The Little Book of Market Wizards: Lessons from the Greatest Traders
By Jack Schwager
When I saw that Jack Schwager wrote another Market Wizards book I was excited to take a look.
“The Little Book of Market Wizards: Lessons from the Greatest Traders” as the title suggests, is not a series of profiles of new Market Wizards or Wizards from a different sector or asset class (like in past efforts). Instead, it’s an attempt by Schwager to tie together some of the common traits they share, as well as guiding principles of the many traders he has profiled over the years.
To a great extent he accomplishes that in this concise book.
I always felt a kinship to Schwager because I have profiled many successful traders, and when Futures interviewed Schwager a year ago it felt more like talking to a colleague than conducting an interview. And I have come to many of his same conclusions.
Perhaps the most common stream flowing through the book is that there are many ways to succeed, and those who do have found their niche, not a Holy Grail of trading but perhaps their personal Holy Gail, the trading method that suits their skill set best.
He explains how great traders have a passion for their method of trading—not making money. Profit is just a way to keep score. Their sin is more of pride than greed and that is why there are so many different ways to succeed managing money.
Schwager makes that point clear by juxtaposing highly successful traders with diametrically opposed points of view.
He talks about how legendary trader Jim Rogers, co-founder along with George Soros of the Quantum Fund, is a complete fundamental trader who views technical trading as something similar to snake oil. On the opposite side is Marty Schwartz, a similarly successful hedge fund manager who is a strict technician.
“What does the dichotomy between Rogers and Schwartz tell you?” Schwager asks. “It should tell you that there is no single true path in the markets.”
If readers take nothing else away from this short book than understanding that, it will be well worth it as many would-be-traders obsess about finding the perfect system rather than the right strategy for them.
Many of the lessons Schwager has learned can seem contradictory. Here are some chapter titles: “The Importance of Hard Work” vs. “Good Trading Should be Effortless,” and “Doing the Uncomfortable Thing;” or “Discipline vs. Independence.”
Many of these themes can seem divergent but Schwager, for the most part, brings them all together. His chapter on discipline includes one glaring error in that it describes a lapse of discipline by discretionary trader Randy McKay. McKay was traveling while holding a large position in the Canadian dollar (before the age of cell phones) and saw what he mistakenly assumed was a bad tick and ignored it before boarding a plane. When he was able to confirm the price, his position went $3 million against him. When he learned of this he got out of only a portion of the position, which grew to a $7 million loser.
Schwager points out the lapse in judgment in assuming McKay saw a bad tick. Where the greater breakdown was in discipline. He should have got out of everything once he could instead of letting a $3 million loss turn into a $7 million loss. Also, he and simply should not have been out of communication with the market with such a huge position on.
But that is one small point, overall Schwager manages to tie together the varying methods into the overwhelming theme of hard work, discipline and passion for your method, all while staying flexible.
The final chapter is titled “Love of the Endeavor,” and includes a series of quotes from Market Wizards past. Schwager points out that all the quotes are game analogies, adding, “This tells you that for the Market Wizards, trading is not a matter of work or a matter of getting rich. Rather, trading is something they love to do—an endeavor pursued for the fun of the challenge.”
He concludes by pointing out that this is a trait of nearly all successful people.