Michael Marcus "When your position is losing money and you’re unsure whether or not to hold onto the position, reassess the reasoning behind your position"

Michael Marcus is a highly successful trader. At a young age, Michael Marcus began doing research for a brokerage firm, after which he joined Commodities Corporation to trade the company’s money. During his time at Commodities Corporation, his returns often exceeded the returns of all the other traders combined! In the space of a decade, Michael Marcus turned $30,000 into over $80 million. Here’s everything to know about him:

Michael Marcus’ career as a trader and his investment record.

Michael Marcus’ advice on how to trade.

Michael Marcus’ personal life.

In 1972, Michael Marcus, a graduate of Johns Hopkins in 1969, met a man who claimed he could double Marcus’ money every two weeks. Never having traded before, Marcus lost all his money on the man’s commodity tips. An academically gifted Marcus decided that with more time and practice, he too could trade successfully. Drawing funds from family, friends, and his own resources, Michael followed a market letter writer’s advice and made his first profit on a wheat trade. The market was bouncing back and forth between a range, so Michael Marcus bought every time the price hit the bottom of the range and sold when it hit the top, making more money. Over a summer, Michael Marcus put on various commodity trades, parlaying his initial capital into $30,000.

Instead of going back to school, Marcus quit and became a full time commodities trader. Following a market rumour that blight was going to strike crops, Marcus bought in, only to find out that blight never struck. Instead of selling out as fast as possible, Marcus felt paralyzed as he watched his entire stake and his family’s money disappear.

With no money left, Michael Marcus took a research analyst job at Reynolds Securities for commodities. Borrowing money from friends and family, Marcus still consistenlty lost because he had no grasp of trading/investment rules. In October 1971, he met Ed Seykota, who would become one of the greatest trend followers of all time. Trading his own money and learning from Ed Seykota’s trend following approach, Michael Marcus made a small fortune. Part of his success was due to his grasp of fundamental trading rules such as riding profitable positions and cutting losses – the other part was attributed to the 1970s commodities bull market which was favourable to trend followers.

Joining Commodities Corporation and trading their money, Marcus traded an initial stake of $30,000 of the firm’s capital into $80 million in less than 2 decades.
Trading & Investment Advice (from the 1990s).

Confidence is crucial to successful investing & trading.

Take some profits when the market is going up and the rest when the market is going down.

Diversify – never put all your portfolio into one investment/trade.

A good trend follower, Michael Marcus extols the importance of cutting losses and holding on to winners.

When your position is losing money and you’re unsure whether or not to hold onto the position, reassess the reasoning behind your position.

A trading or investment strategy won’t work all the time – you need to find a strategy that fits the kind of secular market you’re in.

Although trend following worked well in the 1970s commodities bull market, it doesn’t work well today because there are too many false trends/breakouts.

A winning investment/trade has all 3 things on its side: fundamentals, technicals, and market sentiment.
30 years ago, you could make a profit just by getting the information faster than the other guys. Nowadays, the internet has destroyed the information advantage.

Trend following is now useless unless: A) The fundamentals are so strong that they overpower everything else. B) The economy is in a major inflationary/deflationary period, meaning the markets have long, clear trends.
In the currency markets, trends are hard to trade because major players such as central banks will take the opposite end of the trend, preventing trends that are easy to identify from materializing.

If something happens that you don’t understand, get in the market and figure out the reason(s) afterwards.

Close all your positions when market volatility spikes. In a volatile market, both the longs and shorts get killed.

Never trade/invest emotionally – always think logically.

A great trader/investor needs to be born with the skill. A good investor/trader can be taught the skill.

When you’re feeling uncertain, close your position and take your mind off the market. It’s easier to think clearly from the sidelines than it is from inside the game.

When the financial news is terrible but the market is no longer falling, you should go long. Likewise, when the news is bad but the markets can’t rise, you should go short.

Losing begets more losses, and winning begets more winners.

A successful investor/trader needs to have a life outside of investing/trading. Trading is a mentally exhausting game, which is why you must have a hobby to help you recharge your batteries.

Take fewer positions and don’t constantly switch between positions.

Read more:

• PAUL TUDOR JONES: The next recession will be ‘frightening’
• Jim Rogers about the bubbles, emerging markets, Asia and something else
• Linda Raschke on Twitter: “So nice when someone sums up timeless guidelines with such a well organized layout”
• Ray Dalio: “The World Has Gone Mad and the System Is Broken.”
• Bill Gross: Cheap is not always cheerful in value investing