Market Wizards by Jack D. Schwager Concepts

Unknown Market Wizards: The Best Traders You've Never Heard Of

by Jack D. Schwager · 2 Nov 2020

Unknown Market Wizards The best traders you’ve never heard of Jack D. Schwager Contents Preface Acknowledgments Part I: Futures Traders Peter Brandt: Strong Opinions, Weakly Held Jason Shapiro: The Contrarian Richard Bargh: The Importance of Mindset Amrit Sall:

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Who Beat the Pros Conclusion: 46 Market Wizard Lessons Epilogue Appendix 1: Understanding the Futures Markets Appendix 2: Performance Metrics Publishing details Other books by Jack D. Schwager Market Wizards: Interviews with Top Traders The New Market Wizards: Conversations with America’s Top Traders Hedge Fund Market Wizards: How Winning Traders Win Stock Market Wizards: Interviews with America’s Top Stock

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Traders The Little Book of Market Wizards: Lessons from the Greatest Traders A Complete Guide to the

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those who don’t know that they don’t know. —John Kenneth Galbraith Preface THE premise I had when I set out to write Unknown Market Wizards was that there were solo traders, operating in complete obscurity, who were achieving performance results that far surpassed the vast majority of professional asset managers

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something else that amazed me. I never thought I would again find traders whose records matched those of some of the traders in the first Market Wizards book. I assumed the extraordinary performance achieved by some of those traders, while a testament to their exceptional trading skill, was partially made possible

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ago—“There are some amazing stories here”—seems entirely appropriate to this volume as well. Here are the remarkable traders you will meet in Unknown Market Wizards: A college graduate who started with a $2,500 account and in the course of the next 17 years pulled $50 million of profits

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learned to avoid; what advice they have for other traders—you will find much here that is instructive. Acknowledgments The first step in writing a Market Wizards book is identifying exceptional traders. In this regard, two individuals were extremely helpful. Steve Goldstein, Managing Director of Alpha R Cubed, a London-based

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com analytics to calculate all the performance statistics referenced in this book. I am grateful to my wife, Jo Ann, who, as in all previous Market Wizards books, provided an invaluable sounding board and offered constructive criticism where appropriate—advice that I always followed. Of course, there would be no book without

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it helpful to first read the short primer provided in Appendix 1. Peter Brandt: Strong Opinions, Weakly Held IT is remarkable how many of the Market Wizards that I have interviewed failed in their initial trading endeavor—some multiple times. In this respect, Peter Brandt fits the bill. What is unusual about

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the catalyst for moving me from writing this book “someday” to beginning the preliminary steps for the project. I knew that if I wrote another Market Wizards book, I wanted Brandt to be in it. Brandt and I are friends. I was familiar with his views about trading, which I thought were

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on to become among the world’s best traders, probably first and foremost being Michael Marcus and Bruce Kovner who were featured in the original Market Wizards book.4] I don’t recall how it started, but they reached out to me. I think somebody at the Board of Trade may

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experienced. [Another account of a trading experience related to this same stunning market reversal came up in my interview with Tom Basso in The New Market Wizards.6] With the market gapping so much lower on the open, did you still get out at the open, or did you wait before liquidating

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by saying that although he had done all right, he was not in the same league as some of the great traders in the other Market Wizards books. He started rattling off a string of names to make his point. Brandt concluded by saying that if I decided not to include him

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markets are closed. Brandt’s comments on the adverse impact of human emotions on trading reminded me of William Eckhardt’s observation in The New Market Wizards: “If you’re playing for emotional satisfaction, you’re bound to lose, because what feels good is often the wrong thing to do.”8

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losing year after becoming a full-time trader occurred immediately following his best trading year ever. I am reminded of Marty Schwartz’s comment in Market Wizards: “My biggest losses have always followed my biggest profits.”9 The worst drawdowns often follow periods when everything seems to be working perfectly. Why

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Complete Guide to the Futures Market (New Jersey, John Wiley and Sons, Inc., 2017), 205–231. 4 Jack D. Schwager, Market Wizards (New Jersey, John Wiley and Sons, Inc., 2012), 9–82. 5 This three-word designation is a misnomer in at least two ways. First, the

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give advice, as the name suggests. 6 Jack D. Schwager, The New Market Wizards (New York, HarperBusiness, 1992), 286–288. 7 Jack D. Schwager, Market Wizards (New Jersey, John Wiley and Sons, Inc., 2012), 171. 8 Jack D. Schwager, The New Market Wizards (New York, HarperBusiness, 1992), 132. 9 Jack D. Schwager, Market Wizards (New Jersey, John Wiley and Sons, Inc., 2012

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), 275. 10 Jack D. Schwager, Hedge Fund Market Wizards (New Jersey, John Wiley & Sons, Inc., 2012

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and thought-provoking.” The message was sufficiently intriguing for me to follow up. I sent Shapiro the following email: “I am working on a new Market Wizards book, and Bill Dodge suggested you would be a perfect candidate for inclusion. Let me know if you are interested in participating.” Shapiro replied: “I

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hope all is well in this crazy time. As I mentioned to you before, I think your story would be a great addition to the Market Wizards book I am working on—lots of interesting material and good lessons. As I also indicated, I always let interview subjects review the final chapter

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task far easier than finding those who reliably right—then their opinions could well be useful in a contrarian sense. * * * 11 Jack D. Schwager, The Little Book of Market Wizards (New Jersey, John Wiley and Sons, Inc., 2014), 72. Richard Bargh: The Importance of Mindset IT is ironic that although Richard Bargh was

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was constantly berating myself. My entries now are entirely different.” Bargh credits the Trading Tribe Process (TTP) created by Ed Seykota, whom I interviewed in Market Wizards, as an essential influence in helping him achieve emotional balance in both his trading and life overall. As a massive oversimplification, TTP seeks to create

