Published by Jack D. Schwager in 1989, "Market Wizards" marks the beginning of an indispensable series for traders and investors alike. Through engaging interviews, Schwager brings to light the experiences of titans such as Bruce Kovner, Richard Dennis, Paul Tudor Jones, Michael Steinhardt, Ed Seykota, Marty Schwartz, and Tom Baldwin, making learning from the best an enjoyable journey.
To keep things short, we highlighted the most important parts of the interviews and came back with these key takeaways:
There is no holy grail to trading success. The methodologies employed by the "market wizards " cover the entire spectrum from purely technical to purely fundamental and everything in between. The time they typically hold a trade ranges from minutes to years.
Although the styles of the traders are very different, many common denominators
were evident:
1. All those interviewed had a driving desire to become successful traders - in many cases, overcoming significant obstacles to reach their goal.
2. All reflected confidence that they could continue to win over the long run. Almost invariably, they considered their trading as the best and safest investment for their money.
3. Each trader had found a methodology that worked for him and remained true to that approach. Significantly, discipline was the word most frequently mentioned.
4. The top traders take their trading very seriously; most devote a substantial amount of their waking hours to market analysis and trading strategy.
5. Rigid risk control is one of the key elements in the trading strategy of virtually all those interviewed.
6. In a variety of ways, many of the traders stressed the importance of having the patience to wait for the right trading opportunity to present itself.
7. The importance of acting independently of the crowd was a frequently emphasized point.
8. All the top traders understand that losing is part of the game.
9. They all love what they are doing.
Below we've gathered a list of opinions from the traders interviewed in the book:
1. Implementation is as IMPORTANT as direction:
Getting the direction of the trade right is only part of a successful trade; putting the trade in the right way is critical.
2. You don’t get paid for being right.
Many traders fail not so much because of the trades they make when they are wrong, but rather because of the trades they don’t make when they are right.
3. Sometimes it is what you don’t do that counts.
“Music is the space between the notes.” – Claude Debussy. Analogously, the space between investments – the times one is out of the market – can be critical to successful investing.
4. Risk Control
Many market wizards interviewed in this book consider risk control even more important than the methodology.
5. Trade size can be more important than the entry point.
Traders focus almost entirely on where to enter a trade. In reality, the entry size is often more important than the entry price because if the size is too large, a trader will be more likely to exit a good trade on a meaningless adverse price move. Don’t let your greed influence position sizing beyond your comfort level.
6. Don’t try to be 100 percent right.
The market is moving against you and you are well aware of the dangers of an unconstrained loss, but you also still believe in your position and you are worried about throwing in the towel before the market turns. You are frozen in indecision.
7. Flexibility is a critical trait.
Flexibility is an essential quality to successful trading. It is important not to get attached to an idea and to always be willing to get out of a trade if the price action is inconsistent with your trade hypothesis.
8. The best remedy for a losing streak.
When you are in a losing streak, you can’t turn the situation around by trying harder. When trading is going badly, often the best solution is to stop trading for a while.
9. When everything is going great, watch out!
The worst drawdowns often come suddenly right on the heels of periods when just about everything seems to be working as well as if it had been optimistically scripted. In this case, a trader will be most susceptible to being lulled into complacency.
10. The market doesn’t care where you entered a trade.
Don’t make trading decisions based on where you bought (or sold) a stock or futures contract. The market doesn’t care where you entered your position. A common error traders make when they realize they are in a bad trade is to commit to getting out, but only after the market returns to their entry level – the proverbial “I will get out when I am even”. The linkage of liquidation to entry level is one of the major causes of turning small losses into large ones.
In conclusion, "The Market Wizards" by Jack D. Schwager serves as an illuminating guide into the minds and strategies of some of the most successful traders of our time.
Through insightful interviews and analysis, Schwager provides invaluable lessons on trading psychology, risk management, and market tactics. However, this is just the beginning of the journey into the world of market mastery.
To delve even deeper and expand your understanding, we highly encourage traders to explore the following volumes penned by Schwager: "The New Market Wizards" (1992), "Stock Market Wizards" (2001), "Hedge Fund Market Wizards" (2012), and "The Little Book of Market Wizards" (2014). These sequels offer a rich tapestry of new interviews, anecdotes, and wisdom from a diverse array of trading luminaries, further enriching your knowledge and empowering your trading endeavors.
