All credit to the excellent Triangulated Research for putting out a couple of great reports on George Soros, Stanley Druckenmiller, and Michael Marcus.
I'm an investor first, not a trader. But I'm not above learning from people who are smarter than me - even if they are playing a different game. Some of the lessons below are directly applicable to value investing, and some are not. Either way, these are some of the lessons that I've learned from these great traders, with a focus on where they intersect ideas.
The main takeaways don't apply to trading, but are also applicable to life as a whole. If you don't want to read the entire piece, here were my main takeaways:
All of these traders were not in love with their ideas. They respected the market and reality, and would avoid emotions getting the better of them.
In value investing, this would be ignoring Mr. Market, or feeling dispassionate in valuation. The difference here is that the traders would not stick their heads in the sand and only look at calculators, but they would watch the market price, actively find new information, and try to seriously destroy their ideas. You have to be able to kill your ideas.
Warren Buffett often talks about the rule of never lose money. Joel Greenblatt says if you don't lose money, the other alternatives are pretty good. All of these traders feel the same way.
Taking a loss can hurt, but it is a lot worse to get absolutely killed by a bad investment. Or even worse, have a loss take over your emotions and have an effect of hurting all of your other decisions. Bad bad bad. If something is eating at you, you need to get rid of it. It's not worth it.
Don't cut the roses to water the weeds. Winners average winners, and you want to be a winner.
When you have a winner, and you have conviction, you need to average up big time. Don't get stuck in seeing a low cost base and not wanting to average up. As the possibilities tighten, you need to be able to invest more and increase your returns. Money comes from concentration and conviction, so you should earn both when possible. If not, kill it.
The most important elements of all the great investors is their inner abilities and skills to manage themselves.
You need to believe in yourself. That is the first step. If you can't accomplish that, then what could you possibly do?
Make sure you are also playing your own game. Don't copy others just because they are doing OK. You will fail that way. The only way to self-actualize and become great at anything is to stick to your guns.
"Nothing in this world can take the place of persistence."
"You also have to follow your own light. Because I have so many friends who are talented traders, I often have to remind myself that if I try to trade their way, or on their ideas, I am going to lose."
"When you're right on something, you can't own enough."
"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong."
"My approach works not by making valid predictions but by allowing me to correct false ones."
"Soros is also the best loss taker I have ever seen...If a trade doesn't work, he's confident enough about his ability to win on other trades that he can easily walk away from the position."
"The way to build long-term returns is through preservation of capital and home runs."
"I'm smart enough to realize that a slap is easier to recover from than a beating..."
"When you have tremendous conviction on a trade, you have to go for the jugular."