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Richard Dennis: 10 Trading Lessons from a Market Wizard

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Richard Dennis: 10 Trading Lessons from a Market Wizard

hey hey what’s up my friend so in today’s video I want to share with you ten trading lessons from which Dennis for those of you who do not know who Richard Dennis is right he is pretty much a trader in the 1980s right he is the founder of the total traders he is a market wizard and according to sources right he actually took a $400 trading account and transformed it into two hundred million dollars over a ten-year period so this guy’s pretty much a ledger name I want to share with you ten trading lessons that you can learn from him number one it’s misleading right to focus on the short-term results and the reason being is that in trading right when you’re dealing with probabilities or statistics right in the short run your results are random and it’s only in the long run right will it be a line to its expected value or it’s true expectancy let’s say for example write this over here is a it’s a systematic trend following strategy you can see that from the looks of it right it doesn’t look profitable at all at all right because you know consider it in 2018 January it’s up 6.

8% ferrites down much it’s down Apryl down mates down n2 a trader who doesn’t know what is getting involved with you were claiming that the strategy doesn’t work okay and probably you know hop on and try something else but if you look at a big picture how this strategy has fare you’ll see that this is pretty much likely to be just be a drawdown within a big picture you can see that overall this strategy it has losing years right like for example in 2005 2009 right in 2012 right but generally right you’re near it’s profitable so this is why you know you don’t pay attention too much on the short-term results because as you can see in the short term right the results can look very bleak it can look bad for example you look at over here right bad results bad results right this is pretty okay it’s pretty not very bad but still you know losing for three months in a row this one losing or four months in a row and you can see that this one over here pretty bad as well and this are pretty bad as well so you can see that all this all pretty much short-term results but if you treat long term if you have an itch in a markets right you have to trust that your system right well you know turn the type over so this is why you know Richard Enys sees right you know it’s it misleading to focus on the short-term results okay number two you should expect the unexpected in this business right expect the extreme don’t think in terms of boundaries or limit to what market my to so this is actually a very good lesson right I think back sometime in twenty twenty seventeen all right let’s talk about bitcoin so if you look at bitcoin over here you can see that it’s about five thousand dollars and you look at this chart right if you let’s not talk about you know what happened right if you look at this shot at this point in time right now you say that man bitcoin is so high right you know this is not safe to be buying right now look at the price how extreme it is okay and if you have this type of boundary or cap to how much you think the price can go then what happens is that you know you would tend to take profits you exit your trade too early and you end up missing you know the move like this where you know it was at five thousand it did a retracement and M boom all the way up to a high of twenty thousand dollars so this is why I know there’s a trend follower you don’t want to limit yourself to how much the market can go you’d want to say you know oh man it’s too high let me take my profits let me put my profits because you just have no idea how high or how far the market can go so this is why you know you just you know trillion stops right and take what the market decides to reward you okay so this is a hallmark of a trend follower number three you have to minimize your losses and try to preserve your capital for those few instances where you can make a lot of money in a short period of time what you kind of what to do is throw away your capital on suboptimal trades so again right this really is a relevant to trend follower because you know you will not be catching trends all the time there are times where you know man said you know you catch a good friend and they’re man’s way is dry you’re just bleeding you know getting your stop-loss heat you know one after another so this is why right you you have to really you know minimize your losses when you know the trainer’s reverse cut the loss right here your trailing stop cut the loss and when the market moves in your favor you have to you know maximize the profit or you have two trillion stop loss alright and you know be willing to take what the market is offering and not gonna just limit your gains right because that is not enough right to kind of no recoup those little losses that you have suffered during the dry period of time okay so you have to minimize your losses and try to preserve capital for those very few instances where you can make a lot in a shop of time okay you have to play good defense and when the good times is here that’s where you can actually know try in the better time period number four whatever method you used to enter your trades right the most critical thing the most critical thing is that if there is a major trend your approach to ensure that you get into the Train so one thing that you will realize is that trend for Louis a lot of them right they like to create breakouts because if you think about this right breakouts is actually one of the few entry techniques that would almost assure you get into a trend let’s say for example right what is a breakout so the price you know breaks above the highs you go along over here if you talk about pullback sometimes the trend just trends very strongly like this there is almost no pullback and if you’re always waiting for a pullback