Monday, December 31, 2012

Lessons from Hedge Fund Market Wizards: Scott Ramsey

Today we continue our series, "Lessons from Hedge Fund Market Wizards", with a look at Jack Schwager's interview with Scott Ramsey of Denali Asset Management. 

Ramsey, a futures trader and CTA who works on the island of St. Croix, spoke to Schwager about his first foray into the markets, his evolution as a trader, and the process he stands by to protect and grow his clients' money.

1). Ramsey started trading in college. He was roped into the OTC metals market via a broker's ad in the Wall St. Journal. The broker charged customers a flat fee to buy and sell as much as they wanted in a particular market for six month. At the time, Scott was a novice and didn't know about futures, so he traded metals in this fashion through the inflationary run-up of the late 1970s.

2). Scott had to rethink his trading strategy after he bought silver at $50 an oz., only to watch it collapse to $26 following a long string of limit-down days. He sold as soon as the market resumed trading, but he lost all the money he had made plus some starting capital.

3). "Losing money was what got me hooked", says Scott. He knew that some 90% of futures traders lost money and he was determined to be in the 10% that profited. This motivated him to succeed. He was so engrossed in trading that he left college 9 credits shy of graduating, despite being an excellent engineering student.

Futures floor trader Chicago pit

4). Scott learned to trade first w/ his own money, then by advising clients as a broker. He leased a seat on the IMM and tried trading from the floor. Being on the floor turned out to be a big disadvantage compared to screen trading. Scott felt there was a lack of meaningful info in the pits and he lost his feel from watching other markets. He soon left the floor.

5). Ramsey continued to broker and screen trade, watching every market and updating chart books by hand. He made money in his own account almost every year, but not a lot. Why? Ramsey says it was because he focused only on TA, not fundamentals. Also, because he regularly pulled money out of his account. He stayed a 1-2 lot trader instead of pushing it and increasing his size.

6). "The evolution of a trader is when you start letting your money work for you and increasing your size."
 
7). Scott is one of those traders who has used his time as a broker to his learning advantage. By observing retail clients, he learned what not to do - everything from holding losers and taking small profits to emotional decision making and chasing market activity.

8). In order to make the big money, Scott realized he had to embrace fundamentals. The transition began when he started thinking about prevailing sentiment in the bond market and why prices were where they were. He thought about how people were positioned and the psychology behind prices. He then initiated a trade that was positioned against the prevailing sentiment, which turned out to be a very profitable move. "I began to look at the market from the perspective of other traders."

9). Discussing market action during the Euro crisis, Ramsey notes, "The market's repeated resilience in the face of negative news tells me it wants to go higher. Chaos creates opportunity. We learn so much about the markets when we have crisis events."

10). Rigorous risk control not only keeps losses small, it impacts profit potential. You must be in a position to seize opportunity. The only way to do that is w/ a clear mind. Don't expend mental energy by managing poor trades. Cut those that are not working.

11). When asked what trading advice he offers to friends, Ramsey tells them that it's not about being right - it's about making money. Taking losses is part of the process, so don't dwell on losing trades. Think about your next trade. Trading is a business. Treat it like one, keep records of your trades and journal your experience.

Once again, I highly recommend reading Hedge Fund Market Wizards to get the full detail and feeling of these interviews. Hope you enjoyed this latest post and we'll see you back here, with more to come, soon. 

Happy New Year to all our readers and friends across the globe!  

If you're enjoying these posts and would like to see more, please subscribe to our free RSS updates and follow Finance Trends in real-time on Twitter and StockTwits. You can also check out our related posts below for more market wisdom and trading insights

Related posts

1. First 3 posts from "Lessons from Hedge Fund Market Wizards" series.

2. Lessons from Hedge Fund Market Wizards: Ray Dalio.

Photo credit: Trend Capture Futures.

Thursday, December 20, 2012

Heads up: new "Market Wizards" posts coming soon...

