What Warren Buffet has taught me about Forex
Warren Buffet is a personal hero of mine. His story has always inspired me and he is one of the reasons I do what I do. So here are some of his most famous quotes, with a few thoughts on how they relate to Forex.
1. “Beware of geeks bearing formulas.”
This is a great quote. For the past few years, more and more coders and programmers have flooded into the Forex market. With little to no actual trading experience, they code trading robots and indicators. All these formulas and code usually (or always) amount to nothing, when used live.
Geeks and their formulas don’t meld well with Forex, or other financial markets, especially when the person bearing the formula is not an experienced, professional trader.
2. “If past history was all there was to the game, the richest people would be librarians.”
This one is obvious to experienced traders. What happened last week, month or year or a decade ago will not necessarily repeat itself in Forex.
If you look to the past, for ideas on trading in the future, you won’t be successful. This is why I am a proponent of price action trading. Price action is all about the here and now.
3. “Chains of habit are too light to be felt until they are too heavy to be broken.”
This obviously does not apply only to Forex. However, one of the biggest issues that hurt new traders are bad habits. These come from many different sources. You can have bad personal habits that do not meld well with Forex. If you’re easily stressed, or quick to anger, in day to day life and carry that through to your trading it will hurt you. This is why you should have a strategy in place to nip bad habits in the bud.
Demo accounts are also a major cause of bad habits. Traders who spend a long time trading demo accounts tend to become too open to risk.
4. “Let blockheads read what blockheads wrote.”
I love this quote. There are so many failed Forex traders out there who turn to selling products, because they cannot trade. These guys are marketers not traders. They may be smart people, in general, but when it comes to trading they are idiots. So let the idiots read what the idiots wrote.
5. “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”
This one is self-explanatory. Even though it makes perfect sense it is hard to put into practice. That should not stop you from trying though.
6. “Risk comes from not knowing what you’re doing.”
This says it all and it is a huge problem in the Forex market. So many people come into Forex with absolutely no clue what they are doing. Yet they jump into the market and they get batted around, like a cat playing with a little bitty mouse.
Check out this post in the forum. This guy entered a trade minutes before the release of the NFP, last Friday. That is a massive risk and it is no wonder he lost the trade. The guy simply did not know what he was doing and it cost him.
7. “When you combine ignorance and leverage, you get some pretty interesting results.”
Even though the CFTC has limited leverage for US traders, outside of the US people can still get leverage as high as 500:1. Leverage can be a great aid if you know what you’re doing. However, when you combine a newbie with leverage it almost certainly spells disaster.
What’s your favourite Warren Buffet quote or Forex related quote?
There are many quotes by Warren Buffet and from other inspirational people. Do you have a personal favourite?
Jude
I’m printing this blog entry and sticking it on my wall. I might even do #1 up large in some fancy calligraphy to hang over my archway (since I appear to be prone to having geeks – me, included – finding me dumb , useless, but momentarily interesting, stuff to waste more time and money on)
Great post, Nick!
I wonder what Warren thinks of the CFTC nanny-state rules we’ve got to deal with. I cannot, for the life of me, figure out why on earth, Canada has gone along with this. We can gamble our shirts off online if we so choose,..the gov’t even promotes gambling,…so, what’s the problem with Forex? Were our banks afraid the little folk would get some of their crumbs?
Steve
Hey Nick. Nice post, just thought I’d let you know you need the link in Number 6.
Cheers.
Contles
zach
“If past history was all there was to the game, the richest people would be librarians”
Even trading price action is still assuming that patterns seen in price in the past will result in the same results today. WB trades fundamentals too and uses far more information than just price action for his trading.
NeilA
Great quotes Nick but I never thought of Warren Buffet as a “Trader” rather a cool, calculating business man, who sized up Companies for opportunity, by closely examining their Assets and Balance Sheets.
No Buffet quotes from me, just admiration for someone who has never flaunted his wealth, has lived in same home for eons, is giving away mega millions along with one W. Gates.
Who started this trend well, check out one Andrew Carnegie, a Scot who became one of America’s wealthiest men. He procalimed something like “It would be a disgrace for a Rich man to die Wealthy”
His legacy are numerous Libraries and Buildings in the UK and World-Wide, particularly Scotland.
Hey I love your turn on Philosophical matters, after all “what matters”
Common charecteristics for both Buffet & Carnegie, I suggest, and also every successful businessman, absolutely ruthlessness and devotion to detail.
No matter what the home spun homilies that Buffet chants out.
Interesting chat though.
Keep it going, thought stimulates, debate sharpens, minds change.
Best, Neil
NickB
@NeilA:
I always like to think of him as a trader but I do understand he is not a trader in the sense that we are traders.
Art
Look at that post before mine it looks like a novel haha
Thanks for keeping me entertained while I’m at work Nick!
Vince
“Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway”
Kevin
Very interesting site. I like how it is designed, a good choice of few colors and a clean layout. Good info too on forex and I enjoy your youtube videos. Keep it up.
dallia
I work for Warren, well I work for one his companies. He will be visiting the company on Friday. The guy has an iron code of ethics and tells us to use our bonuses to pay off our credit cards and he puts half of it into our retirement accounts. Our retirement accounts are all very low expenses unlike any other place I’ve worked. He’s a well liked billionaire around here. Good model for any trader. Heck for any human being.
Shaun
I cant remember who said it, but here is a quote that has been ringing in my head for a while now.
“What’s wrong? Don’t you believe in comebacks?”
It truly applies to my newbie trading at the moment.
staalc05
Love this post =)
Especially number 7 ^^ I have a friend, who is exactly like this ^^ Invested in oil, with, i think 1:50 leverage, and a way too big position, AND even though I told him like a hundred times “you have to have one, otherwise, you’ll be out of the game faster as you can say Stop loss”, without any SL… I mean he was perfectly right that oil is going to skyrocket cause of egypt and lybia, but he simply was in too early, and since he had no sl, and a way too big position, he didn’t survive till oil went up ;)
Jay Molina
I love number 2, This shows that not everything is based on past performance.
ARSHAD HUSSAIN
Rule #5 -RULE -1:NEVER LOSE MONEY RULE-2 : SEE RULE -1 Again.
I think this is the best if one can imagine the philosphy behind it,EVERYONE can be successful.