Lessons from Legendary Traders

The Best Traders Usually Live By the Same Rules

Larry Hite said the rules they lived by at Mint Investments were simple:

1. Never risk more than 1% of total equity on any trade.

2. Always follow the trends and never deviate from the method.

Risk first.

Trend second.

Process always.

And even though Hite was a systematic trend follower, this is not much different from what O’Neil taught as a techno-fundamental growth stock trader.

Different style.

Same foundation.

Protect your capital.

Trade with the trend.

Stick to your process.

The best traders usually are not doing something wildly different.

They are just better at following the rules most people ignore.

“I consider trend following to be a subset of charting. Charting is a little like surfing. You don’t have to know a lot about the physics of 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.” -Ed Seykota

“The institutional buyers are by far the largest source of demand for stocks. Leading stocks usually have institutional backing.”

- William O’Neil

“The one area that I am constantly trying to improve on is to let my gains run. I’m not able to do that well. I’m always working on it. To my dying day, I’ll probably still be working on it.”  -Marty Schwartz

Marty Schwartz said:

“I used fundamentals for nine years and got rich as a technician.”

Why?

Because technicians are forced to respect price.

They are forced to respect trend.

They are forced to admit when the market is proving them wrong.

Fundamentals and macro may help explain the story.

But price tells you if the story actually matters.

Price is king.

“If you don’t bet, you can’t win. If you lose all your chips, you can’t bet.” - Larry Hite

“I really feel that if you can trade one market, you can trade them all. The principles are the same. Trading is emotion. It is mass psychology, greed, and fear. It is all the same in every situation.”

-Michael Marcus

“I don’t know of too many people who get rich by taking small profits.” -Larry Hite

Why One of the Greatest Traders Wrote a Psychology Book

Ed Seykota was one of the first great systematic trend-following traders.

He was profiled in Market Wizards.

He helped pioneer computerized trading systems and took a small client account from around $5,000 into more than $15 million.

So you would think the one book he wrote about trading would be packed with entries, exits, indicators, formulas, and tactics.

It wasn’t.

The Trading Tribeis mostly about trading psychology.

That should stop every serious trader in their tracks.

Because Seykota already knew what most traders learn the hard way:

The strategy is usually not the biggest problem.

You are.

If you are brand new, yes, you still need to study. You need a real strategy, a real edge, risk management, position sizing, entries, stops, exits, and enough screen time to know what you are doing.

But if you already have rules...

If you already know where your stop goes...

If you already know you should not chase...

If you already know you should cut the loss...

If you already know you should let the winner work...

And you still keep breaking your own rules?

Then your problem is probably not the market.

It is probably not the chart.

It is probably you.

That is why The Trading Tribe matters.

It is not a magic indicator book.

It is not a secret system book.

It is about the emotions and internal drama that cause traders to abandon good systems at the worst possible time.

Hope.

Fear.

Greed.

Despair.

The same emotions that make traders exit good trades too early, enter bad trades too late, move stops, oversize, hesitate, revenge trade, and turn a trading plan into an emotional negotiation.

That is where the real damage happens.

A trader can have a profitable system and still lose money if he cannot follow it.

A trader can know the right thing to do and still fail if he cannot execute under pressure.

A trader can study every setup in the world and still destroy his account if he keeps acting out his emotions in the market.

So here is the challenge:

Study yourself as much as you study charts.

• Why do you move your stop?

• Why do you sell too early?

• Why do you hesitate?

• Why do you chase?

• Why do you need to be right?

• Why can’t you take a small loss?

• Why do you abandon your plan the second the market makes you uncomfortable?

At some point, the next level is not another indicator.

It is not another setup.

It is not another video.

It is learning how to get out of your own way.

That is where most traders are stuck.

And that is why one of the greatest systematic traders of all time wrote a trading book that was essentially all psychology.

“Most investors think that charts are hocus-pocus. Only about 5 to 10 percent of investors understand charts. Even a lot of professionals are totally ignorant about charts. Just as a doctor would be foolish not to use X-rays and EKGs, investors would be foolish not to use charts.” -William O’Neil

“The most important thing is to have a method for staying with your winners and getting rid of your losers.” - Gary Bielfeldt

“If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in. There is nothing better than a fresh start.” 

- Paul Tudor Jones

One of the BEST Trading Quotes of ALL TIME

Mark Weinstein said:

“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.”

Be like the cheetah.

“Don’t increase your position size until you have doubled or tripled your capital. Most people make the mistake of increasing their bets as soon as they start making money. That is a quick way to get wiped out.”

-Marty Schwartz

“I have two basic rules about winning in trading as well as in life:

1. If you don’t bet, you can’t win.

2. If you lose all your chips, you can’t bet.”

- Larry Hite

“The common mistake most people make in designing systems is to try to find a system that works in all market conditions. That’s insane.” - Dr. Van K. Tharp

“The institutional buyers are by far the largest source of demand for stocks. Leading stocks usually have institutional backing.”

- William O’Neil

I Didn’t Find O’Neil and Minervini Through Blind Faith. I Found Them Through Skepticism.

