The Achievements
Michael’s first success a trader came about in between 1971 and 1973. He turned an account from $1,400 to $12,000, lost 2/3 of it only to grind all the way back over the next year, turning his stake into $64,000.
in 1974, after joining Commodities Corporation as a trader with $30,000, Marcus saw his account grow exponentially to reach a staggering $80 million. His best trading year was in 1979.
Amidst the tumultuous global geopolitical landscape of that specific year, Marcus swiftly recognized a golden opportunity. The bull run on gold presented itself as a remarkable prospect that would go down in history as one of his most exceptional trades.
Marcus embarked on the initial move by acquiring an astounding 2000 contracts of gold, a remarkable quantity equivalent to 200,000 ounces of this precious metal. His decision was fueled by the seismic shock of the Afghanistan invasion, an event that reverberated through the financial markets and propelled gold prices to unprecedented heights.
Marcus's instincts proved to be spot on, as gold rapidly scaled the summit, reaching an astonishing $800 per ounce in 1980 from it’s start near $200 just a year earlier.
Over the course of ten years, Marcus astonishingly multiplied his company account by a staggering 2,500-fold.
Early days
Michael Marcus, born on August 2, 1947, had an intriguing journey that led him to become a highly successful commodities trader.
Raised in Providence, Rhode Island, he graduated in 1969 Phi Beta Kappa from Johns Hopkins and studied Psychology at Clark University, however the path he took would change through an offer that was too good to be true.
During his time at Johns Hopkins he met a fellow student called John who promised him to double his money every 2 weeks. Upon researching trading Michael realized his acquaintance was lying, however in the process, Michael fell in love with the markets.
‘I think the leading cause of financial disablement is the belief that you can rely on the experts to help you. Investing requires an intense personal involvement.’
Trading the $3000 he received through the life insurance money that was released upon the death of his father, he turned the small $3,000 stake into $30,000 buying a combination of corn, wheat, and soybeans, partly on recommendations of a the letter, and partly through his own intuition.
‘‘I had accumulated $30,000, a princely sum to me, having come from a middle class family. I thought it was the best thing in the world.”
This is where the tumultuous journey truly starts. Hubris got hold of him.
He decided to borrow $20,000 from his mother, adding it to his $30,000 trading account, resulting in a total of $50,000. What followed was a risky and over-leveraged trade. With his theory that blight would attack the corn crop, causing a shortage, he bet everything on corn and wheat contracts.
However, a single article titled "More Blight on the Floor of the Chicago Board of Trade Than in Midwest Cornfields" in the Wall Street Journal caused the corn market to plummet. By the time Michael liquidated his position, he had lost $42,000. This loss not only wiped out his initial $30,000 but also $12,000 of the borrowed money.
‘Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough.’
Devastated by this setback, Michael decided to get a job and became a commodity research analyst at Reynolds Securities. Despite the restriction on trading for analysts at the firm, he managed to find a way to trade without getting caught. However, what was by now his fourth attempt at trading ended in failure once again, following the same cycle of borrowing money and losing it.
Fortunately, Michael's fortune began to change when he crossed paths with Ed Seykota, a phenomenally successful trader. Working alongside Ed, Michael learned valuable lessons such as staying with a trend until it changes and being patient. Despite this guidance, Michael continued to experience losses due to his impatience and inability to wait for clearly defined trading opportunities.
Undeterred, Michael made another attempt with a small $1,400 trading account. He bought plywood contracts when the fixed price ceiling was broken, reasoning that if the price could exceed the ceiling, it could go even higher. As the price increased, he kept adding contracts and profited from the trade. He also predicted that lumber would follow a similar pattern and bought contracts accordingly. However, when the government announced a crackdown on lumber speculators, the market crashed, and Michael's account nearly got wiped out once again. Fortunately, he held on, and by the end of the year, his account had grown to $24,000.
The close call with losing his account motivated Michael to quit over-trading. In the following year, his account grew from $24,000 to $64,000. This was just the beginning of his success as a trader. In subsequent years, he traded heavily in currencies and became one of the biggest currency traders in the world, including the banks. His career took off, and he multiplied his company account by 2,500-fold over a ten-year period.
