Michael Marcus: "Trading is something you can learn"

The name of Michael Marcus is well-known in the United States: he's been a legend of the futures market since the late eighties. He has turned his initial thousand-dollar deposit into earnings of around $80m. And, as a fund manager, he nearly trebled his hedge fund's capital in two years! And now Marcus is famous in Russia too, since Jack D. Schwager's book Market Wizards was translated into Russian. Incidentally, Marcus has always been one of Schwager's most respected traders.

From a game of chance...

It all began in the late sixties of the last century. Marcus was studying psychology at Clark University, and knew nothing about financial markets. He was expected to have a career as a lecturer; successful at college, he still never had enough money (a common thing with students). A classmate by the name of John told Michael about a "guaranteed" way to earn piles of money for almost no work. What he had in mind was stock market trading, of course—where his pal Michael knew about as much as he did.

But Michael did not immediately work out how uninformed his fellow student was: he began by following John's "recommendations" blindly. As a result, his thousand dollars—the money he had managed to save over four years at college—was almost exhausted in a few weeks. "John treated trading like betting on the races," Michael would recall later. "He placed his bets 'intuitively', only covered his positions at a loss, and still passed himself off as an expert. In the end he and I parted company, and I decided to trade independently." He borrowed money from relatives to keep trading—and the second thousand dollars fared better than the first.

Michael had simply read a few short manuals on trading, and had also—without particularly getting into details—started to follow advice from a futures bulletin. His first profit came from following a wheat purchase tip. Soon, encouraged by his successes, the young trader had created a whole grain portfolio, and in one summer (1970) he made $30,000 in profit. "A success like that is the best thing that can happen," says Marcus. But he did not have enough knowledge or professionalism to hold onto his capital: quite soon, his own mistakes once again left Michael with nothing.

... to serious analysis

The saddest thing is that once Michael had got into trading he gave up his university studies altogether. A teaching career no longer interested him. So, after college, he took a job as an analyst with a finance company. The firm did not allow employees to trade, so Michael took to trading in secret: he saved up $700 for his next deposit. Studying the market and studying what the specialists at the company did helped Marcus to understand trading a lot better.

He made the acquaintance of several professional traders, and finally realized that the majority of his failures were purely the result of his own mistakes. Soon Michael was a capable futures trader, and in 1973 his deposit crossed the $100,000-dollar barrier. He quickly became a fund manager at a finance company—and achieved colossal success in the role, earning as much on his own as all the firm's other traders put together.

The knowledge he had acquired as a psychology major was undoubtedly one thing that helped Marcus. But even for a psychologist the burden of the market was sometimes too much to bear. Michael recounted in an interview how he covered his Deutschmark futures positions, fearing that the Bundesbank would raise interest rates. His impulse decision cost $2.5m—and in five minutes' time the exchange rate had returned to what it was before. By that time, though, Marcus was so experienced that he could recover even from losses of that magnitude.

Michael Marcus believes that it takes a special talent to trade at a genius level, and make astronomical profits. But anyone can learn to work on the financial markets and make decent money there: anyone can learn, provided they keep educating themselves and working on their mistakes.

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