I remember even 20 years ago, before YouTube, Twitter, Substack, and social media, the trading and investment world was already full of fraudsters.

People were selling the next big stock idea.

The next secret system.

The next “can’t miss” strategy.

And if I’m being honest, some of it caught my eye back then.

But that is also what sent me down the path of studying the legendary traders and going back through market history.

Now, from the outside, it may look like I am some cult-like follower of William O’Neil, Mark Minervini, Jesse Livermore, Nicolas Darvas, Bernard Baruch, Gerald Loeb, and the other great traders.

But it is actually the opposite.

I found them because I did not trust people.

• I did not trust the hype.

• I did not trust the gurus.

• I did not trust 99% of what I saw.

So I went backward.

I studied the legendary traders to look for the similarities, not the differences.

The people who survived multiple market cycles.

The people whose methods kept showing up again and again across different eras.

And eventually, you start to realize something David Ryan quotes from the bible and has said many times:

“There is nothing new under the sun.”

Most of what works in the market has already been discovered, tested, taught, forgotten, repackaged, and rediscovered again.

• Buy strength.

• Cut losses.

• Let winners run.

• Respect the general market.

• Price is always right.

• Manage risk.

• Use proper position sizing strategies.

• Avoid the need to be right.

These ideas are not new.

They are old because they work.

So to the newer traders, especially the beginners who feel overwhelmed, do not feel bad if you are still swimming through the garbage.

A lot of us did the same thing.

A lot of the legendary traders did too.

They tested ideas. They made mistakes. They chased the wrong things. They learned the hard way. Then they eventually found the principles that kept showing up across history.

Honestly, I challenge you not to believe me.

Try to prove me wrong.

Go study market history and ALL the books I listed in the Momentum Trading Strategy Course.

Go study O’Neil, Livermore, Darvas, Baruch, Loeb, Wyckoff, Weinstein, Ryan, Minervini, Zweig, and the Market Wizards.

Study the biggest winning stocks.

Study the biggest winning traders.

Study what actually repeats.

And in trying to prove me wrong, you may end up coming to the same conclusion I did:

Most successful traders are not inventing something revolutionary.

They are building on proven principles from the people who came before them. Many just copied a proven system and followed it and there is absolutely NOTHING wrong with that.

That is true for growth stock traders.

It is true for trend followers.

It is true for value investors.

It is true for systematic traders.

Different disciplines. Different tools. Different timeframes.

But the serious people eventually stop chasing magic and start studying what has already worked.

Some of you are lucky if you are discovering this method first.

I am jealous of you.

For the rest of us, it took longer.

We had to swim through the fraudsters, the hype, the hot tips, the secret systems, and the fantasy of easy money before we finally found the way.

But once you find real principles, you stop needing the next shiny thing.

You stop looking for someone to save you.

You start integrating a proven strategy and process.

And that is when trading finally starts to work.

Making Money Is Not the Hard Part

Bernard Baruch made his fortune in the market long before the Roaring Twenties.

He was also one of the classic market operators William O’Neil studied and learned from while developing his own approach to growth stock investing.

And in Baruch: My Own Story, he gave one of the most important lessons every trader eventually has to learn:

“It’s one thing to make money, and another thing to keep it. In fact, making money is often easier than keeping it.”

That is the part most traders underestimate.

In a strong market, almost everyone can look smart.

Stocks are breaking out. Leadership is expanding. Your watchlist is working. Your account is moving higher. You start thinking the money came only from your skill, when sometimes it came from the environment.

But keeping it?

That requires a completely different level of discipline.

• Can you reduce exposure when the tape changes?

• Can you stop pressing after a big run?

• Can you sit in cash when there is no edge?

• Can you avoid turning a great month into a round trip?

That is why the old masters obsessed over risk.

Baruch understood it. Livermore learned it the hard way. Loeb wrote about it. O’Neil built rules around it.

The goal is not just to make money in a good market.

The goal is to keep enough of it that you are still around when the next great opportunity shows up.

Because the market will always offer another chance.

But only to the traders who protected their capital.

Buying Strength Is Not a New Idea

A lot of traders think buying strength is some modern momentum concept.

It is not.

Bernard Baruch understood this more than 100 years ago.

In My Own Story, he described watching Goldfield Consolidated get hit with a large sell order, but instead of crumbling under that supply, the stock barely moved.

Baruch wrote:

“Instead of being driven down, the stock held to within a fraction of a point. This showed a market strength in Goldfield Consolidated that few had dreamed possible.”

That is strength.

Not necessarily relative strength against the entire market in that exact passage, but strength against selling pressure.

And that is the same thing growth stock and momentum traders still look for today.

• When a stock gets hit with supply, does it break?

• When the indexes are weak, what stocks are holding key levels?

• When sellers show up, where are buyers still stepping in?

Because those are often the names that can become leaders when conditions improve.

Weak stocks break under pressure.

Strong stocks absorb supply.

The amateur looks for what is down the most.

The trained trader looks for what refuses to go down when it should.

Because strength is critical information.