The approach
What set Michael Marcus apart was his distinctive approach to trading commodities.
He emphasized the significance of adopting a long-term perspective on the markets. By analyzing the overall market and asset trends, he made sure to be aligned with the market and not step in front of trends. Additionally, he believed in the virtue of patience when dealing with commodities. Rather than impulsively entering trades, he exercised restraint, waiting for opportune moments to strike.
“Successful trading is anticipating the anticipations of others.”
Risk management strategies were a notable strength of Michael Marcus. He advocated for traders to establish a comprehensive plan of action prior to entering trades. This plan should encompass strategies for minimizing risks and maximizing profits. Moreover, he stressed the importance of diversifying investments as a safeguard against substantial losses in any single trade.
“You can be wrong and still make money, as long as you cut your losses quickly.”
Discipline played a pivotal role in Michael Marcus's trading approach. He firmly believed in adhering to established strategies and avoiding emotional impulses. Calculated risks were his preference, and he cautioned against taking on excessive risk at once.
“The only way to make money in the markets is to take calculated risks.”
The combination of market knowledge and effective risk management strategies propelled Michael Marcus to remarkable success in the commodities markets. He was willing to exercise patience, waiting for opportune moments, and would then take calculated risks
Ed Seykota
Michael Marcus finds his origin in the mentorship Ed Sekoyta gave him. Thus analyzing Ed’s management rules is of importance to understand how Marcus saw the world.
Ed Sekoyta is known as a market wizard most major traders have specifically named as influential. He is the godfather of automated trading and turned $5,000 into over $150,000,000
Buying is done above the market to reduce risk and capture strong market momentum.
Protective stops are set at trade entry and adjusted to lock in profits as the trend continues.
Stops are set at chart levels that indicate a deteriorating situation before entering a trade.
Getting back into trades is crucial for trend following.
Markets constantly change, and they are the same as they were years ago in terms of change.
‘In order of importance to me are: (1) the long-term trend, (2) the current chart pattern, and (3) picking a good spot to buy or sell.
Skill in reading markets and managing anxieties is essential for trading.
Risk is the uncertain possibility of loss, and risk control relies on allowing stops to do their job.
Relying on fundamentals suggests a lack of faith in trend following.
Risk should be managed so that a win is meaningful but does not exceed what can be afforded to lose.
Avoid relying on advice from other traders, especially those claiming a "sure thing."
Short-term trading systems are often hindered by transaction costs and execution friction.
Trend systems aim to ride the trend rather than pick tops or bottoms.
Short-term traders need exceptional guessing skills to compensate for profit roll-off. (R/R vs Win rate)
Mentors are the cornerstone of most of the greatest traders. Especially during the formative years, their guidance gets engrained into the traders mindset and automatic response.
Final thoughts
Michael Marcus's journey as a trader is a testament to the power of resilience, learning from failures, and developing a unique trading approach.
From his initial setbacks and devastating losses, he persevered and honed his skills to become one of the most successful commodities traders of his time. By emphasizing long-term trends, practicing patience, and implementing effective risk management strategies, Marcus achieved remarkable growth in his trading accounts.
His mentorship under Ed Seykota further shaped his perspective and solidified his understanding of the markets. Ultimately, Marcus's achievements serve as inspiration for aspiring traders, highlighting the importance of discipline, calculated risk-taking, and continuous learning in the pursuit of success in the financial markets.
Good post. Met with him over a decade ago. The last graph there with ROR - that's neat but I don't think it can be compared to the other firms. MM and a lot of those guys were commodity traders as u know and guys like Greenblat are value/event-driven. A lot more speculation factor in commodities v. other strats asset classes.
From what I understood, this great trade on gold was made from pyramiding, the same strategy that Richard Dennis and also yourself used. So let me ask: how to balance the pyramiding aspect with the potential risk of ruin of any given trade? For instance, if gold limited down 3 days in a row, how Marcus could have reacted? I assume all of you had maybe a position limit? (Although in one of your videos you said that you couldn’t get enough size if the setup was good enough)