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The world's top trader's reveal the secrets of their phenomenal success!
How do the world's most successful traders amass tens, hundreds of millions of dollars a year? Are they masters of an occult knowledge, lucky winners in a random market lottery, natural-born virtuosi—Mozarts of the markets? In search of an answer, bestselling author Jack D. Schwager interviewed dozens of top traders across most financial markets. While their responses differed in the details, all of them could be boiled down to the same essential formula: solid methodology + proper mental attitude = trading success. In Market Wizards Schwager lets you hear, in their own words, what those super-traders had to say about their unprecedented successes, and he distils their responses down into a set of guiding principles you can use to become a trading star in your own right.
- Features interviews with superstar money-makers including Bruce Kovner, Richard Dennis, Paul Tudor Jones, Michel Steinhardt, Ed Seykota, Marty Schwartz, Tom Baldwin, and more
- Tells the true stories behind sensational trading coups, including the one about the trader who turned $30,000 into $80 million, the hedge fund manager who's averaged 30% returns every year for the past twenty-one years, and the T-bond futures trader who parlayed $25,000 into $2 billion in a single day!
"Market Wizards is one of the most fascinating books ever written about Wall Street. A few of the 'Wizards' are my friends—and Jack Schwager has nailed their modus operandi on the head."
Martin W. Zweig, Ph.D., Editor, The Zweig Forecast
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About the Author
Jack D. Schwager is a recognized industry expert on futures and hedge funds and the author of a number of widely acclaimed financial books. He is currently the co-portfolio manager for the ADM Investor Services Diversified Strategies Fund, a portfolio of futures and FX managed accounts. He is also an advisor to Marketopper, an India-based quantitative trading firm. Previously, Mr. Schwager was a partner in the Fortune Group, a London-based hedge fund advisory firm, which specialized in creating customized hedge fund portfolios for institutional clients, and also spent over twenty years as a director of futures research for some of Wall Street's leading firms.
Read an Excerpt
Blighting Never Strikes Twice
Michael Marcus began his career as a commodity research analyst for a major brokerage house. His near-compulsive attraction to trading led him to abandon his salaried position to pursue full-time trading. After a brief, almost comical, stint as a floor trader, he went to work for Commodities Corporation, a firm that hired professional traders to trade the company's own funds. Marcus became one of their most successful traders. In a number of years, his profits exceeded the combined total profit of all the other traders. Over a ten-year period, he multiplied his company account by an incredible 2,500-fold!
I first met Marcus the day I joined Reynolds Securities as a futures research analyst. Marcus had accepted a similar job at a competing firm, and I was assuming the position he had just vacated. In those early years in both our careers, we met regularly. Although I usually found my own analysis more persuasive when we disagreed, Marcus ultimately proved right about the direction of the market. Eventually, Marcus accepted a job as a trader, became very successful, and moved out to the West Coast.
When I first conceived the idea for this book, Marcus was high on my list of interview candidates. Marcus' initial response to my request was agreeable, but not firm. Several weeks later, he declined, as his desire to maintain anonymity dominated his natural inclination to participate in an endeavor he found appealing. (Marcus knew and respected many of the other traders I was interviewing.) I was very disappointed because Marcus is one of the finest traders I have been privileged to know.Fortunately, some additional persuasion by a mutual friend helped change his mind.
When I met Marcus for this interview, it had been seven years since we had last seen each other. The interview was conducted in Marcus' home, a two-house complex set on a cliff overlooking a private beach in Southern California. You enter the complex through a massive gate ("amazing gate" as described by an assistant who provided me with driving directions) that would probably have a good chance of holding up through a panzer division attack.
On first greeting, Marcus seemed aloof, almost withdrawn. This quiet side of Marcus' personality makes his description of his short-lived attempt to be a floor trader particularly striking. He became animated, however, as soon as he began talking about his trading experiences. Our conversation focused on his early "roller coaster" years, which he considered to be the most interesting of his career.
How did you first get interested in trading futures?
I was something of a scholar. In 1969, I graduated from Johns Hopkins, Phi Beta Kappa, near the top of my class. I had a Ph.D. fellowship in psychology at Clark University, and fully expected to live the life of a professor. Through a mutual friend, I met this fellow named John, who claimed he could double my money every two weeks, like cock-work. That sounded very appealing [he laughs]. I don't think I even asked John how he could do it. It was such an attractive idea that I didn't want to spoil things by finding out too many facts. I was afraid I would get cold feet.
Weren't you skeptical? Didn't he sound too much like a used car salesman?
