If you have built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them.
—Henry David Thoreau, Walden
Today We are going to talk about the master trader who is famously known for trading and harvesting S&P Stock Market. Mark D Cook got a title in the “Market Wizard” book during the Interview with Jack D Schwager.
During the interview with America’s top stockbroker reveal some of his best strategies, which helped him to achieve success in the stock market. And It could also help you to make a strategy for the next trading plan.
In the initial days of trading, Cook’s get repeated setbacks, but he never gave up and learned from each failure. Setbacks only motivated him to work harder.
From every failure and money loss, he only learned that he wants his money back. He is not a quitter who quit after the failure. He was determined to learn everything about the stocks and options.
The only reason he wanted to become the stockbroker was to get his money back. And finally, his trading style became consistently profitable after carefully tracking the stock market and recording and analyzing every trade he made for many years.
Therefore, from so many Ups and down in his trading carrier, we could learn some important lessons from him. It will help us to get success in the trading carrier of the stock market. Below are some advice given by MARK D. COOK in the interview with Jack D. Schwager, that you should read before making trading as your carrier.
Planning For Making Carrier In Trading
First, you should know that trading is not a part-time time job. You have to treat it as a full-time business and go into trading with a solid plan. If you want to be a successful trader, you must have a solid business plan and strategies. Because we know that hard work without a plan will never give you success in the stock market.
Therefore, the following point you should consider making a trading plan according to Mark D Cook.
- Find the market which fits according to your personality for trading, because the market is a reflection of the trader. Choose the market in which you have an understanding.
- You must find your trading capitalization. First, you should honestly be able to say that If you lose all this money, it will not change your lifestyle. Second, for making money at least equal to your earning from your current job, You require a large enough capital. Otherwise, you will think of yourself as a failure because you have worked harder for the trading than you are working in your current job.
- Find the answer to the following question:- How will you enter your orders? Will you scale into positions or put them on all at once? How will you exit your losing trades? How will you exit your winning trades?
- What type of drawdown will cause you to stop trading and reevaluate your approach? What type of drawdown will cause you to shut down trading?
- What are your profit goals, measured on as short a time frame as is feasible for your trading approach?
- What procedure will you use for analyzing your trades?
- What will you do if personal problems arise that could adversely impact your trading?
- How will you set up your working environment so that it is conducive to trading and maximizes your chances for success?
- How will you reward yourself after successful trading? Will you take a special vacation, buy yourself a new car, etcetera?
- How will you continue to improve yourself as a trader? What books will you read? What new research projects will you do?
After making the Plan for your trading you should also know some cold truth that leads to the failure. This is important because no one wants to hear and tell the truth about failure. Ignoring them doesn’t change the truth and reality about trading in the stock market. It gives you the vision that how you will fall in the trap of failure.
Reasons People Fail As Traders In Trading
According to Mark D Cook, there are many reasons when people succeed in trading at the stock market and everyone loves to talk about it. But there are some hard facts that you must know why people failed in trading.
Success Takes Time
Most of the people dream while entering into trading, that they are going to be successful in one Night. People underestimate the Time, which succeeds them as a trader. People underestimate the fact that trading requires experience, and experience takes time to come.
The common reason for the failure of a trader is Undercapitalization. If you want to make the money at least equal to your earning from your current job, You required a large enough capital. Otherwise, you will think of yourself as a failure because you have worked harder for the trading than you are doing in your current job.
Honest about your weakness
For trading in the Stock Market, it doesn’t matter how intelligent you are, or how much you have market Knowledge. Many times people with good trading skills fail, and people without having experience get success in trading. You have to be honest about your weakness and deal with them. If you can’t do that, then you will not survive as a trader.
Support from family
People need family support in a tough time. If you are fearful and don’t tell the family about the trading, then nothing can help you. If you keep trading secretly, one of the two things will happen; you will lose all your money, or you will lose your marriage. In the worst case, you will end up losing both.
Mark D. Cook Strategies For Successful Trading
- He didn’t get out of the trade on which he is losing money; he just reduces the size of his position.
- Hope is not in his vocabulary because he only believes in hard work in the stock market.
- He never increases the size of his positions on a winning trade.
- He keeps a daily trading diary and wrote down the recurrent patterns that he noticed in the market.
- Tick is one of the indicators which is useful for him during trading. It is the difference in the number of New York Stock Exchange stocks whose last trade was an uptick and whose last trade was a downtick.
- He noticed that whenever the tick became very negative, the market became highly Bullish. Vice versa, strongly positive tick readings lead to follow bearish Market. Then he talked with many experienced brokers, and they tell them that one should buy above 400 tick and sell below minus 400 tick, which is just opposite from his observation. Therefore, he just did the opposite, and it became a winning strategy for him.
- Conjunction Trade:- It requires two simultaneous signals to buy. 1st Tick Going below -400 and Tiki, which is a tick indicator based on the thirty Dow Jones stocks, going below —22. He gives this trade only twenty-one minutes to work and get his 3-point profit objective, his 6-point stop-loss is hit, or the twenty-one-minute time limit is running out.
- The Ratio Between The S&P Index And The Nasdaq Index:- He uses the information to decide which market he will trade if he gets a signal from the ticker. If he gets a buy signal on one of his other indicators, he will buy the index, which is stronger on that day. And if he gets a sell signal, he will sell the index which is weaker on that day.
Relation Between Bonds and Stock Market
The stock market and bonds are like a couple. Where the bond market always leads, and the stock market followed it.
Thus a bond is a female, and the stock market is male as it follows the female bond.
Before dating started, the couple didn’t know each other, so they are a bit out of harmony when they started dating. On similar markets days, the stock market may go up, when the bonds go up, but they do not follow each other very tightly.
Then the relationship becomes closer and gets married and went on honeymoon. On the honeymoon period, everything they do is synchronous. On “honeymoon days” in the markets, when Cook sees the bonds go up a few ticks, he knows that the S&P(share market) will immediately follow it, and he will have to buy the S&P for a profitable trade.
After that they settle into married life, the bonds will drag the S&P husband along with her, but they do not synchronous like they were in the honeymoon time.
Then the couple is no longer closed with each other or in market terms, whenever the bonds go up, the stock market will likely come down.
Last, the bitter divorce period comes and on that day, the bonds and stock market will move in exactly opposite directions. Every day, Mark D Cook determines what type of day it is, for the market for profitable trading.
According to him, the probability of winning is every bit as essential as looking at the ratio of potential gain to risk.
Read More: Super-Performance stocks from Mark Minervini
A strategy can lose more on losing trades than it gains on winning trades and still be a terrific approach if its probability of winning is high enough. Conversely, a strategy could make ten times as much on winning trades as it gives up on losing trades and still lead to financial ruin if the probabilities are low enough.
And last, there is some strange fact about the Cook we should know, which helps him to get success in his trading carrier.
- From every failure, he learns that he wants his money back. He is not a quitter in any form and shape. He was determined to learn everything to get his money back.
- He frequently withdraws profits from his account but never adds funds in his trading account after getting success.
- Cook is happy to take a small profit on trade but hates to take even a small loss.
- One of his cardinal rules. He never let a profit turn into a loss.
- He has willing to work hard and pay his tuition fee, which is the money he loses while he is learning how to trade.
- He never leaves the office during the day when he has a position on that day.