For those who are still searching for the Holy Grail of investment or trading strategies, several individuals have in the past achieved immeasurable success while utilizing vastly different approaches. The fact is, anyone can replicate or even exceed their success by learning and putting into practice how they did it. Some strategies make better reading and are "cooler" than others, undoubtedly, but all share the common tenets of discipline and focus which most aspiring traders lack. These individuals' accomplishments are proof positive that it is not necessary to use more than one strategy to succeed, but it is critical to master said strategy and use it repeatedly until circumstances change so much they cease to be effective. For the traders profiled below, that has yet to happen. This list is in no way exhaustive, but for the benefit of those who are unfamiliar with the individuals mentioned, I have provided links to their most popular reads.
Jesse Livermore
A man known as Jesse Livermore made a fortune in the early 1900 through the Great Depression by identifying what he referred to as "Pivot Points", which are basically support and resistance levels. He followed the commodity and stock markets very closely looking out for breakouts above resistance and below support and instances when the levels were tested and prevailed. When a stock or commodity hit resistance and the level was not breached, he would go short, if a breakout occurred he would go long. At support he would go long if the level was tested and held, but go short if it was breached. Trading breakouts can generate huge and quick profits but is also subject to whipsaw signals therefore it takes time to master the technique. Jesse Livermore advocated strict discipline as requisite for success. He religiously followed his principles for trade timing, selection and execution. By his own admission, his failures came when he tried to do different things that he had no competency in.
Peter Lynch
Peter Lynch managed the Magellan Fund from 1977 to 1990 averaging 29.2% annual returns. He followed a simple philosophy; "invest in what you know". Peter Lynch recognized that small investors could do well by investing in companies and sectors which they already knew and understood, which negates the need for complex analysis. Large investment banks have teams of analysts combing through endless streams of data which gives them a theoretical, and sometimes practical advantage over the small investor. Even then they rarely, if ever, beat the performance of the market averages.
Warren Buffett
The revered Warren Buffett investment style is based on his mentor's teaching, Benjamin Graham. Put simply, Mr. Buffett seeks companies with good businesses and good management, the stock of which is valued at below the company's tangible book value. This gives a margin of safety in the event the business fails. It has worked like a charm for decades, so why change it. The success of Berkshire Hathaway has been nothing short of spectacular.
Larry R. Williams
Larry Williams is on record as having made $1 million from $10,000 in one year trading commodities, but his method can also be used on stocks. The short version of the story says he used primarily one indicator, the Williams %R indicator which measures overbought and oversold conditions as signals for entry and exists, and to establish long and short positions. Most technical analysts will argue that a single indicator is unreliable, which is valid, but there's no limit to what any tool can achieve if expertly mastered. Oscillators can frequently generate false signals and it is always prudent to wait for price to confirm any reversal signals.
Carl Icahn
The most popular activist investor, Carl Icahn, employs boardroom warfare to generate wealth for himself and his shareholders. His methodology has been tried and tested. Sometimes it fails to work, but it often does, yielding huge profits. His tactics have been revered by some, and disparaged by others. They are inseparable from his seemingly personal crusade on corporate governance and are therefore frequently documented in biographical rather than finance texts, but still offer great lessons for any aspiring corporate raider.
Some investors have amassed wealth trading high dividend stocks only. Some have realized wealth in pharmaceutical stocks by closely following FDA drug reviews and approvals, others by focusing primarily/solely on acquisition targets, and others on spin offs, IPOs and bankruptcies. The fact is there is not one strategy worthy of the "Holy Grail" moniker; all can generate wealth, but all of them occupy a specific niche and require dedication and focus in order to succeed. As with all professions, those who specialize enjoy more success than those who do not. In investing and trading, it often pays to stick one thing you know best, and do it exceedingly well.
To sum up, the first thing a trader ought to do to succeed is simply pick a strategy and stick with it, because ultimately there is no single strategy that is better than all others in terms of wealth creation potential. The important thing to remember is that each strategy works best under specific circumstances and each has specific rules and guidelines which must be stringently adhered to achieve positive results. It is therefore essential, if not critical, to be disciplined and focused so as to truly master the ins and outs of any chosen strategy. Ceaselessly experimenting with different strategies is simply a recipe for failure, the Achilles heel of most traders.
Some of the strategies outlined require huge amounts of capital, but the overarching principle remains the same, even bolstered. If investors with billions of funds under management can stick to one primary strategy and execute it over and over with massive results, then surely there is no reason why a much smaller investor should be using a multitude of strategies. The inclusion of Warren Buffett on this list was meant to illustrate the point that being a master at a single strategy can produce great results, otherwise Mr. Buffett is not a trader as he believes in holding stocks "forever". Mr. George Soros has been excluded from this particular post because he tends to focus mostly on currencies.
To sum up, the first thing a trader ought to do to succeed is simply pick a strategy and stick with it, because ultimately there is no single strategy that is better than all others in terms of wealth creation potential. The important thing to remember is that each strategy works best under specific circumstances and each has specific rules and guidelines which must be stringently adhered to achieve positive results. It is therefore essential, if not critical, to be disciplined and focused so as to truly master the ins and outs of any chosen strategy. Ceaselessly experimenting with different strategies is simply a recipe for failure, the Achilles heel of most traders.
Some of the strategies outlined require huge amounts of capital, but the overarching principle remains the same, even bolstered. If investors with billions of funds under management can stick to one primary strategy and execute it over and over with massive results, then surely there is no reason why a much smaller investor should be using a multitude of strategies. The inclusion of Warren Buffett on this list was meant to illustrate the point that being a master at a single strategy can produce great results, otherwise Mr. Buffett is not a trader as he believes in holding stocks "forever". Mr. George Soros has been excluded from this particular post because he tends to focus mostly on currencies.