No, I had never invested in anything, and I was very naive. I hired John, who was a junior at my school, to be my commodity trading advisor at $30 a week. Occasionally, I threw in free potato chips and soda. He had a theory that you could subsist on that diet.
That's all you paid him? Weren't there any profit incentives -- extra potato chips if he did well?
How much money did you allot for trading?
About $1,000 that I had saved up.
Then what happened?
My first trip to a brokerage house was very, very exciting. I got dressed up, putting on my only suit, and we went to the Reynolds Securities office in Baltimore. It was a big, posh office, suggesting a lot of old money. There was mahogany all over the place and a hushed, reverential tone permeated the office. It was all very impressive.
The focal point was a big commodity board at the front of the office, the kind that clicked the old-fashioned way. It was really exciting to hear the click, click, click. They had a gallery from which the traders could watch the board, but it was so far away that we had to use binoculars to see the prices. That was also very exciting, because it was just like watching a horse race.
My first realization that things might become a little scary was when a voice came over the loudspeaker recommending the purchase of soybean meal. I looked at John, expecting to see an expression of confidence and assurance on his face. Instead, he looked at me and asked, "Do you think we should do it?" [he laughs]. It quickly dawned on me that John didn't know anything at all.
I remember soybean meal was trading quietly: 78.30,78.40,78.30, 78.40. We put the order in, and as soon as we got the confirmation back, almost mystically, the prices started clicking down. As soon as it knew that I was in, the market took that as a signal to start descending. I guess I had good instincts even then, because I immediately said to John, 44 We're not doing too well, let's get out!" We lost about $100 on that trade.
The next trade was in corn, and the same thing happened. John asked me whether we should do the trade. I said, "Well all right, let's try corn." The outcome was the same.Did you know anything at all about what you were doing? Had you read anything about commodities or trading?
Did you even know the contract sizes?
No, we didn't.
Did you know how much it was costing you per tick?
Apparently, that was about the only thing you knew.
Right. Our next trade, in wheat, didn't work either. After that, we went back to corn and that trade worked out better-, it took us three days to lose our money. We were measuring success by the number of days it took us to lose...
Table of Contents
Preface to the Paperback Edition ix
My Own Story xxi
Part I Futures and Currencies 1
Taking the Mystery Out of Futures 3
The Interbank Currency Market Defi ned 7
Michael Marcus: Blighting Never Strikes Twice 9
Bruce Kovner: The World Trader 51
Richard Dennis: A Legend Retires 83
Paul Tudor Jones: The Art of Aggressive Trading 115
Gary Bielfeldt: Yes, They Do Trade T-Bonds in Peoria 139
Ed Seykota: Everybody Gets What They Want 151
Larry Hite: Respecting Risk 175
Part II Mostly Stocks 193
Michael Steinhardt: The Concept of Variant Perception 195
William O’Neil: The Art of Stock Selection 221
David Ryan: Stock Investment as a Treasure Hunt 239
Marty Schwartz: Champion Trader 257
Part III A Little Bit of Everything 281
James B. Rogers, Jr.: Buying Value and Selling Hysteria 283
Mark Weinstein: High-Percentage Trader 321
Part IV The View from the Floor 343
Brian Gelber: Broker Turned Trader 345
Tom Baldwin: The Fearless Pit Trader 367
Tony Saliba: "One-Lot" Triumphs 385
Part V The Psychology of Trading 405
Dr. Van K. Tharp: The Psychology of Trading 407
The Trade: A Personal Experience 429
Postscript: Dreams and Trading 435
Final Word 439
What I Believe 22 Years Later 441
Appendix 1: Program Trading and Portfolio Insurance 453
Appendix 2: Options—Understanding the Basics 455
Excerpt: Edward Thorp 473
What People are Saying About This
"One of the most fascinating books ever written about Wall Street."
“Market Wizards is one of the most fascinating books ever written about Wall Street. A few of the “Wizards” are my friends—and Jack Schwager has nailed their modus operandi on the head.” —Martin W. Zweig, Ph.D., Editor The Zweig Forecast
“It’s diffi cult enough to develop a method that works. It then takes experience to believe what your method is telling you. But the toughest task of all is turning analysis into money. If you don’t believe it, try it. These guys have it all: a method, the conviction and the discipline to act decisively time after time, regardless of distractions and pressures. They are heroes of Wall Street, and Jack Schwager’s book brings their characters vividly to life.” —Robert R. Prechter, Jr., Editor of The Elliott Wave Theorist
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