right then it can be difficult to hop on board a train and in fact you might be on the sidelines when the train is you know trending well because you are waiting for a pullback so this is why right for a trend follower systematic trend follower a lot of them trade breakouts some of them invent rate moving average crossover right a short term cross the long term moving average right and that is one of the surest way that you can assure that you will get on board the train I’m not saying that pullback doesn’t work but when you are applying systemic trend following okay sometimes pullback right might not get you on what the trend and it can be very painful if you miss the trend because you know you’re waiting for price to come to your level fifth lesson right I could trade without knowing the name of the market and this is possible because Richard Danny sir if you think about this right trend follower they are not trading a particular commodity like you know oil go silver etc they’re just simply trading the price on a chart they are looking to buy in this price level and hopefully they can sell it at a higher level you’re just trading the raw price itself and to be honest when I treat alright sometimes I don’t even know what is the most of the time I do not know what’s the fundamentals of the market all right is it bullish is it bearish you know and stuff like that I just create what I see if the price is hitting higher I buy if the price is hitting lower I go short okay and that’s pretty much what a trend follower do we just follow price and we’re not concerned with you know what’s the name of the market what’s the fundamentals behind it was the macroeconomics behind in it etc and yadda-yadda number six when you have a position right you put it on for a reason and you’ve got to keep it until the reason no longer exists so for example you put on a position and you want to write a trend you have to be in the tree writing the trend till the trend is is showing signs of reversals so until you hit your trailing stop loss so you have to define right at what point right the reason no longer exists so basically at what point I would if the price hit the level right it’s telling you that the trend right it’s probably coming to an end so this is where you know trend follows they use trailing stop loss you can use a moving average to Trillian stop-loss you can use the average True Range indicator to trail your stop-loss right and have a set parameter for it and just follow it right so for longer-term trend follows they typically use you know six times the average True Range to trill their stop loss for medium term trend follows they can use no for time the average true range to trill their stop-loss so until their stop-loss is hit right they will be in a trade holding on to the tree until your stop losses hit right because if their stop losses hit right then there’s a good chance right there you know hey the trend might be coming to an end right and they don’t want to stay in the trade any longer okay number seven trading has taught me not to take conventional wisdom for granted right what money I mean in trading is a testimony to the fact that the majority is wrong a lot of the time so this one is can really bring it down to the point where we talk about bubbles mania so again back to Bitcoin in 2017 right when the price was that I think around fourteen fifteen thousand right I have people at the gym telling me you know talking about Bitcoin all right and I have people on Facebook I’m not sure what scheme they’re on where do you refer a friend right you end like fifty or sixty dollars for referring a friend to some Bitcoin scheme or program I don’t know what it is at this point that it’s a signal to me that no man the retail at all you know piling in right because I consider myself a professional trader I’m pretty much in tune right to what the price is doing on a day to day basis if someone who is outside of you know trading who doesn’t even get involved in trading suddenly got involved in it right because it seems like to be a attractive scheme right it’s an easy way to make money this to me right is I know that you know it’s towards near the end of the move right I’m not trying to no predict how high the market will go but all the more I want to be a lot right when the market reverse I want to be a lot of the trade I don’t want to know take it for granted because if everybody is all in the market the retails are in the professional or in and who is left to buy the stock or they do the product or an instrument okay so this is a warning sign right whenever you see mom and pop talking about a particular instrument like a Bitcoin the Dutch tulip mania there I don’t know whatever right you want to be aware that hey you know the top or the bottom it’s about there really okay another example I can share it’s a crude oil I think in 2014 you had a very strong collapse it’s just declining week after week and again right this this person and the gene came up to me say hey Rana you know I think crude oil has been dropping you know so much I do you think I know I can you know shot some crude oil and apart in time crew I was about sixty dollars something you know I mean he the person right let’s call him John he doesn’t even trade right so you’re gonna short crude oil you have to open open a brokerage account you know understand what some you know short and find a product to show the crude oil and to me I just tell him say you know no you know what forget it right I think by the time you enter it’s probably too late and a well crude oil declined right from 60 down to mom you know I think maybe 40 or thirty dollars there is some life in a move but the reversal is equally swift back towards the upside so again right this is a another kind of you know rate flag right when someone who doesn’t treat come to you and talk about trading and talk about particular instrument that is a strong red flag near the bottom or a top it’s there about it’s about about time for it to occur okay so there’s a support signal that you can use right to pick