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another shot. And your goal of becoming a trader was primarily motivated by a desire to get rich quick? Yes. That’s odd. In previous Market Wizards books, I can’t recall other traders who indicated their primary motivation to get into trading was the money. Yet, for this book, you are

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interviewing all of you for this book. I don’t think I have had that circumstance before except for Marcus and Kovner in the first Market Wizards book. And Seykota as well. Yes, you’re quite right. Seykota was a mentor to Marcus, who then later hired Kovner. So that was

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thing of beauty.” Sall has a unique trading style—one that I have not come across among any of the traders I interviewed in previous Market Wizards books. Although in this book there is another trader with a similar trading style (Richard Bargh), a resemblance that is related to Sall being

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going poorly is a unique piece of advice. It is a concept that was never mentioned by any of the traders I interviewed in previous Market Wizards books. It has worked well for Sall, but is it good advice for traders in general? I don’t know, but individual traders can

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risk management, a significant percentage of people could become at least marginally profitable traders, but only a small percentage possess the intrinsic skill to become Market Wizards. Sall creates detailed write-ups of all his trades and periodically reviews these trade logs. One reason he performs this exercise is to compile a

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a much clearer understanding of why prices moved from one level to another. I also found fundamental analysis way more interesting. Actually, reading your first Market Wizards book was a formative influence in my early career. I don’t remember who said it, but the advice to trade a method in line

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said it either because that same message came up either explicitly or implicitly in multiple interviews. When I give talks about the lessons of the Market Wizards, the importance of trading an approach compatible with your personality is one of the first points I tend to stress. How did you start using

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trading rules you live by? It’s interesting, in the beginning, a lot of my rules and principles came from what the traders in your Market Wizards book said. Over time, these rules changed to fit my personality and what worked for me. These are the rules I have now: To paraphrase

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favorite day of the week. When you love what you do, you’re going to be successful. I, as well as a number of the Market Wizards I have interviewed, have long advised eliminating emotions from trading. John Netto, on the other hand, takes the provocative view that emotions are one of

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tell this tale, I would appreciate it greatly! Thank you for your time. Jeff Neumann I replied that I was tentatively planning to do another Market Wizards book, but not for a while. As events transpired, six months later, I decided to begin working on a new book and asked Neumann to

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way, however, Neumann seems to be there to catch the upward price movement stage. In talks I give on the subject of lessons of the Market Wizards, I often refer to the perspective of being attracted to trading because “it is an easy way to make a lot of money,” as an

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market buying hysteria that this message made a difference. The Spongetech trade also provides a perfect illustration of a trading principle noted in Hedge Fund Market Wizards: “If you are on the right side of euphoria or panic, lighten up. Parabolic price moves in either direction tend to end abruptly and

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has similar skills, taking such large concentrated positions would be very risky and expose the trader to an account-ending loss. * * * 15 Jack D. Schwager, Hedge Fund Market Wizards (New Jersey, John Wiley & Sons, Inc., 2012), 497. Chris Camillo: Neither FOR the entire history of market analysis, methodologies could be divided into either

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t figured it out yet either, but he’s thinking about it. By the time Camillo and I met, I had decided to do another Market Wizards book, which was not the case in our first email communication. From his introductory email, it sounded like Camillo could be a possible candidate, so

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larger positions on higher-probability trades and smaller positions on lower probability trades. Confidence is one of the best indicators of future trading success. The Market Wizards tend to be highly confident in their ability to continue to win in the markets, and Camillo certainly fits this description. He exudes confidence in

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those traditional paths, he most likely would have failed. Marsten Parker: Don’t Quit Your Day Job When I interviewed Ed Seykota for my book, Market Wizards,16 I asked him, “What are the trading rules you live by?” Two of the rules he mentioned were: Follow the rules without question. Know

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my search for exceptional performance is not representative of the total trader population, but I suspect it is. Ever since the release of my first Market Wizards book in 1989, I had found that standout individual traders tended to be discretionary, and this bias seems to have become even more pronounced over

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this task leads him to advise aspirants seeking to trade for a living to keep their day job as long as feasible. * * * 16 Jack D. Schwager, Market Wizards (New Jersey, John Wiley and Sons, Inc., 2012), 151–174. 17 I excluded the first two years of Parker’s track record in the return

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York, McGraw Hill, 2009). O’Neil was also one of the interview subjects in Market Wizards (ibid., 221–238), and he described the CANSLIM method in his interview. 20 The following discussion of optimization is adapted from Jack D. Schwager, A Complete Guide to the Futures Market (New Jersey, John Wiley and Sons

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had positive returns in 93% of all quarters. Krejčí has the distinction of having by far the smallest account of anyone ever included in a Market Wizards book. His trading account has generally ranged between $50,000 and $80,000. Krejčí trades only stocks with extremely high volume, so his methodology

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What did you read to get some knowledge about the markets and trading? I read some local books on technical analysis. I also read your Market Wizards book, which was translated to Czech. What was your trading approach when you began? I had no approach at all. If a stock looked like

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traders reflects basic market truths that are invariant to methodology or time period. Some of the lessons that follow, however, are unique to Unknown Market Wizards—insofar as the ensuing summary is based solely on the interviews in this book. 1. There Is No Single True Path After reading this book

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ventured beyond stocks and bonds. * * * 23 Sections of this appendix have been adapted from Jack D. Schwager, A Complete Guide to the Futures Market (New Jersey, John Wiley and Sons, Inc., 2017) and Jack D. Schwager, Market Wizards (New Jersey, John Wiley and Sons, Inc., 2012). 24 Some beginners are confused about how it

Hedge Fund Market Wizards

by Jack D. Schwager · 24 Apr 2012 · 272pp · 19,172 words

by Jack D. Schwager A Complete Guide to the Futures Markets: Fundamental Analysis, Technical Analysis, Trading, Spreads, and Options Getting Started in Technical Analysis Market Wizards: Interviews with Top Traders The New Market Wizards: Conversations with America’s Top Traders Stock Market Wizards: Interviews with America’s Top Stock Traders Schwager on Futures: Fundamental Analysis Schwager on Futures: Managed

