I just finished reading Market Wizards – Interviews with Top Traders by Jack D. Schwager. As the title indicates this book consists of a series of interviews with some of the best most successful traders in the world.
Not only does this book cover a wide variety of trading techniques, it also covers a wide variety of markets as well (treasuries, futures, commodities etc.). The book also sheds light on the personal traits and characteristics of successful traders. By reading the different interviews one starts to see the commonalities but also the differentiators between them. It is very intriguing to read one very successful trader present opposite techniques than the next trader being interviewed.
A must read for any serious investor. This book is filled with wisdom from start to finish – for both novice and advanced traders. One will also find that much of this wisdom applies to any career.
Below are excerpts from this book that I found particularly insightful:
1- “You also have to follow your own light. Because I have so many friends who are talented traders, I often have to remind myself that if I try to trade their way, or on their ideas, I am going to lose. Every trader has strengths and weaknesses…As long as you stick to your own style, you get the good and bad in your own approach. When you try to incorporate someone else’s style, you often wind up with the worst of both styles. I’ve done that a lot.”
2- “Don’t ever feel that you are very good. The second you do, you are dead.”
3- “What are the traits of a successful trader? The most important is discipline – I am sure everyone tells you that. Second, you have to have patience; if you have a good trade on, you have to be able to stay with it. Third, you need courage to go into the market, and courage comes from adequate capitalization. Fourth, you must have a willingness to lose; that is also related to adequate capitalization. Fifth, you need a strong desire to win.”
4- “I have two basic rules about winning in trading as well as in life: (1) If you don’t bet, you can’t win. (2) If you lose all your chips, you can’t bet.”
5- “The stock market is neither efficient nor random. It is not efficient because there are too many poorly conceived opinions; it is not random because strong investor emotions can create trends.”
6- “I don’t see how you can invest in American steel without understanding what is going on in Malaysian palm oil. As I explained before, it is all part of a big, three-dimensional puzzle that is always changing.”
7- “Although the styles of the traders are very different, many common denominators were evident:
1- All those interviewed has a driving desire to become successful traders – in many cases, overcoming significant obstacles to reach their goals.
2- All reflected confidence that they could continue to win over the long run. Almost invariably, they considered their own 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. It is significant that 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 independent of the crowd was a frequently emphasized point.
8- All top traders understand that losing is part of the game.
9- They all love what they are doing.”