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A primer on key beliefs and fallacies held by professional and lay traders
on 12 September 2006
Market Wizards is the first in a series of three edited collections of interviews of professional traders with fellow trader Jack Schwager. The latter has already earned a reputation as the author of a comprehensible and comprehensive guide to financial futures trading. This book reproduces the first set of interviews taken around 1988 and concerns mainly US futures traders.
The spectrum of interviewees covers both self-made men, career traders and the more academically educated traders who switched to trading. It also includes, quite rightly, a psychologist/trader coach. Some of the names still ring a bell today, Ed Seykota, Paul Tudor Jones, Jim Rogers, Marty Schwartz and Mark Weinstein. Others have been all but forgotten since, but that does not devalue their two cents' worth.
My interest in this book was to assess the drivers that make these traders what they are/were - reputedly highly profitable and successful individuals. The book does deliver in this respect; it distils the interviews down to some of the more pertinent questions.
So, what makes a good trader? A willingness to learn, to dedicate oneself, ability to exercise emotional control and apply trading systems without second guessing, the energy to develop a trading system and to perfect it continuously, the commitment to continuously study the market and develop what-if scenarios, and the courage to cut losers quickly and manage your money, and finally the willigness to suffer the excruciating delay of the gratification coming from locking into profits as they evolve. All in all - hard work, hard work and hard work - as well as some technical knowhow.
The book does not provide trading systems as most traders talk around rather than about their proprietary technology, however they all do emphasise trading systems should be developed or studied so as to at least comprehend how they may influence other market participants. In this respect, a majority of traders makes extensive use of technical analysis in addition to fundamental analysis.
Finally, the book highlights the need for aspiring traders to be aware of their inner self, i.e. the psychological dimension of trading and the interaction with our character traits. In this respect, the book did neatly set the scene for the later and better books "Traders" and "The Psychology of Trading" by Brett Steenbarger.
All in all, the book deserves its place on an aspiring trader's bookshelf and has certainly pointed me to further areas of study and related books.