Michael Marcus (trader) Market Wizard and Trend Following Approach

Michael Marcus is a legendary trader who has made a name for himself in the trading community. He is one of the original Market Wizards, a group of traders profiled by Jack D. Schwager in his book of the same name.

Marcus is known for his trend following approach, which involves identifying and following major market trends. He believes that trends are the key to successful trading and that by following them, traders can make consistent profits.

As a trend follower, Marcus uses a variety of technical indicators to identify trends and make trading decisions. He is particularly known for his use of the 50-period moving average, which he uses to identify long-term trends.

Michael Marcus grew up in Providence, Rhode Island. He was a graduate of John Hopkins and studied Psychology at Clark University.

He was an acolyte of Maharishi Mahesh Yogi at some point in his life. Marcus began his trading career in 1972, trading plywood futures with his life savings of $7000.

In the summer of 1972, the price of some commodities was put on hold by then-president Nixon, but the futures market rallied instead, making Marcus a profit of $12,000 from his initial $7000.

Marcus was mentored by Ed Seykota, who taught him money management, and he met Seykota while working as an analyst.

Michael Marcus began his trading career in 1972 with a mere $3,000, which he used to trade plywood futures.

He turned his initial investment into $12,000 after President Nixon froze prices of some commodities, and then into $64,000 a year later.

Marcus credits Ed Seykota, a mentor who taught him money management, for helping him develop his trading skills.

Marcus' trading approach involves looking for confirmation from charts, fundamentals, and market action, and he believes that trading success requires courage and the ability to take calculated risks.

He has been considered one of the most successful traders, making an outstanding trading profit for his company 2,500 fold over a period of ten years.

Starting with a modest $3,000, Michael Marcus' trading career was marked by early setbacks, including an initial $42,000 loss in corn and wheat contracts.

This could have been a crushing blow for many, but Marcus used it as an opportunity to learn and grow, hardening his resolve and honing his analytical skills.

In 1973, Marcus turned $24,000 into $64,000, a remarkable turnaround that showcased his trading prowess.

Marcus' ability to manage risk and adapt to market conditions was likely influenced by his mentorship under Ed Seykota, whom he met while working as an analyst.

Marcus eventually became an EVP at Commodities Corporation, a testament to his hard work and dedication to the field.

As his career progressed, Marcus expanded his investment portfolio to include small-company stock through his holding company Canmarc Trading Co.

Combining technical and fundamental analysis can improve market predictions.

Marcus's approach is a great example of this, as he integrates both types of analysis to make informed decisions.

His fundamental analysis looks at the broader economic environment and company-specific details to identify potential long-term shifts in value.

This helps him anticipate potential changes in the market.

Marcus's methodical reliance on data and patterns has allowed him to consistently make informed decisions and maximize his returns.

He looks for confirmation from multiple sources, including charts, fundamentals, and market action.

Patience is a key component of Michael Marcus' trading approach. He views trading as an exercise in patience, likening it to the art of waiting for the perfect opportunity.

Marcus examines each trade carefully, entering the market only when things align with his analysis. This selective approach contrasts with higher-frequency trading, favoring higher-probability trades that offer substantial reward potential.

The timing of an exit is as important as the entry for Marcus. He set stop-loss orders in advance, preparing himself for any downturns.

Marcus' disciplined approach to trading is rooted in his understanding of the importance of patience. He believes that taking the time to carefully analyze trades and wait for the right moment to enter can lead to more profitable outcomes.

Marcus' mentor, Ed Seykota, also emphasized the importance of patience in trading. Seykota's emphasis on risk and money management principles helped Marcus refine his trading strategy and develop a more patient approach.

Marcus' patience has served him well in his trading career, allowing him to navigate the ups and downs of the market with greater ease. By taking a step back and waiting for the right opportunity, he has been able to achieve success in the forex market.

Risk Management is a cornerstone of Michael Marcus's trading strategy. Marcus emphasizes the importance of risk management and uses stop orders to protect his capital and prevent losses from eroding his gains.

