Market Wizards by Jack Schwager

A couple of notes from one of Jack Schwagers well known books. Market Wizards contains interviews with world’s best traders. I find it useful to remind myself of these core principles. It probably a useful discipline to return to these kinds of notes periodically to ensure that the good habits of being ingrained and the bad habits weeded out.

If at first you fail, try, try and try again. Many of the first traders failed at first

Persistence is instrumental to success

There is no single correct methodology to trading. There are many different approaches that have worked. You have to find the approach that works for you and your personality.

Hard work is required in trading, specifically in the preparation: research, process, reflection, reading, etc

That being said, execution should be effortless. Do not force the trade – it leads to worse outcomes. If you are struggling and losing confidence, reduce position sizing

“Don’t focus on making money, focus on protecting what you have” – Paul Tudor Jones

Know where your breaking point is on a trade before you open it. Once you enter you have lost your objectivity.

If things are going against you but you still think you are right, lower the position size.

Many ignore the partial liquidation outcome because it guarantees that they are wrong

  • If the market continues to go against, they should have reduced more
  • If the market goes for them, then they should not have reduced at all
  • But being 50% wrong is better than being 100% wrong!
  • You cannot be 100% right all the time. In fact, you are going to be wrong a lot of the time. deal with it!
  • lowering the position also allows you to think clearly again

When you let a loser get bigger you can get into a negative mental spiral which can impact your ability to put on trades elsewhere

Never lapse on discipline

Traders are fiercely independent. Listening to other people is very dangerous because they have different approaches, time frames and risk tolerances.

One of the most consistent traits exhibited by successful traders is confidence. If you are unsure of your confidence, you are not there yet and you need to move more cautiously in committing capital. One sure sign of a lack of confidence is seeking the advice of others.

If you are confident in your approach and methodology, then taking losses is easy. Taking losses is just a step on the path towards getting to the ultimate goal of outperformance

Be patient and wait for high conviction trades. Be patient and capitalize on winners

Do not be loyal to a position. Great traders can cover/close and reverse a position

Increasing position size is dangerous, if it causes you to be fearful of the market

Humans seek comfort, which leads to bad decision making

There is a persistent overall trend for capital to flow from the many to the few. In the long run the majority loses. Traders need to act like to minority.

Overly optimized and back-tested strategies tend to seem more comfortable to trade but they are more likely to fail.

Successful traders are ice cool and are not looking for emotional excitement in the markets

Scale into an out of positions

Mistakes present a wonderful learning opportunity. Traders have to confront their mistakes because the numbers do not lie.

Trading journals are crucial

Trading is a game. You must enjoy it.


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