Hi gang, just wanted to let you know that we'll have a new "Lessons from Hedge Fund Market Wizards" post up soon. In the meantime, you may want to check out the most recent posts from this series. 

Dive in with this introductory post: key interviews and a trading webinar with Hedge Fund Market Wizards author, Jack Schwager. The videos found in this post contain some excellent insights and quotes from the traders and hedge fund managers interviewed in Schwager's latest Wizards book.


Ready to learn from some of the most astute traders around? Here you'll find some choice trading and investing lessons from global macro trader, Colm O'Shea and noted hedge fund manager, Ray Dalio

You'll find the first 3 posts in our "Lessons from Hedge Fund Market Wizards" series below.

1. Jack Schwager shares insights from Hedge Fund Market Wizards.

2. Lessons from Hedge Fund Market Wizards: Colm O'Shea

3. Lessons from Hedge Fund Market Wizards: Ray Dalio.

Now if you'd like to keep up with our real-time updates and be alerted to our upcoming posts, please subscribe to the Finance Trends RSS feed or follow Finance Trends on Twitter (totally free). 

We'll see you next week with the latest in our "Market Wizards" series. Until then, thanks for reading and have a safe and happy holiday season!

Thursday, December 13, 2012

Marc Faber's advice to young people and the meaning of "success"

 

Greatly appreciated Marc Faber's advice to young people and his thoughts on "success", heard near the 8:00 mark of this interview clip. 

Kids today might wonder if they need a college education, or the certification conferred by a degree, to do well in life. Given the rising costs (and diminishing returns) of higher education and the problems of widespread student loan debt in the US, this is a subject for serious consideration.

Faber offers, "I don't think a degree is important. If you have parents that can pay for your degree, then take one. If I had to borrow a lot money to pay for the degree, I don't think I would take one... 

"...I would try first to work for someone who is successful in any industry and acquire knowledge from them. Whatever the area, you should like what you do. If you like what you do, you'll do a better job than if you are indifferent towards your job." 

Speaking to the idea of success, Marc adds, "I think in life success comes on many different levels. Monetary success is just one of them. If you have a happy family life or you can help other people, these are also measures of success. Our society maybe overrates monetary success...". 

Something for people of all ages to consider, now that I think about it. What do you think of Marc's advice? What would you say to young people starting out in life?

Related posts:

1. Ray Dalio: Meditation is the Secret of My Success.

2. Self-Education and the School of Experience

3. Michael Bigger on Starting Over.

4. James Altucher: 8 Alternatives to College.

5. Gary North: Find Your Calling (Making a Difference in the World).

Wednesday, December 05, 2012

Ray Dalio: meditation is the secret of my success

Ray Dalio Bridgewater benefits of meditation


Hedge fund manager, Ray Dalio credits meditation as the key to his success. 

Says the Bridgewater Associates founder, "Meditation has given me centeredness and creativity. It's also given me peace and health...  and it's given me open-mindedness." 

"Meditation, more than anything in my life, was the biggest ingredient of whatever success I've had".

I was very interested to hear Dalio's take on the benefits of meditation, since he's obviously a very successful individual who assigns a great deal of value to this practice. It's also a subject I've been wanting to learn more about.

While I am not a yoga practitioner and have never tried transcendental meditation, I've come to learn that my long walks through the forests may share some benefits associated with mindfulness meditation. For me, it's about taking time to exercise, relax, and just focus on the natural (or built) world around us.

As Dalio notes, the key for beginners is to challenge themselves to stick with meditation for the first six months. Those who try it must realize that the 20 minutes spent meditating in mornings and evenings is an investment that pays off in numerous ways, enhancing one's enjoyment of life.

Ray Dalio was also the subject of our most recent post, "Lessons from Hedge Fund Market Wizards: Ray Dalio". If you'd like to know more about Dalio and his ideas on trading and learning from mistakes, check it out. 

Related articles and posts:

1. Lessons from Hedge Fund Market Wizards: Ray Dalio.

2. Meditation: A Simple, Fast Way to Reduce Stress (Mayo Clinic).