advantage of you know the majority given that they’re usually wrong I’m a trait small because that’s when you’re gonna be as bad as you know you’re gonna be learn from your mistakes so this is something that I just always advise new traders right you know let’s say for example you have a hundred thousand dollars maybe have some inheritance and and you want to trade I don’t recommend putting the four hundred thousand dollars into a trading account even though you have that money because when you start off right you’re gonna be as bad you’re gonna suck as bad as possible okay it’s like riding a bicycle when you first write it right you’re gonna fall you got a trip right when you first do let’s say if hot surgery you don’t go and open a hot surgery you know right from the get-go you think you know steps along the way and finally you know you open up the heart and you don’t do whatever you need to do and it’s the same for trading you don’t stir a fun a hundred thousand dollars training account then treat that from the stat okay because you will make mistakes you will you know have lessons that the market will want to teach you and think about this if it’s like tuition fees right I’m sure you wanna pay as little as possible – why fun and latch account and pay expensive creation fees why not fun and smaller come you can learn the same lesson at a fraction of the cost okay so you know you have money I’ve I’ve no read no I’ve no doubt that you might have money but you know you don’t want to put in all your money at one go right take it slow step by step and when you’re ready when you’re confident you can always scale up a game at the same time the best part is if you do make mistakes right the mistakes cost you very little and it’s the same lesson where there is a hundred thousand dollars trading account or a thousand dollars trading account number nine in the real world it is not wise to have your stop-loss right where everyone else has their stop so this really brings down or boils down to the fact that you know what I talk about you know don’t set your stop-loss an obvious level like support resistance so let me just you know share with you what I mean so for those of you who have been following me you know whenever I trade no range support resistance right I say that you know let’s say for example you wanna go along near the loss of support right and market really you don’t want to just put your stop-loss so I just blowed this absolute loop because the market could very easily swing down lower hideous tops and then really back up higher okay so instead what you have to do is you know give your stop-loss you know some buffer a distance away from your obvious market structure so for example if the if this is the lure and you want to set it know a distance a buffer away okay so if the market really know comes to this area and hit your stop-loss chances are you know that support is broken that’s why I know you can you know break and go down below it by so much okay so this is something that you know to me it’s one of the most important thing that a discretionary trader price action trader should pay attention to do not just blindly put your stops above the highs or lows because those are very prime levels to get stopped hunted okay so that’s the ninth lesson and finally right you can publish trading rules in newspapers and nobody will follow them the key is consistency and discipline and I can vouch for this right I have read many trading books studied research papers they’re all available for free in the public I mean well the books are not likely technically free if the board imma buy them from Amazon but technically it’s available on a public domain their exact trading rules in trading books they are there but I’ve hardly see any traders just you know following the rules alright reason being is because number one they don’t have to discipline number two they don’t have the conviction to trade it so this is why you know you can share rules out there right and most retail traders they will just look at it try it for a while they ain’t come to draw down or draw down it I share with you a little kiss on a short-term results and after which they abandon the strategy and try something else because they just don’t have the conviction right they don’t have the discipline to follow the rules so this is really key in trading right because you can have no the best trading strategy out there okay but if you can’t follow it religiously you don’t have conviction to trade it you don’t understand why it works right you will never right be a consistently profitable trader so consistency and discipline is really key right not just your strategy not just your risk management is the execution okay so with that said right let’s do a super quick recap right I can’t do it on this PowerPoint slide but so it’s over here right so this are the ten lessons right there I’ve learned from Richard Dennis and hopefully you know sharing some of my insights right you kind understand know what you know it means in how you can apply it to your own trading okay so with that’s it I have come towards the end of this video if you want to learn more about you know what I do we can go down to my website trading with Rainer comma I’ll just go to the link here and share it with you right now trading with Rainer calm okay trading with Rainer calm okay the links are on top over here okay so just go down to my website any three we talked about trend-following so really if you’re interested about trend following you learn more about this trading approach this strategy go and download this guide over here the ultimate trend-following guide click click this blue button and I’ll send it to your inbox for free okay so we that’s it I’ve come towards the end of this video you know if you’ve enjoyed it please hit the thumbs up button subscribe to my youtube channel and any feedback or comment let me know below and I’ll do my best to help so that’s it I wish you good luck and good trading I’ll talk to you soon you

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