Richard Dennis is one of the most well know traders in the world. He began trading in the the early 1970s and for 15 years was considered one of the top traders on the planet.
Its said over the course of ten years Richard turned a $400 trading account into $200 million in profits, because of this he started his own fund which manged money for other people and ended up being very successful. Dennis was a trend trader whose method revolved around finding a trend and placing more and more trades in the direction of the trend at an increasingly higher leverage in order to make as much money as possible.
The 1987 crash caused Dennis to lose a significant amount of his and his investors trading capital. In the end he decided to stop trading for a number of years only to return in the mid 1990s with a new trading firm which he eventually closed in the year 2000.
Although Dennis was active in the markets a long time ago many of his quotes still reveal important lessons for us apply to the markets today. I’ve found 7 of his quotes which I believe are still relevant to today’s markets and will give you my explanations of them over the course of this article.
When you have a position, you put it on for a reason, and you’ve got to keep it until the reason no longer exists.
Trading has taught me not to take the conventional wisdom for granted. What money I made in trading is testimony to the fact that the majority is wrong a lot of the time. The vast majority is wrong even more of the time. I’ve learned that markets, which are often just mad crowds, are often irrational; when emotionally overwrought, they’re almost always wrong.
I learned to avoid trying to catch up or double up to recoup losses. I also learned that a certain amount of loss will affect your judgment, so you have to put some time between that loss and the next trade.
There is another point that I think is as important: 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 in the nearly twenty years that I’ve been in this business, it is that the unexpected and the impossiblehappen every now and then.
Trading decisions should be made as unemotionally as possible
This is a tough one for many traders.
You should always have a worst case point. The only choice should be to get out quicker.
You have to minimize your losses and try to preserve capital for those very few instances where you can make a lot in a very short period of time. What you can’t afford to do is throw away your capital on suboptimal trades.