Great Traders: What Richard Dennis Has to Say


​Richard Dennis was born in Chicago in 1949. As a young man, he borrowed $1,600 to trade commodities, and then turned that sum into $200 million within 10 years. 

This trader turned thousands into millions. Now, you can learn trading from him. Click here.

Early on, Dennis bought a seat on MidAmerica Commodity Exchange (which cost him $1,200 in the early 1970s) from which he made $500,000 trading soybeans. Later on, he moved to Chicago Board of Trade. Unlike traders who were seeking to take tiny and frequent profits by scalping, Dennis held positions for longer.

Richard Dennis also trained others. His so-called “Turtles” group generated profits of $175 million trading commodities, bonds, and forex by using simple trend following strategies. However, when this system was back-tested and applied to 1980s and later periods, it didn’t work as well. Here’s a major point: a single strategy will not work forever, especially once many others start following it. A winning strategy eventually turns into a losing strategy.

Dennis took some losses, too. He has lost for himself and for his clients tens of millions of dollars during 1987 market crash and a year after. He also ran investment funds, which were closed in 2000 after taking losses. The lesson here is that no one wins forever and that even the best can lose money.

Below are some of the best Richard Dennis’ quotes as well as our commentary.

“I always say you could publish rules in a newspaper and no one would follow them. The key is consistency and discipline.”

 Many amateur traders don’t even have a strategy, therefore their approach to trading is inconsistent. Even when they learn about the rules and strategies, they often lack discipline to follow them. This inevitably leads to losses.
 

“Trading has taught me not to take the conventional wisdom for granted. What money I made in trading is testimony to the fact that the majority is wrong a lot of the time. The vast majority is wrong even more of the time. I've learned that markets, which are often just mad crowds, are often irrational. When emotionally overwrought, they're almost always wrong.”

Yes, the majority is often wrong. Even the best traders have periods of losing, so no wonder many amateurs have their accounts wiped out. Trading is a difficult business. You need to get to the top 10% to make some money, and to the top 1% to make big money.


“Whatever method you use to enter trades, the most critical thing is that if there is a major trend, your approach should assure that you get in that trend.”

Professional traders agree: trade with the trend, not against it. There are many trading systems, many trading charts and indicators, many markets, as well as many strategies. But they all should aim to get you into a good trade when a trend is growing in strength.


“A good trend following system will keep you in the market until there is evidence that the trend has changed.”

Your system and strategies should get you out of a trade once the trend weakens and starts to reverse. There are so many chart formations, moving averages, and other indicators. If you use too many, you’ll get conflicting signals. Then, the challenge is to find the right configuration for you. Something that will get you to trade with the trend and get out once it starts reversing.


“When you have a destabilizing loss, get out, go home, take a nap, do something, but put a little time between that and your next decision.”

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“Trading decisions should be made as unemotionally as possible.” 

You can test your strategies with free demo trading systems many brokers provide. But, once you get into real trades, emotions will run. As a trader, you need to manage your emotions, especially when you’ve lost some money. At that time, it’s important to take some time off from trading. And if you become uncomfortable after that loss, make your next trade smaller.


“You have to minimize your losses and try to preserve capital for those few instances when you can make a lot in a very short period of time. 

Dennis’ trading style wasn’t about making frequent and small gains. He loaded up when opportunities arose and made a few great killings. It is possible to make lots of money in a short period of time, but you need to be prepared. For example, some seasoned traders load up derivatives and use leverage when they see an opportunity. Then they wait for the moment when the price starts rising. It is a risky strategy, though. A milder version would be not to use leverage and/or derivatives. What’s most important is not to risk it all.


Summary:

  • Most amateur traders don’t make it
  • A good trading system will get you into a trade once there’s a good trend and get you out once it reverses
  • When it gets too emotional, take it easy, relax, and reduce your trading


 

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Whatever your trading system is, it needs to get you in and out of trends on time