Market Wizards, Updated: Interviews With Top Traders
The world's top trader's reveal the secrets of their phenomenal success!
How do the world's most successful traders amass tens, hundreds of millions of dollars a year? Are they masters of an occult knowledge, lucky winners in a random market lottery, natural-born virtuosi—Mozarts of the markets? In search of an answer, bestselling author Jack D. Schwager interviewed dozens of top traders across most financial markets. While their responses differed in the details, all of them could be boiled down to the same essential formula: solid methodology + proper mental attitude = trading success. In Market Wizards Schwager lets you hear, in their own words, what those super-traders had to say about their unprecedented successes, and he distils their responses down into a set of guiding principles you can use to become a trading star in your own right.
- Features interviews with superstar money-makers including Bruce Kovner, Richard Dennis, Paul Tudor Jones, Michel Steinhardt, Ed Seykota, Marty Schwartz, Tom Baldwin, and more
Mr. Schwager is a recognized industry expert in futures and hedge funds and the author of a number of widely acclaimed financial books. He is currently engaged as a consultant in the construction and management of managed account portfolios with a particular emphasis on liquid trading strategies. He is also an advisor to an Indian quantitative trading firm, supervising a major project that will adapt their trading technology to trade a global futures portfolio.
Previously, Mr. Schwager was a partner in the Fortune Group, a London-based hedge fund advisory firm, which specialized in creating customized hedge fund portfolios for institutional clients. Mr. Schwager was one of three partners with direct responsibility for selecting managers and constructing portfolios. The Fortune Group was fully acquired by the Close Brothers Group, a U.K. merchant bank, in 2010. His previous experience includes 22 years as Director of Futures research for some of Wall Street’s leading firms and 10 years as the co-principal of a CTA.
Mr. Schwager has written extensively on the futures industry and great traders (in all financial markets). His first book, “A Complete Guide to the Futures Markets” (1984) is considered to be one of the classic reference works in the field. He later revised and expanded this original work into the three-volume series, “Schwager on Futures”, consisting of “Fundamental Analysis” (1995), “Technical Analysis” (1996), and “Managed Trading” (1996). He is also the author of “Getting Started in Technical Analysis” (1999), part of John Wiley’s popular “Getting Started” series. Mr Schwager is perhaps best known for his best-selling series of interviews with the greatest hedge fund managers of the last two decades: “Market Wizards” (1989), “The New Market Wizards” (1992), and “Stock Market Wizards” (2001).
Mr. Schwager is a frequent seminar speaker and has lectured on a range of analytical topics with particular focus on the characteristics of great traders, technical analysis, and trading system evaluation. He holds a BA in Economics from Brooklyn College (1970) and an MA in Economics from Brown University (1971).
Q & A with Jack D. Schwager, author of Market Wizards: Interviews with Top Traders
More than twenty years have passed since the first edition of this book was released. Is it as relevant today as it was then?
Absolutely. Markets may change and the specific techniques or systems that work best may change, but the underlying core principles that lead to trading success stay the same. And there is a good reason for that. Through all periods, market price moves reflect some combination of underlying fundamentals and human behavior. Since human nature doesn't change, the market's basic behavioral patterns don't change either. I believe that every conclusion I reached about the factors important to trading success in the first edition remains equally valid today. Perhaps the best testament to the continued relevance of Market Wizards in today's markets is that so many of the managers I meet who read the original edition early in their careers make it required reading for new traders in their organization.
Has trading fundamentally changed with the rise of the quants and algorithmic traders?
The growing role of algorithmic trading may have eliminated some market inefficiencies as sources of profitable strategies, and it may even have impacted the efficacy of some trading systems, but I don't believe it has changed fundamental market behavior. The same basic concepts that are critical to trading success remain as valid now as they were a generation ago when computerized trading was in its infancy.
What are these basic concepts?
Well that's what this book is all about. But to offer one example, I believe that developing a trading methodology that fits your personality, as opposed to seeking someone else's approach, is an absolutely critical element to succeeding as a trader.
Why do most traders fail?
There are many reasons. They seek easy answers. They listen to "experts" and chase trading fads instead of doing the hard work of developing their own methodology. They focus almost all their energy on determining trade entry points and all but ignore the more critical questions of trade exit and risk management. They listen to other people. These are a few of the reasons. Readers will find a lot more in the book.
Which trader interview in the book has been the most popular?
Readers will often tell me that a certain chapter was their favorite and by far the most important in improving their own trading. The interesting thing is that they always seem to mention a different trader. There is no consensus. Different readers will find different things in the book important. They will relate to different traders. It all goes back to the importance of finding your own approach in the market.
Have the interviews you did for Market Wizards been important to your own trading?
The interview and writing process has helped solidify in my own mind the principles that are important to trading success. At times, it has also had a very specific influence. A great example occurred last summer. At the time, the stock market was approaching the high end of a long-term trading range, and for a variety of reasons, I expected the rally to fail and was positioned on the short side of stock index futures. Then the government released an extremely bearish employment report. It was so negative that commentators couldn't even cite one offsetting bullish consideration, as they usually do. The market initially sold off sharply in response--"perfect," I thought of my trade--but by the end of the day, it nearly recovered the entire loss, ending the week near the recent high. From the perspective of a short, this was terrible price action. I thought I was in trouble. I was prepared to cover most of my position when the market opened on Sunday night. On Sunday night, however, the market opened lower. I immediately thought of Marty Schwartz's advice in this book: "If you're very nervous about a position overnight, and especially over the weekend, and you're able to get out at a much better price than you thought when the market trades, you're usually better off staying with the position." I did, and Schwartz's insight saved me a lot of money, as the market proceeded to move sharply lower in the ensuing weeks.
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