I have finished the fourth and last book of the Market Wizards series from Jack D. Schwager. It was published in 2012 and includes interviews with top traders on how winning traders win.
Ray Dalio, Colm O’Shea, Edward Thorp, Steve Clark, Jimmy Balodimas, Larry Benedict to name a few plus many other good traders and hedge fund managers are being interviewed by Jack Schwager. It’s a more modern era after the financial crisis of 2008 in the book which makes it an interesting read.
I took a lot of good nuggets from the book and want to share it with you:
- In bubbles it’s easier to get in early and ride it long til it starts to fall than to predict the top – it’s much harder to time the short side and once it starts to fall it can bounce heavily.
- Let go of what you feel about the market if your tools are saying something different.
- Don’t place stops by the book but place them where you think your thesis is wrong and you want to be out.
- Limit loss but not the gain. In longs can be done with call options where you can lose the premium but the gains are unlimited.
- If you trade instruments with less correlation the risk becomes smaller.
- Avoid gambler’s attitude, that is to cut losses and take trading as a process.
- Discretionary trader can reduce size after losses but a systematic trader would ruin opportunities with it and break the system.
- Even for a technical trader knowing some main fundamentals where the market could be heading to can create better opportunities.
- Analyse your past trades by segmenting winners and losers. Do what works and don’t do what doesn’t work. Do what your good at and don’t try various other things just because you were successful at your own thing.
- The larger the position, the more fear and emotions will affect the decision-making. Trade within your emotional capacity.
- If trading is going badly and in a losing streak, close everything and take a holiday. This will allow objectivity to come back into decision-making.
- Don’t watch every tick and be tied to screens, it will make you liquidate positions prematurely.
- Your job as a trader is to protect the direction of the equity line.
- Work out on your own methodology and system. You will never use someone’s system as well as the original author cause you are not them.
I hope you find my takeaways useful and I also recommend to read the whole book as each person can find different insights to be educational.
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