Trading criteria and strategy from market wizard Michael Marcus - Business Insider

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Market wizard Michael Marcus famously turned $30,000 into $80 million. He shares the 3 criteria he looks for in every trade — and the 7 timeless rules that have contributed to his success.

"First, the fundamentals should suggest that there is an imbalance of supply and demand, which could result in a major move," he said. "Second, the chart must show that the market is moving in the direction that the fundamentals suggest. Third, when news comes out, the market should act in a way that reflects the right psychological tone."

Marcus provides an example of bad news being shrugged off in a bull market, while good news is responded to voraciously. He also gauges tone by paying attention to how many consecutive up or down days the market has had and sentiment indexes. "If you can restrict your activity to only those types of trades, you have to make money, in any market, under any circumstances."Although Marcus' trading career is littered with an array of harsh losses, he was able to turn negatives into positives by learning from his mistakes.1. Never bet more than 5% on one idea

"That way you can be wrong more than twenty times; it will take you a long time to lose your money," he said. "I mean actually put them in, because that commits you to get out at a certain point," he said."Another thing is that if a position doesn't feel right as soon as you put it on, don't be embarrassed to change your mind and get right out," he said."Perhaps the most important rule is to hold on to your winners and cut your losers," he said.

 

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