Market Wizards: Interviews with Top Traders
by Jack D. Schwager
Market Wizards, by Jack D. Schwager, is a series of candid interviews with some of the world's most successful traders. It's a classic in the investing world, and many of the market wizards in the book are well-known figures in the trading world. What makes "Market Wizards" so special is that it shows how vastly different trading strategies can work successfully. It's also written in a unique interview style that takes the author's interpretation out and let's the traders express what they need to in order to convey their trading styles directly from their point of view.
Market Wizards: Interview with Top Traders is the first book in the wildly successful Market Wizards series.
Here's a clip from the book:
- A trader who, after wiping out several times early in his career, turned a $30,000 account into $80 million
- A fund manager who achieved what many thought impossible - five consecutive years of triple-digit percentage returns
- A trader from small-town America who started out on a shoestring and has become one of the world's largest bond traders
- A former securities analyst who, during the past seven years, has realized an average monthly return of 25 percent (over 1,400 percent annualized), primarily trading stock index futures
- An electrical engineering graduate from MIT whose largely computerized approach to trading has earned his accounts an astounding 250,000 percent return over a sixteen-year period
"What sets these traders apart? Most people think that winning in the markets has something to do with finding the secret formula. The truth is that any common denominator among the traders I interviewed had more to do with attitude than approach. Some of the traders use fundamental analysis exclusively, others employ only technical analysis, and still others combine the two. Some traders operate on a time horizon measured in hours or even minutes, while others typically implement positions that they intend to hold for months or even years. Although the trading methodologies varied widely, the forthcoming interviews reveal certain important commonalities in trading attitudes and principles."~ Jack Schwager, Market Wizards
Short Summary of Each Market Wizard:
Paul Tudor Jones
Paul Tudor Jones is renowned for his macroeconomic analysis and risk management strategies. He founded Tudor Investment Corp in 1980 and gained fame for predicting the 1987 stock market crash. Jones emphasizes limiting losses to 1% per trade and maintaining a minimum 5:1 risk-reward ratio, often using the 200-day moving average for trade decisions. His approach combines technical and macroeconomic analysis, focusing on indicators like GDP and interest rates to spot trends before others do.
Michael Marcus
Michael Marcus turned $30,000 into over $80 million by focusing on long-term trends and combining technical and fundamental analysis. He learned from his mistakes and emphasized the importance of mentors, such as Ed Seykota, in guiding his trading philosophy. Marcus believes in holding profitable trades over time rather than chasing short-term gains and uses strict stop-losses to manage risk, especially in futures trading. His approach involves blending technical indicators with market fundamentals to make informed trades.
Bruce Kovner
Bruce Kovner built his wealth by treating trading like a business, combining trend following with fundamental analysis. He emphasizes the importance of a fundamental reason behind every trade and uses automated trading methods primarily in Forex and futures. Kovner's success is attributed to his disciplined approach, where he sticks to his trading plan without letting emotions interfere, and his ability to manage risk by under-trading and carefully sizing positions.
Marty Schwartz
Marty Schwartz, known as the "Comeback King," won the U.S. Trading Championship multiple times by focusing on trend momentum and technical analysis. He advocates for strategic placement of stop losses to avoid market traps and emphasizes the importance of admitting when wrong and cutting losses quickly. Schwartz's approach involves harnessing the power of ongoing trends rather than predicting shifts, using his "Magic T" theory to anticipate trend durations.
Richard Dennis
Richard Dennis is famous for the "Turtle Traders" experiment, where he taught ordinary people his systematic trading rules. He turned $1,600 into $200 million by using trend-following strategies with strict entry and exit rules, often buying breakouts or selling breakdowns. Dennis proved that discipline and simple rules can lead to significant success, demonstrating that anyone can learn to trade effectively by following a well-defined system.
Ed Seykota
Ed Seykota is a pioneer of systematic trading, turning $5,000 into $15 million by using simple, rules-based systems to follow trends. He emphasizes cutting losses quickly, riding winners, and keeping bets small to manage risk. Seykota's approach is rooted in simplicity, using technical indicators like moving averages to identify trends, and he prioritizes emotional discipline to avoid impulsive trades.
Tom Baldwin
Tom Baldwin is known for his short-term trading strategies in the bond market, focusing on market timing, volume analysis, and risk management. He developed innovative strategies that emphasize discipline and psychological resilience, often using technical charts and indicators to identify trends and potential reversals. Baldwin's success is attributed to his ability to stay focused, avoid distractions, and never hold trades overnight, ensuring he remains adaptable to changing market conditions.
Jim Rogers
Jim Rogers co-founded the Quantum Fund with George Soros and is renowned for his global macro investing strategies. He focuses on commodities and emerging markets, often taking contrarian positions against prevailing market sentiments. Rogers emphasizes a long-term perspective, holding investments for years to allow them to mature, and uses robust risk management techniques like diversification and hedging to protect against market volatility.
Mark Weinstein
Mark Weinstein is known for his high win rate by waiting patiently for "sure thing" setups using technical analysis. He combines chart patterns, Fibonacci retracements, and Elliott Wave analysis to confirm trends before entering trades. Weinstein emphasizes the importance of humility and flexibility, advising traders to avoid arrogance and be willing to change strategies as market conditions evolve.
Linda Raschke
Linda Raschke is a successful trader and hedge fund manager known for her technical strategies. She combines chart patterns, momentum indicators, and volatility analysis to adapt to changing market conditions. Raschke's "Holy Grail" strategy involves identifying strong trends and waiting for pullbacks before entering trades, emphasizing the importance of discipline and a well-defined trading plan.
Michel Steinhardt
Michel Steinhardt is another trader featured in "Market Wizards." He is known for his aggressive trading style and ability to adapt to changing market conditions. Steinhardt's approach involves a combination of technical and fundamental analysis, with a focus on making bold moves when market conditions align with his strategies. His trading philosophy emphasizes the importance of being proactive and responsive to market shifts.
"There is no holy grail to trading success. The methodologies employed by the "market wizards" cover the entire spectrum from purely technical to purely fundamental and everything in between. The length of time they typically hold a trade ranges from minutes to years. Although the styles of the traders are very different, many common denominators were evident."~ Jack Schwager, Market Wizards
My Thoughts on Market Wizards
There's so much to learn from each interview, and this is a book that I'm often coming back to time and again to read certain chapters. Whether you're an experienced investor or just starting out, Market Wizards provides timeless advice. I recommend this to any investors or traders, and it's on my list of All-Time Best Investing Books.
If you've made it this far, I really recommend checking out my book summary and review of The Outsiders. This is a book similar to Market Wizards in that it's the top CEO's of their industries. This book dives into 8 different CEO's and their strategies for success.
