The Little Book of Market Wizards: Lessons from the Greatest Traders

The Little Book of Market Wizards: Lessons from the Greatest Traders

Jack D. Schwager

Language: English

Pages: 90

ISBN: 1118858697

Format: PDF / Kindle (mobi) / ePub

An accessible look at the art of investing and how to adopt the practices of top professionals

What differentiates the highly successful market practitioners—the Market Wizards—from ordinary traders? What traits do they share? What lessons can the average trader learn from those who achieved superior returns for decades while still maintaining strict risk control? Jack Schwager has spent the past 25 years interviewing the market legends in search of the answers—a quest chronicled in four prior Market Wizards volumes totaling nearly 2,000 pages.

In The Little Book of Market Wizards, Jack Schwager seeks to distill what he considers the essential lessons he learned in conducting nearly four dozen interviews with some of the world's best traders. The book delves into the mindset and processes of highly successful traders, providing insights that all traders should find helpful in improving their trading skills and results.

• Each chapter focuses on a specific theme essential to market success
• Describes how all market participants can benefit by incorporating the related traits, behaviors, and philosophies of the Market Wizards in their own trading
• Filled with compelling anecdotes that bring the trading messages to life, and direct quotes from the market greats that resonate with the wisdom born of experience and skill

Stepping clearly outside the narrow confines of most investment books, The Little Book of Market Wizards focuses on the value of understanding one's self within the context of successful investing.

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the fund managed to attain annual returns that have averaged two-and-a-half times the size of the single largest equity drawdown for the entire period? The key is that the 3 percent/3 percent risk rule applies only to a manager’s starting stake for the year. So while the risk control rules encourage the fund’s managers to be very cautious at the outset, managers can take increasingly greater risk as they build a profit cushion. Effectively, a manager can risk the original 3 percent plus any

validation of Eckhardt’s contention that the proverbial monkey would outperform humans making their own investment decisions. Behavioral Economics and Trading Eckhardt ties in human biases to the tendency for the majority of market participants to lose. As Eckhardt explains it, “There is a persistent overall tendency for equity to flow from the many to the few. In the long run, the majority loses. The implication for the trader is that to win you have to act like the minority. If you bring

observation came up in my interview with Bill Lipschutz when he described the first time in his trading career that he was truly scared. At the time, he traded a very large proprietary foreign exchange (FX) account for Salomon Brothers. It was the fall of 1988, and Lipschutz was looking for the dollar to decline vis-à-vis the deutsche mark. He explained that since the market was in a low-volatility period, his position size was much larger than normal. He was short $3 billion against the deutsche

know.” I doubt that it would be possible to get any more cynical about a particular trading methodology than Jim Rogers’s attitude toward technical analysis. Marty Schwartz Now let’s consider another incredibly successful trader, Marty Schwartz, who is at the other end of the spectrum in terms of analytical approach. When I interviewed Schwartz, he had run a $40,000 account into over $20 million while never realizing a drawdown of more than 3 percent (based on month-end data) in the process.

the topic of the efficacy of fundamental analysis versus technical analysis? He had been a securities analyst for nearly a decade before he became a full-time trader using technical analysis. When I asked Schwartz whether he had made a full transition from fundamental analysis to technical analysis, ironically, his reply seemed to be a direct retort to Rogers’s comment on technical analysis—a statement I hadn’t mentioned to him. Schwartz answered, “Absolutely. I always laugh at people who say,

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