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more information about Wiley products, visit our web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data Schwager, Jack D., 1948– Hedge fund market wizards : how winning traders win / Jack D. Schwager. p. cm. Includes index. ISBN 978-1-118-27304-3 (hardback) 1. Floor traders (Finance). 2. Hedge funds. I

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Stock Operator by Edwin Lefèvre, The Crowd by Gustav LeBon, Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay, and the entire Market Wizards series by Jack Schwager. Trading, it turns out, is the solution to most economic problems; free markets, sanctity of trading, and healthy economy are all ways to

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, and develop his talent, evolving to become our Chronicler-General. Schwager’s contribution to the industry is enormous. His original Market Wizards inspired a whole new generation of traders, many of whom subsequently appeared in The New Market Wizards, and then, in turn, in Stock Market Wizards. Jack’s Wizards series becomes the torch that traders pass

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from one generation to the next. Now Hedge Fund Market Wizards extends, enhances, and perfects the tradition. Traders regularly use passages and chapters from Schwager’s books as a reference for their own methods and to guide their own trading. His work is an

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of equity price movements and how he had to adjust his own approach accordingly. Markets have changed in the generation since I wrote the first Market Wizards book, but in another sense, they have not. A bit of perspective is useful. When I asked Ed Seykota in

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Market Wizards whether the increasing role of professionals had changed the markets (a shift that the intervening years have demonstrated was then only in its infancy), he

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the significant statistical biases inherent in hedge fund indexes that are based on individual manager returns. 2Market Wizards, New York Institute of Finance, 1989. New Market Wizards, New York, HarperBusiness, 1991. Acknowledgments First and foremost, I would like to thank my son Zachary for being my sounding board for this book. He

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in the process of moving from New York to Florida and solicited me to come work for him. I knew of Marty from your book Market Wizards and thought it would be a privilege to work for him. I went to my boss, Peter Kellogg, and told him that I had an

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trader. As you know, you have to be neutral in this game. Your story reminds me of Ed Seykota’s provocative observation in the first Market Wizards book: “Everybody gets what they want out of the market.” Putting it into context of your experience on 9/11, you wanted to not feel

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, is not merely unlimited, but accelerates exponentially if there is a large price move in either direction. 2Marty Schwartz is a trader I interviewed in Market Wizards (New York: New York Institute of Finance, 1989). Chapter 4 Scott Ramsey Low-Risk Futures Trader I don’t think I have ever been to

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to figure out how to beat the markets, but I also knew there were some people who were beating the markets, thanks to your first Market Wizards book and other sources. As soon as I learned about the efficient market hypothesis, I was on a mission to prove it wrong. Right around

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his trading style, because I learned pretty early on that I had no interest in being a discretionary trader. Right around the time I read Market Wizards, he came to give a talk at Darden, University of Virginia’s graduate business school. He wasn’t that famous then. Do you remember anything

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style. I wanted an approach that fit my personality, which is a very important point that I got out of one of your first two Market Wizards books. Mean reversion partially fit my personality, but because people knew about it, it didn’t fully fit my personality. So I looked for other

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if they worked? I know what to grab. [He gets up again in search of another book—this time it is one of mine, Stock Market Wizards. He flips through pages and then finds the spot he is looking for.] This is really key. I wouldn’t spend the time to do

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far too lengthy and tangential. 13Bruce Kovner is the founder of Caxton Associates, a highly successful global macro fund, and was profiled in my book Market Wizards (New York: Institute of Finance, 1989). Chapter 7 Jamie Mai Seeking Asymmetry I became aware of Jamie Mai through Michael Lewis’s book, The Big

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potential gain. Mai’s investment approach demonstrates the principle that high volatility does not necessarily imply high risk. Flexibility is one of the hallmarks of Market Wizards. Mai routinely changes his view as dictated by the research. His trade in dry bulk shippers provides a perfect example. He started off with the

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enough so that if I could find volume or a story, I could trade it. I was trading successfully, and then I read your book [ Market Wizards]. It was a seminal moment in my trading career. I was reading about people in your book and thinking, That is what I do. That

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be out of reach for most people. There is no single true path to trading success. On the contrary, the trading methodologies employed by the Market Wizards are extraordinarily varied. The trading approaches used are not merely different, but in the case of someone like Jimmy Balodimas, the trading methodology may be

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many inquiries that read something like the following: Dear Mr. Schwager, I wonder whether you know of any traders who are looking for apprentices. I’m willing to work long hours without pay to be able to learn from one of the Market Wizards. This type of query reflects a misdirected quest. You

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name came up several times when I called hedge fund managers I knew for their recommendations on who I should consider including in a new Market Wizards book. One manager said, “He wrote this book, You Can Be a Stock Market Genius .” Responding to my muffled groan, he said, “Yeah, I know

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than normal when the profit potential appears to be much greater than the risk is one of the key ways in which many of the Market Wizards achieve superior returns. Trading smaller, or not at all, for lower probability trades and larger for higher probability trades can even transform a losing strategy

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prolonged, massive decline. In this sense, past performance can sometimes even be an inverse indicator. Epilogue I am often asked by readers how doing the Market Wizards interviews affected my own trading. The interview and writing process has helped solidify in my own mind the principles that are important to trading success

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the market opened on Sunday night. On Sunday night, however, the market opened lower. I immediately thought of Marty Schwartz’s advice in my first Market Wizards 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

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, as some of my trades that went nowhere ended up generating net profits. Over the years, many people have told me that reading the original Market Wizards books changed their careers and changed their lives. I have been told this both by professional managers and by numerous attendees at my conference talks

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about having deprived the world of a doctor in exchange for one more trader. Ironically, one of the people whose lives was changed by the Market Wizards books was my own son, Zachary, who also had a direct impact on the content of this book. Here, too, I don’t know whether

