The Turtle System

In 1983, famous fund manager Richard Dennis and his partner William Eckhardt had a disagreement. Dennis thought that great traders could be made through systematic mentorship, while Eckhardt disagreed and believed that great traders were simply born. In order to settle the difference, they decided to hire a group of people with little to no trading experience, and see if they could the students to manage real money and trade successfully.

Watch What People Do

A great investor does not only have to know about finance, but must also understand psychology and be good at observation. Legendary speculator Jesse Livermore once told a story of successful investor known by the nickname “Pennsylvania Dutchman” (in Lefèvre, 1923). According to Livermore, the Pennsylvania Dutchman was an “indefatigable Missourian”. He was a great investor who believed in hearing answers with his own ears and seeing things with his own eyes. He valued the information that others gave him, but he would not believe it until it was personally verified by him.

Manipulation of a Stock

A company may be listed in the stock market for many reasons, but the most important of all, invariably, is to make money for the large shareholders. The shares of a company are usually worth a certain value, but until someone is willing and able to buy them from the holder, they remain a paper asset that cannot be converted into actual cash. By listing the company in the market, it provides a channel for the shareholders to openly distribute their shares to the public. In other words, a large shareholder of a newly-listed company is not very different from a shopkeeper with a full house of inventory: they both want people to come and buy their stock as soon as possible.

Defence is the Best Offence

Mark Minervini is one of the best traders in the stock market. From 1994 to 2000, he achieved a super performance of 33,500 percent of compounded total return, averaging 220 percent per annum, during which time he won an U.S. Investing Championship title in 1997 with a 155 percent return. He was also one of the selected traders who were featured in Stock Market Wizards (Schwager, 2001), which is a collection of interviews with America’s top traders in the stock market. But return is only half the story: during that time, he had only one down quarter, with a bare loss of a fraction of 1 percent.