When asked which film best illustrates the stock market and FX trading, the most popular response is “Wall Street.” Gordon Gekko is a name that traders worldwide are familiar with. Here are some of the lessons the film may teach us, the fifth being the most important.
1. Be determined
If you set your mind to anything, you will succeed. In an attempt to “get in the game,” a new broker has called Mr. Gekko for 59 days in a row. Gekko responds, “You should have a picture of yourself next to the description of perseverance in the dictionary.”
Take a calculated risk: he buys just enough of the company to forestall any potential outside takeover efforts and then conducts an internal study to evaluate whether or not to acquire more. This way, if he’s incorrect, he doesn’t lose anything; if he’s correct, no one takes advantage of the situation. Take risks that are calculated and purposeful.
To paraphrase Benjamin Franklin, he saves money on unneeded health appointments by monitoring his blood pressure while wrapping up a conversation with Bud Fox from 30 years ago. “Lunch is for wimps,” he says as Bud Fox walks in. I’m not suggesting going without food or skipping lunch, but you should know that the key to success is a well-planned diet and week.
2. There is no pride in poverty
There is no pride in poverty – this remark, made famous by Jordan Belfort (Leonardo DiCaprio) in The Wolf of Wall Street, actually first featured in Wall Street, with Bud Fox’s father training him to be a sales executive. In the current market, stocks still outperform inflation. There is always a route to financial success despite the economic circumstances you may find yourself in.
When Gordon Gekko hires Bud Fox, he makes it clear that he is seeking someone who doesn’t love losing and who will profit handsomely from victory.
According to Mr. Gekko, information is more valuable than any other commodity. To make informed investments, you must first study the company, its management, and its products. Gekko advises investors to exclusively put money down on certain products. People make the rashest purchases when they buy something without doing their homework or because someone else promised a large return, such as when a stock doubles in value.
3. Keep emotions in check
Try to keep your emotions in check when investing in stocks, no matter how tempting it may seem (what Gordon calls the “first rule of investing”). Don’t become too connected to your stocks. A vigilant trader is always looking for the next move, which means taking what you can from your positions and moving onto the next.
In the early hours of Wall Street 2, Gekko uses the slogan “money never sleeps” to wake up Bud Fox with an early morning call. But the truth is that you should always keep an eye on your money to ensure you get the most out of every dollar.
Buy a dog if you want a friend; the stock market is not a place for sentimentality, and you must understand that you are on your own. When he buys the company, Gekko tells the shareholders to liquidate it, and that management has not invested in its success; the owners’ money is at stake. Before making any investments, it is critical to pick the right broker for you that meets your needs.
4. Greed is good
“Greed is good,” one of Gekko’s most famous phrases, links the impulse to collect financial belongings with the fundamental need to survive. It pays to be greedy and hold stock even when everyone else sells.
In addition to Bud Fox and Gordon Gekko, there is a third key character named “Lou,” who is the firm’s senior broker and constantly gives Bud Fox sound advice. At the beginning of the film, the phrase “good things take time” appears. Investing in core companies over time has produced greater returns than most people could ever dream of.
5. Stability is critical for survival
Lou informs Bud Fox that the players who enter with imprudent investments during the bull market are the ones who do not survive the downturn. Stability is critical for survival in a difficult market.
Take advantage of the opportunity to congratulate Bud Fox on his meteoric journey to stardom. “You’re hot right now; suck it up while you can,” Lou adds. Simply put, it never occurs. You may feel like you’ve reached the summit of the market at times. Now is the time to start taking profits, as falling from a high position may be more painful than starting from a low one.
“The problem with money is that it forces you to do things you don’t want to do,” Lou says to Bud Fox before being jailed for insider trading in the film. Consider how meaningful the quotation is to you.