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dad’s office to seek his advice on a major. It’s quite embarrassing to say, but at this point, I had still not read Market Wizards. I had no involvement with the markets, and my father was never one to push anyone toward his own desires. I told him I wanted

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wanted to know and understand more, including my own father, as this desire was what had set him out on his quest to interview these Market Wizards many years earlier. I have had the honor of getting to work with my dad on this book, which is not meant to imply that

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premiums), which may be higher or lower than the historical volatility, is called the implied volatility. *This appendix was originally published in Market Wizards (1989). About the Author 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

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perhaps best known for his bestselling series of interviews with the greatest hedge fund managers of the last two decades: Market Wizards (1989, new edition 2012), The New Market Wizards (1992), and Stock Market Wizards (2001). Mr. Schwager’s first book, A Complete Guide to the Futures Markets (1984), is considered to be one of the classic

Market Wizards: Interviews With Top Traders

by Jack D. Schwager · 7 Feb 2012 · 499pp · 148,160 words

Insurance Appendix 2: Options—Understanding the Basics Glossary Excerpt: Edward Thorp Additional Praise for Market Wizards “Market Wizards is one of the most fascinating books ever written about Wall Street. A few of the ‘Wizards’ are my friends—and Jack Schwager has nailed their modus operandi on the head.” —Martin W. Zweig, Ph.D., Editor

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Other Books by Jack D. Schwager A Complete Guide to the Futures Markets: Fundamental Analysis, Technical Analysis, Trading, Spreads, and Options Getting Started in Technical Analysis The New Market Wizards: Conversations with America’s Top Traders Stock Market Wizards: Interviews with America’s Top Stock Traders Schwager on Futures: Fundamental Analysis Schwager on Futures: Managed Trading Myths

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with hard work, but performing at an elite level requires some degree of innate talent. The level of trading success attained by many of the Market Wizards is possible only because they have some innate skill, or some inner radar, that gives them a better-than-even probability of sensing what markets

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might be the subconscious’ way of breaking through mental impediments. Final Word 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 length of time they typically hold a trade ranges from

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game. 9. They all love what they are doing. What I Believe 22 Years Later Twenty-two years have elapsed since the original publication of Market Wizards. How have my views on markets and trading changed in the interim? Or have they changed at all? By chance, the release of this edition

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coincides with my working on a new book of interviews with a new set of Market Wizards. I deliberately avoid referring to them as a “new generation” because whereas some were in grade school when I conducted the interviews in these chapters

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are a reflection of human nature, and I believe it is the constancy of human emotions that explains why the same rules that applied when Market Wizards was published still apply today, as they did a century earlier and as they will a century from now. Good Trades and Bad Trades* A

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to stay on the sidelines when the environment is adverse to your approach or when opportunities are lacking or suboptimal. Risk Control of Course Many Market Wizards consider risk control even more important than the methodology. One recently interviewed manager goes so far as to limit risk to a mere 0.1

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focused on the dangers of trading too large, but trades can also be too small. Not all trades are created equal. One characteristic of the Market Wizards is that when they perceive exceptional trade opportunities (e.g., high-probability trades, trades with large return potential relative to the risk), they will take

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position and gritting your teeth and riding it out, remember that there is a third alternative: partial liquidation. Trading Around a Position Many of the Market Wizards use a dynamic rather than static approach to individual trades. Instead of simply using one entry and one exit transaction, they will adjust their position

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is that sometimes you can have high volatility because of abrupt, large gains, but the theoretical risk of the investment is limited. Some of the Market Wizards pursue highly asymmetrical strategies in which the maximum risk on trades is well defined and contained, while the upside potential can be very large (e

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the target. The Path to Trading Success There is no single true path to trading success. On the contrary, the trading methodologies employed by the Market Wizards are extraordinarily varied. The trading approaches used are not merely different, but, as in the case of one trader I interviewed for a book in

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matter of finding that one approach that unlocks the secrets of market success, but rather of finding an approach that fits their personality. All the Market Wizards found an approach that worked for them because it fit their personality. The approach of any given trader, even a

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looking for apprentices. I’m willing to work long hours without pay to be able to learn from one of the Market Wizards. This type of query reflects a misdirected quest. You

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your personality. The answer lies not in copying someone else’s method, but in finding your own. * The remainder of this chapter is adapted from Market Wizards in the Hedge Fund Era, a work in progress by the author. Appendix 1 Program Trading and Portfolio Insurance One subject that has received widespread

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before downside price reversals and sell signals just before upside price reversals. EXCERPT Edward Thorp The Innovator Read an excerpt from Jack D. Schwager’s latest book in the Market Wizards series . . . Edward O. Thorp, a PhD mathematician and near PhD physicist, came to the markets via gambling, but not gambling in the

New Market Wizards: Conversations With America's Top Traders

by Jack D. Schwager · 28 Jan 1994 · 512pp · 162,977 words

THE NEW MARKET WIZARDS CONVERSATIONS WITH AMERICA’S TOP TRADERS JACK D. SCHWAGER TO MY FAMILY Jo Ann Daniel Zachary Samantha Who are all very special to me With love More is learned from one’s errors than

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by success in your life (and I use the word success here without monetary connotation). In conducting the interviews for this book and its predecessor, Market Wizards, I became absolutely convinced that winning in the markets is a matter of skill and discipline, not luck. The magnitude and consistency of the

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Trader’s Window, ED SEYKOTA PART I Trading Perspectives Misadventures in Trading O n the lecture tour following the completion of this book’s predecessor, Market Wizards, certain questions came up with reliable frequency. One common question was: “Has your own trading improved dramatically now that you’ve just finished interviewing some

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trading was by losing. Is that right?” Ed didn’t have to say anything more. I recalled that in my 10 / The New Market Wizard interview of him for Market Wizards,, his most striking comment was: “Everybody gets what they want out of the market.” I had wanted not to be trading, and sure

