Jack Schwager - Author of Market Wizards book series

In this podcast Aaron Fifield and Jack Schwager discuss the many key trading lessons that Jack has learned from interviewing many of the world’s best traders in his Market Wizard book series.  These books especially “Market Wizards” and “New Market Wizards” are classics and should be at the top of all aspiring traders reading lists.  Jack explains that he first got started trading after university and educated himself on the markets.  He is revered as an industry expert in the markets, hedge funds and trading advise.  At one time he even ran his own hedge fund.  Jack has a solid background in both fundamental and technical analysis but did not believe in technical analysis when he first started trading. Even though Jack is an expert he does not consider himself a great trader.  The trading advice discussed in the interview primarily comes from the lessons he has learned from interviewing successful traders. Today he enjoys writing more than trading.  In the interview Aaron and Jack discuss why successfully traders succeed where most fail.  Jack notes that over 25 years of interviewing traders he doesn’t believe much has changed in what makes a successful trader.  Jack is currently involved with Fundseeder.com, a company whose goal it is to discover unknown “market wizards”.  His next book will feature traders that have been discover through this venture.

Lessons learned from Podcast that will make you a better trader

  • Technical analysis works because stock charts reflect the behaviour of all the participants and therefore charts are helpful in making trading decisions. Technical analysis helps with risk management.
  • Jack notes that he did not have success trading using fundamental analysis. Fundamental analysis does not help with risk management.
  • Jack believes the markets are not random. He interviewed too many people that were significantly beating the market to validate the efficient market hypothesis. Market prices are not always correct.
  • Markets are difficult to beat because human emotions are involved.
  • Many successful traders have experienced significant failure before they became successful. Failure is not indicative of future success. You can’t give up.
  • Most successful traders have ability to be flexible. They don’t jump from strategy to strategy but they constantly tweak their strategy based on lesson learned as their trading experience increases.
  • The majority of the successful traders he interviewed were trend-following traders. A very small percentage were counter trend-following traders.
  • It is important to find your own trading strategy that matches your personality and not directly copy what someone else is doing
  • All systems will have bad periods. If the system is not yours and you don’t understand why the system works you will abandon it during these drawdown periods.
  • For the most part successful traders have a simple trading strategy. Most successful traders use some type chart pattern recognition combined with risk management.
  • Having an edge is necessary for a successful trading strategy. You can’t have an edge without a defined trading strategy.
  • Your system has an edge if you make money over the long term combined with manageable drawdowns.
  • It’s very hard to make money in a choppy market. During these times almost all systems will lose money.
  • Know where you are getting out of a trade before you get in. Once you are in a trade you lose objectivity and it will be very hard to pull the trigger.
  • There are a million ways to make money in the market, unfortunately they are hard to find.
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