursuit of excellence, maintaining mundanity is the key psychological challenge. In

Henry de Monfreid I have lived a rich, restless, magnificent life.

Robert Henri Do whatever you do intensely.

Vince Lombardi Success demands singleness of purpose.

...a positive feedback is self-reinforcing. It cannot go on forever because eventually,

Economic theory needs to be fundamentally reconsidered. There is an element of

As a student of economics, I found it strange that classical economic theory, particularly

Croupier Hold on tightly, let go lightly.

Eugen Herrigel You must learn to wait properly.

Helen Keller Ideas without action are worthless.

Horace Wisdom is not wisdom when it is derived from books alone.

Hunter S. Thompson Buy the ticket, take the ride.

Ted Williams Wait for a good pitch to hit.

William Blake I must create a system or be enslaved by another man's.

Dickson G. Watts Don't storm the fortress of fortune—lay siege to it.

French expression (Look for the Cherchez L'Argent!

Volatility is greatest at turning points, and diminishes as a [new] trend is established.

If a self-reinforcing process goes on long enough it must eventually become

Risk aversion is absolutely essential for the markets to function properly.

John W. Henry Man's expectations manifest in trends.