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he wanted—a perfect job, huge trading profits, and an absence of conflict between his personal and company trading. * As proposed by Ed Seykota in Market Wizards. PART III Futures—The Variety-Pack Market Futures—Understanding the Basics T oday’s futures markets encompass all the world’s major market groups: interest

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in the United States alone exceeded 263,000,000. Conservatively assuming an aver- Note: This chapter was adapted from Jack Schwager, Market Wizards (New York: New York Institute of Finance, 1989). 72 / The New Market Wizard age contact value of at least $40,000, the total dollar value of these contracts exceeded $10 trillion! (Yes

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D. Schwager, John Wiley & Sons, 1984], The Handbook of Futures Markets, by Perry Kaufman [John Wiley & Sons, 1984], and The Commodity Futures Game: Who Wins? Who Loses? Why? by Richard J. Tewles and Frank J. Jones [McGraw-Hill, 1987]. Then there are some fun books I recommend, like your Market Wizards, which

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conditions still point to continued higher prices. The steely patience necessary to hold such positions to fruition is one of the attributes that distinguishes the Market Wizards from less skilled traders. Even though Driehaus and Druckenmiller employ dramatically different approaches, “home run” trades are an essential ingredient to the success of

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book and its predecessor stressed the absolutely critical role of psychological elements in trading success. When asked to explain what was important to success, the Market Wizards never talked about indicators or techniques, but rather about such things as discipline, emotional control, patience, and mental attitude toward losing. The message is

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subjects of extended observation and modeling. In the case of floor traders, such as Tom Baldwin [a phenomenally successful T-bond floor trader profiled in Market Wizards], direct observation was quite easy, requiring nothing more than access to the trading floor, which I got. In the case of Pete Steidlmayer [a

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talks or interviews. Jimmy Rogers, Paul Tudor Jones, and Richard Dennis [three of the best traders of our generation, who were also profiled in Market Wizards] fall into this last category. I later saw Dennis on a futures industry panel that you moderated and determined my inferences about his trading strategies

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the traders I interviewed. Dr. Van Tharp, a psychologist who has done a great deal of research on traders and was interviewed in Market Wizards, claims that 468 / The New Market Wizard one of the basic traits of winning traders is that they believe “they’ve won the game before the start.” 15. LOSING

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a lot to do with the image of trading but nothing to do with success in trading (except in an inverse sense). In Market Wizards, 476 / The New Market Wizard Larry Hite described his conversation with a friend who couldn’t understand his absolute adherence to a computerized trading system. His friend asked, “

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managing director and principal of the Fortune Group, an alternative asset management specialist regulated in the UK and the United States. Schwager is the Senior Portfolio manager for the Fortune’s Market Wizards Funds of Funds, a broadly diversified series of institutional hedge fund portfolios. He also serves on the board of Fortune

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research. Visit www.AuthorTracker.com for exclusive information on your favorite HarperCollins author. Books by Jack D. Schwager Market Wizards A Complete Guide to the Futures Markets Stock Market Wizards Copyright THE NEW MARKET WIZARDS. Copyright © 1992 by Jack D. Schwager. All rights reserved under International and Pan-American Copyright Conventions. By payment of the required fees, you

Stock Market Wizards: Interviews With America's Top Stock Traders

by Jack D. Schwager · 1 Jan 2001

of the method described in this book, and/or this potential conflict of interest, and any such liability is hereby expressly disclaimed. STOCK MARKET WIZARDS. Copyright © 2001 by Jack D. Schwager. All rights reserved. Printed in the United States of America. No part of this book may be used or reproduced in any

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53rd Street, New York, NY 10022. FIRST EDITION Designed lay Fearn Cutler Library of Congress Cataloging-in-Publication Data Schwager, Jack D., 1948Stock market wizards : interviews with America's top stock traders / by Jack D. Schwager. p. cm. ISBN 0-06-662058-9 1. Stockbrokers—United States—Interviews. 2. Investment advisors—United States—Interviews

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to provide such assistance, holding the unofficial world record as the technical analyst who has worked for the most (four) Market Wizards or their organizations. Marty Schwartz and Linda Raschke were two former Market Wizards ("former" referring to the books in which their interviews appeared, not their trading talent) who helped me find new

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Market Wizards for this book. Other industry contacts who were particularly helpful in aiding my search for great trading talent include: Sol Waksman and George Van; Bob

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who are successful in this business are the people who are willing to lose money. One of the most common trading blunders cited by the Market Wizards is the folly of listening to others for advice—a mistake that proved very costly to some (Walton and Minervini for example). Steve Watson was

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ten thousand stocks Okumus surveys, he holds only about ten in his portfolio at any given time. One element of market success frequently cited by Market Wizards, both in this volume and its two predecessors, is the age-old trading adage: Cut your losses short. Yet Okumus's methodology seems to fly

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is just my guess—by his own account, Lescarbeau's initial research direction was inspired by the Gil Blake interview in my book The New Market Wizards. Perhaps agreeing to this interview was a courtesy granted for having provided this indirect aid to his own career. Lescarbeau doesn't let up. Even

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group of in-house traders who managed the firm's proprietary funds as well as outside investor funds. Two of the traders I interviewed in Market Wizards—Michael Marcus and- Bruce Kovner—achieved their early success at Commodities Corporation.] One day, I went down with Tim to meet with T H E

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too distant from what I used to do by describing my perception of Gil Blake's system. [Blake was a trader interviewed in The New Market Wizards.] Gil's approach was to follow different sectors, and if on a given day, a sector had both above-average volatility and above-average return

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lead to confidence. But even then, until you are truly confident, proceed with great caution in the markets. Another trait I have noticed among the Market Wizards is that they approach trading and sometimes other endeavors with an intensity bordering on obsession. Lescarbeau is a perfect example. He never misses a day

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my dad and my wife, Suzanne, everyone said that you couldn't trade successfully and advised me against trying to do it. Your books [Market Wizards and The New Market Wizards] were actually very helpful because they showed me that it was possible. Just know- •S ing that was very important. 1 realized that