He places stop orders at strategic chart levels to anticipate potential losses and safeguard his capital. This calculated approach to risk management allows him to retain control of his capital while riding market trends.

Marcus is diligent about adjusting his stops to lock in profits when market conditions align with his trade expectations. He's not afraid to take calculated, high-leverage trades at critical points with tight stops, which allows for gains while limiting losses.

Tight stops are a common practice for those who started in futures trading, where you can often leverage a position 10x or 20x or more of your collateral given the leverage embedded in the product. This means losses can be devastating, so traders are incentivized to keep tight stops.

Here are the three critical factors Marcus assesses when evaluating potential trades:

Marcus's approach to risk-taking is deliberate and calculated. He concentrates his capital on a limited number of high-probability trades, unlike many traders who diversify excessively.

Exiting a trade when uncertain is wise, as it provides clarity and prevents emotional decision-making. Marcus has done this many times, and the next day everything was clear.

Michael Marcus' success as a trader can be attributed to his unique blend of psychology and market trends. He combined his academic background in psychology with Ed Seykota's teachings on trend following and rigorous market analysis.

Marcus learned to treat anxiety as a feedback tool rather than a distraction, understanding that impulsive decisions usually led to losses. He simply tried to understand his emotions on an intellectual level, keeping them in check without letting them dictate his actions.

The intersection of mental and methodological aspects of trading was a cornerstone of Marcus' strategy. He developed psychological toughness to withstand market pressures, thanks to Seykota's emphasis on mental discipline.

Marcus' mentorship under Ed Seykota was instrumental in shaping his skills and convictions. Seykota's influence can be seen in Marcus' approach to risk management, trend following, and trading psychology.

Here are the key elements of Seykota's influence on Marcus, along with their outcomes:

Marcus' long-term approach to trading permitted him to distinguish between fleeting market noise and sustainable movements. This allowed him to capitalize on opportunities that others might overlook.

Michael Marcus' trading strategy is built on a foundation of three key elements: fundamentals, technicals, and market tone. He believes that the best trades are those that align with all three.

Markets have become more prone to false breakouts than in the past, according to Marcus. This makes it even more crucial to have a solid understanding of market trends and analysis.

Holding onto winners and cutting losses is a crucial rule in Marcus' trading approach. He emphasizes the importance of letting profits run while cutting losses short.

Gut feel plays a significant role in Marcus' trading decisions. He believes that professional traders rely heavily on their intuition to make informed decisions.

Marcus' approach to trading is centered around a long-term perspective. He views trading as a marathon, not a sprint, and prefers to hold profitable positions over time.

In the 1970s, Marcus made substantial profits by trading corn, wheat, and soybean futures. His trades demonstrate his commitment to a long-term approach.

Marcus' success as a trader is not due to luck, but rather his commitment to comprehensive market analysis. He has an exceptional aptitude for dissecting market trends and identifying sustainable movements.

Michael Marcus' trading career was influenced by his mentor, Ed Seykota. Seykota's philosophy on trend following and rigorous market analysis equipped Marcus with the tools he needed to thrive in financial markets.

Michael Marcus's influence on the trading world is a testament to his dedication to the craft.

He met Ed Seykota, a visionary in computerized trading systems, while working as an analyst. This chance encounter led to Seykota suggesting Marcus join his firm, where he learned critical principles of money management and risk tolerance.

Marcus's mentorship by Seykota helped him refine his trading strategy by understanding the importance of trend-following and disciplined risk-taking.

Marcus has been featured in Thomas A. Bass' book, "Predictors", and interviewed by Jack Schwager in "Market Wizards", where he was described as a chartist with a focus on market entry and resistance.

His trading philosophy emphasizes the importance of trend-following, risk management, and emotional regulation, which are crucial for traders to master.

Marcus's legacy extends beyond his personal success, inspiring traders to approach the market with a balanced, disciplined mindset.

His story serves as a reminder that successful trading is not about luck or randomness, but rather about a thoughtful strategy, patience, and the courage to take calculated risks.