Whether you're a novice or a seasoned trader, these volumes are indispensable companions on your quest for trading success. Dive in, absorb the wisdom, and let it guide you on your path to becoming a true market wizard.
To keep things short, we highlighted the most important parts of the interviews and came back with these key takeaways:
There is no holy grail to trading success. The methodologies employed by the "market wizards " cover the entire spectrum from purely technical to purely fundamental and everything in between. The time they typically hold a trade ranges from minutes to years.
Although the styles of the traders are very different, many common denominators
were evident:
1. All those interviewed had a driving desire to become successful traders - in many cases, overcoming significant obstacles to reach their goal.
2. All reflected confidence that they could continue to win over the long run. Almost invariably, they considered their trading as the best and safest investment for their money.
3. Each trader had found a methodology that worked for him and remained true to that approach. Significantly, discipline was the word most frequently mentioned.
4. The top traders take their trading very seriously; most devote a substantial amount of their waking hours to market analysis and trading strategy.
5. Rigid risk control is one of the key elements in the trading strategy of virtually all those interviewed.
6. In a variety of ways, many of the traders stressed the importance of having the patience to wait for the right trading opportunity to present itself.
7. The importance of acting independently of the crowd was a frequently emphasized point.
8. All the top traders understand that losing is part of the game.
9. They all love what they are doing.
Below we've gathered a list of opinions from the traders interviewed in the book:
1. Implementation is as IMPORTANT as direction:
Getting the direction of the trade right is only part of a successful trade; putting the trade in the right way is critical.
2. You don’t get paid for being right.
Many traders fail not so much because of the trades they make when they are wrong, but rather because of the trades they don’t make when they are right.
3. Sometimes it is what you don’t do that counts.
“Music is the space between the notes.” – Claude Debussy. Analogously, the space between investments – the times one is out of the market – can be critical to successful investing.
4. Risk Control
Many market wizards interviewed in this book consider risk control even more important than the methodology.
5. Trade size can be more important than the entry point.
Traders focus almost entirely on where to enter a trade. In reality, the entry size is often more important than the entry price because if the size is too large, a trader will be more likely to exit a good trade on a meaningless adverse price move. Don’t let your greed influence position sizing beyond your comfort level.
6. Don’t try to be 100 percent right.
The market is moving against you and you are well aware of the dangers of an unconstrained loss, but you also still believe in your position and you are worried about throwing in the towel before the market turns. You are frozen in indecision.
7. Flexibility is a critical trait.
Flexibility is an essential quality to successful trading. It is important not to get attached to an idea and to always be willing to get out of a trade if the price action is inconsistent with your trade hypothesis.
8. The best remedy for a losing streak.
When you are in a losing streak, you can’t turn the situation around by trying harder. When trading is going badly, often the best solution is to stop trading for a while.
9. When everything is going great, watch out!
The worst drawdowns often come suddenly right on the heels of periods when just about everything seems to be working as well as if it had been optimistically scripted. In this case, a trader will be most susceptible to being lulled into complacency.
10. The market doesn’t care where you entered a trade.
Don’t make trading decisions based on where you bought (or sold) a stock or futures contract. The market doesn’t care where you entered your position. A common error traders make when they realize they are in a bad trade is to commit to getting out, but only after the market returns to their entry level – the proverbial “I will get out when I am even”. The linkage of liquidation to entry level is one of the major causes of turning small losses into large ones.
In conclusion, "The Market Wizards" by Jack D. Schwager serves as an illuminating guide into the minds and strategies of some of the most successful traders of our time.
Through insightful interviews and analysis, Schwager provides invaluable lessons on trading psychology, risk management, and market tactics. However, this is just the beginning of the journey into the world of market mastery.
To delve even deeper and expand your understanding, we highly encourage traders to explore the following volumes penned by Schwager: "The New Market Wizards" (1992), "Stock Market Wizards" (2001), "Hedge Fund Market Wizards" (2012), and "The Little Book of Market Wizards" (2014). These sequels offer a rich tapestry of new interviews, anecdotes, and wisdom from a diverse array of trading luminaries, further enriching your knowledge and empowering your trading endeavors.
Whether you're a novice or a seasoned trader, these volumes are indispensable companions on your quest for trading success. Dive in, absorb the wisdom, and let it guide you on your path to becoming a true market wizard.
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