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in his own fund, Bender also manages an undisclosed allocation from the Quantum fund, for which he trades currency options. It is quite common for Market Wizards to use a portion of their substantial trading profits to support favorite charities or causes. I found one of Bender's uses for his winnings

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-fits-all approach doesn't mean it's correct. Don't other firms such as Susquehanna [a company whose principal was interviewed in The New Market Wizards] also trade on models based on perceived mispricings implied by the standard Black-Scholes model? When I was on the floor of the Philadelphia Stock

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. Did they usually accept this type of deal? Sure, no entrepreneur will ever think his stock is going down. There is a common belief that Market Wizards tend to have been obsessed with the markets from an early age. This is often not the case. Guazzoni's early interests— photography and the

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talent. It cannot be taught. Novice traders cannot expect to have gut feel, and experienced traders may also not possess it. Even many of the Market Wizards don't possess gut feel; in many cases, their trading success is due to a different talent—for example, a skill for market analysis or

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to, and this was no different." 10. The Confidence Chicken-and-Egg Question One of the most strikingly evident traits among a l l the Market Wizards is their high level of confidence. This leads to the question: Are they confident because they have done so well, or is t h e

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by the Market Wizards. Certainly some of the examples just cited contain elements of obsession. It may well be that a tendency toward obsessiveness in respect to the markets

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panicking or freezing." On a similar note, Fletcher quotes his mentor, Elliot Wolk, "Never make a bet you can't afford to lose." 15. The Market Wizards Tend to Be Innovators, Not Followers To list a few examples: > WTien Fletcher started his first job, he was given a desk and told to

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people's opinions. His awareness of this personal flaw compelled him to make Ironically, although many people are drawn to the markets for excitement, the Market Wizards frequently cite keeping emotion out of trad- ing as essential advice to investors. Watson says, "You have to invest without emotions. If you let emotions

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,257, 270,281-82,308-9 stock market crash (1987), 47-48, 56, 108, 135, 237, 320-21 Slock Market Logic (Fosback), 156-57 stock market wizards, see traders stocks: "blessed," 15-17, 318 breakouts of, 183 capitalization of, see capitalization certificates for, 69-70 cyclical, 81 discounts on, 140-41, 157

Market Sense and Nonsense

by Jack D. Schwager · 5 Oct 2012 · 297pp · 91,141 words

the Author Index Other Books by Jack D. Schwager Hedge Fund Market Wizards: How Winning Traders Win Market Wizards: Interviews with Top Traders The New Market Wizards: Conversations with America’s Top Traders Stock Market Wizards: Interviews with America’s Top Stock Traders Schwager on Futures: Technical Analysis Schwager on Futures: Fundamental Analysis Schwager on Futures: Managed Trading: Myths & Truths Getting Started

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’s Business Daily, November 1, 2001. Retrieved March 29, 2011, from AccessMyLibrary: www.accessmylibrary.com/article-1G2.106006432/louis-rukeyser-shelves-elves.html. 3Jack D. Schwager, Market Wizards (New York: New York Institute of Finance, 1989). Chapter 2 The Deficient Market Hypothesis The most basic investment question is: Can the markets be beat

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of the subprime securities fiasco, see Michael Lewis, The Big Short (New York: W.W. Norton, 2010). This section has been excerpted from Jack Schwager, Hedge Fund Market Wizards (Hoboken, NJ: John Wiley & Sons, 2012). 2CDOs were a general type of securitization that were also built from many other types of instruments besides

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reversal of uptrends. 3 This episode is detailed in Sebastian Mallaby, More Money Than God (New York: Penguin Press, 2010): 373–374. 4 Jack D. Schwager, Market Wizards (New York: New York Institute of Finance, 1989). 5 John Brooks, The Go-Go Years, p. 142, as quoted by Mallaby, More Money Than God

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of funds managers another example of what might be termed “Eckhardt’s dictum”? Bill Eckhardt is one of the managers I interviewed in The New Market Wizards.1 In that interview, Eckhardt asserted that human nature was so poorly attuned to trading and investing decisions that most people would do worse than

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companies—otherwise, they would have no incentive to assume the open-ended risk. *This appendix is adapted from an appendix originally published in Jack D. Schwager, Market Wizards (New York: New York Institute of Finance, 1989). Appendix B Formulas for Risk-Adjusted Return Measures This appendix provides the formulas for the performance measures

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. Schwager has written extensively on the futures industry and great traders in all financial markets. He is perhaps best known for his best-selling series of interviews with the greatest hedge fund managers of the past two decades: Market Wizards (1989, new edition 2012), The New Market Wizards (1992), Stock Market Wizards (2001), and Hedge Fund Market Wizards (2012

Trend Commandments: Trading for Exceptional Returns

by Michael W. Covel · 14 Jun 2011

’s Trend Commandments offers a breezy rumination on what is right about trend following and what is wrong about conventional trading approaches.” —Jack Schwager, Author of Market Wizards and Schwager on Futures series “Michael Covel’s Trend Commandments is full of practical wisdom in bite-size portions on the benefits of trend trading—written

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Career at Commodities Corporation. United States: Xlibris, 2003. Schroeder, Alice. The Snowball: Warren Buffett and the Business of Life. New York: Bantam Books, 2008. Schwager, Jack D. Market Wizards: Interviews with Top Traders. Columbia: Marketplace Books, 2006. Stridsman, Thomas. Trading Systems That Work: Building and Evaluating Effective Trading Systems. New York: McGraw Hill

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: Harper Collins, 1999. 6. See http://en.wikipedia.org/wiki/David_Harding (mathematician). 7. Jack D. Schwager, Market Wizards. New York: NYIF Corp., 1989. 8. See http://www.absolutereturn-alpha.com. 9. Jack D. Schwager, The New Market Wizards. New York: HarperBusiness, 1992. 247 10. See http://www.forbes.com/profile/louis-bacon. 11. See http

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. See http://www.bucks.blogs.nytimes.com. IQ vs. EQ 1. The Hangover, dir. Todd Phillips, DVD, Warner Bros., June 2009. 2. Jack D. Schwager, The New Market Wizards. New York: Harper Business, 1992. 3. See http://finance.yahoo.com/tech-ticker/forget-harvard-and-a-4-year-degree-you-canmake-more-as

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Rogers, Investment Biker. New York: Random House, 1994. 5. Roy W. Longstreet, Viewpoints of a Commodity Trader. Greenville: Traders Press, 1968. 6. Jack D. Schwager, The New Market Wizards. New York: Harper Business, 1992. 7. Covel, Trend Following, p. 283-284. 8. Joey Reiman, Thinking for a Living: Creating Ideas That Revitalize Your

Alpha Trader

by Brent Donnelly · 11 May 2021

has lost its edge. The current generation of 30-to 45-year-old traders were all brought up on Reminiscences of a Stock Operator and Market Wizards and thus we are always scouring the price action for a signal. Throw in the massive price distortions from non-price sensitive central bank buying

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can bring it all together, we need to cover a few more topics. Next up: The importance of technical analysis, sentiment and positioning. 112. Jack Schwager, Market Wizards (1989). 113. Elliott Wave is an esoteric form of technical analysis. I studied it for a while and found its general approach useful but its

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all the hours he poured into editing this project. Good luck. Be nimble. New Canaan, Connecticut 2021 APPENDIX A FURTHER READING BOOKS Trading classics Market Wizards (series), Jack Schwager (1989) Reminiscences of a Stock Operator, Edwin Lefèvre (1923) Luck vs. skill, process vs. outcome The Success Equation, Michael Mauboussin (2012) Thinking in Bets

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—445 rangebound versus trending, 447—449 volatility, 445—447 See also fast markets, trading market structure, major changes to, 450, 476 adapting to, 449—451 Market Wizards (J. Schwager}, 161, 298, 491 math facts, counterintuitive, 247—259 Arcsine Law/random walk process, 251—254 averages, 250—251 bat and ball problem, 248—249

Systematic Trading: A Unique New Method for Designing Trading and Investing Systems

by Robert Carver · 13 Sep 2015

crop of similar books. Compulsory if you want ideas for new technical trading rules. Fundamental Analysis, Jack Schwager, 1997, John Wiley & Sons See above. Compulsory if you want to trade fundamentals. Hedge Fund Market Wizards, Jack Schwager, 2012, John Wiley & Sons Interviews with many successful hedge fund managers. There are many useful nuggets of

Trend Following: How Great Traders Make Millions in Up or Down Markets

by Michael W. Covel · 19 Mar 2007 · 467pp · 154,960 words

book that captures the essence of what really makes markets tick. Diligently researched and comprehensive in scope, it will replace The Market Wizards as the must-read bible for a new generation of traders.” —Jonathan Hoenig, portfolio manager, Capitalistpig Hedge Fund LLC and Fox News contributor “Investment books

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Trend Following.” —Van K. Tharp, Ph.D., president, International Institute of Trading Mastery, Inc. Van was originally profiled in The Market Wizards by Jack Schwager. “I think that this book documents a great deal of what has made trend following managers a successful part of the money management landscape (how

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managers as a part of an overall portfolio strategy.” —Tom Basso, retired CEO, Trendstat Capital Management, Inc. Tom was originally profiled in The New Market Wizards by Jack Schwager. “Michael Covel mixes a unique blend of trend following matters with the thoughts and quotes of successful traders, investors and society’s leaders. This

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in terms of assets under management. Mint’s achievements won Hite and his team industry-wide acclaim, and in 1990, Jack Schwager dedicated an entire chapter of his bestselling book, Market Wizards, to Hite’s trading and risk management philosophy. Preface “Men wanted for hazardous journey. Small wages. Bitter cold. Long months of

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a trader’ are very different from ‘I’m a trader’ or ‘I own a few stocks and bonds’ (from a major East Coast speculator). The market wizards I’ve met seem to live by William Blake’s phrase, ‘I must make my own system or be enslaved by another’s.’ They have

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by losing money. Ed Seykota48 After you enter the world of markets and investing, you will eventually run across the book Market Wizards by Jack Schwager. Of all the trader interviews in Market Wizards, the most memorable is the one with Ed Seykota. While some may perceive Seykota’s manner as extremely direct, most will

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hired by a major broker. He conceived and developed the first commercial computerized trading system for client money in the futures markets. According to Jack Schwager’s Market Wizards, he increased one client’s account from $5,000 to $15,000,000 in just 12 years. For the past few years, Seykota has

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refused to acknowledge they were even trend followers while Dunn was always candid. Did the hype and mystery of the Turtles set forward in the Market Wizards books help most of them in the long run? All this said, the story of the Turtles is so widespread that the criteria Dennis used

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out.”26 Like many teachers, Faulkner uses simple stories to illustrate complex lessons. I found, for instance, Faulkner’s “Swiss skiing” example from The New Market Wizards to be especially insightful. He used skiing to explain NLP. He pointed out that until the 1950s, most people thought skiing was a matter of

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reluctant to criticize in public. Losers Average Losers There’s a famous picture of Paul Tudor Jones, the great macro trader first profiled in Jack Schwager’s Market Wizards, relaxing in his office. Tacked up on the wall behind him on loose-leaf sheet of paper is the simple phrase in black magic

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to trade another day. 299 300 Trend Following (Updated Edition): Learn to Make Millions in Up or Down Markets My chapter in Jack Schwager’s The New Market Wizards made it possible for me to meet top traders across the industry. Sometimes we appeared on professional panels together. Other times, it was a

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the pyramid, there are fewer stones. No one should be surprised by this. Neither was I. What did surprise me when meeting and modeling these market wizards was that despite their outward, often dramatic, differences in trading and life style, their thinking about their trading principles was extremely similar. It was like

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traders since 1986. The coauthor of NLP: The New Technology of Achievement, he was interviewed on The Psychology of Trading by Jack Schwager for his book The New Market Wizards: Conversations with America’s Top Traders, with other interviews appearing in Robert Koppel’s The Outer Game of Trading and The Intuitive Trader

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performance data from professional trend followers provides concrete results, not just theory. • Appendix C, “Short-Term Trading”: Short-term trading is hard, but not impossible. Market Wizards Jim Simons and Toby Crabel do win as short-term traders, but Ed Seykota offers good insight on the difficulty. • Appendix D, “Personality Traits of

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Treatise on Economics. 4th revised ed. Irvington-on-Hudson, NY: The Foundation for Economic Education, Inc., 1996, printed 1998. First published in 1949. 4. Jack Schwager, Market Wizards: Interviews with Top Traders. New York, NY: Harper Collins, 1993. 5. Ludwig von Mises, Human Action: A Treatise on Economics. 4th revised ed. Irvington-on

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. Henry & Company, Inc. 30. Tass Twenty Traders Talk. Held June 29, 1996 at the Montreal Ritz Carlton Hotel in Montreal, Canada. 401 Endnotes 31. Jack Schwager, Market Wizards: Interviews with Top Traders. New York: Harper Business, 1989. 32. Riva Atlas, Macro, Macro Man. Institutional Investor Magazine. 1996. 33. Trend Following: Performance, Risk and

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, No. 6, Vol. 32, 67, (May 1, 2003) ISSN: 0746-2468. 13. Tricycle Asset Management, part of the Market Wizards Tour. Held on May 15, 2003 in Saskatoon, Saskatchewan. 14. Tricycle Asset Management, part of the Market Wizards Tour. Held on May 15, 2003 in Saskatoon, Saskatchewan. 15. Tricycle Asset Management, part of the

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Market Wizards Tour. Held on May 15, 2003 in Saskatoon, Saskatchewan. 16. Amy Rosenbaum, 1990s Highs and Lows: Invasions, Persuasions and

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. 46. Presentation in Geneva, Switzerland on September 15, 1998. 47. FIA Research Division dinner held in New York City on April 20, 1995. 48. Jack Schwager, The Market Wizards. New York: Harper Business, 1989, 172. 49. The Trading Tribe at Seykota.com. See www.seyokota.com/tribe/. 50. Email to TurtleTrader.com. 51

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: Bobbs-Merrill Company, 1943. 87. Simon Romero, A Homespun Hedge Fund, Tucked Away in Texas. New York Times, December 28, 2003, Business, 1. 88. Jack Schwager, Market Wizards: Interviews with Top Traders. New York: New York Institute of Finance, 1989. 89. Stanley W. Angrist, Commodities: Winning Commodity Traders May Be Made, Not Born

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1990. Futures Vol. 20, No. 3 (March 1991). 405 406 Trend Following (Updated Edition): Learn to Make Millions in Up or Down Markets 96. Jack Schwager, Market Wizards: Interviews with Top Traders. New York: New York Institute of Finance, 1989. 97. Barbara Dixon, Richard Donchian: Managed Futures Innovator and Mentor. Futures Industry Association

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a Leader? Harvard Business Review, 1998. 9. Harris Collingwood, The Sink or Swim Economy. The New York Times, June 8, 2003. 10. Jack D. Schwager, The New Market Wizards. New York: Harper Business, 1992. 11. Ayn Rand, Atlas Shrugged. New York: Random House, 1957. 12. Animal House. Universal Pictures, 1978. Written by Harold

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Spell. Financial Trader, No. 4 (July 1995). 26. Tom Girard, The Wizards Cast a Spell. Financial Trader, No. 4 (July 1995). 27. Jack D. Schwager, The New Market Wizards. New York: Harper Business, 1992, 416. 28. The Trading Tribe at Seykota.com. See www.seykota.com/tribe/. 29. Ludwig von Mises, Human Action

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Kristen Bartholdson, All Systems Go: Emotion and Intuition in Decision-Making. The Consilient Observer, Vol. 3, No. 2 (January 27, 2004). 35. Jack D. Schwager, The New Market Wizards. New York: Harper Business, 1992. 36. Michael Crichton, The Lost World. New York: Knopf, 1995. 37. Educated in England, Lee Kuan Yew led Singapore

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Weiss, and Stuart Weiss, Contrarians. Business Week, The Best of 1986 (December 29, 1986), 74. 29. Washington Post, December 9, 2001. 30. Jack D. Schwager, The New Market Wizards. New York: HarperBusiness, 1992. 31. Jerry Parker, The State of the Industry. Managed Account Reports, Inc. (June 2000). 32. Bruce Terry, Managed Account Reports

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and Implementing Hedge Fund Strategies, Second Edition, R. Lake ed., 2002. Schwager, Jack D. Getting Started in Technical Analysis. New York: John Wiley & Sons, Inc., 1999. Schwager, Jack D. Market Wizards: Interviews with Top Traders. New York: HarperBusiness, 1989. Schwager, Jack D. The New Market Wizards: Conversations with America’s Top Traders. New York: HarperBusiness, 1992. Schwed

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, 3-4 inefficiency of, 288-290 role of speculation in, 6 market price. See price market theories fundamental analysis, 7-9 technical analysis, 9-11 Market Wizards (Schwager), xvi, 58 Markowitz, Harry, xx, 86 Martin, Michael, 64 435 Index Martinez, Pedro, 186, 188 Mauboussin, Michael, 124, 181, 218, 226, 286 McCann, Timothy, 285

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National Institute of Standards and Technology, 225, 228-229 natural gas trading, 144-150 negative skew (statistics), 228 Neuro-Linguistic Programming (NLP), 201 The New Market Wizards (Schwager), 202, 300 New York Stock Exchange, 3 New York Yankees, 186, 188 Newton, Isaac, 238 Neyer, Robert, 188 Niederhoffer, Victor, 100, 164-168, 272, 289