Trading Tips

Trading Education is Not Just About Trading Systems

The following comment, sent to me by email, and referring to the Market Wizards and The New Market Wizards books, strikes at the very heart of why so many folks end up crashing and burning when it comes to trading, or take longer than necessary to reach a reasonable level of success.

They are not worth reading. None of the wizards share any of their strategies. A complete waste of time in my opinion.

First of all, the statement that none of the wizards share their strategies is technically incorrect. William O’Neil from the first book is quite specific about his methods (you can also find it in his book How to Make Money in Stocks). I will admit that most do not specifically share their methods, but some of those can be found in other sources. For example, the Turtle system employed by Richard Dennis (first book) can be found in Way of the Turtle. Furthermore, many of them trade in a discretionary fashion not readily quantified.

That is so not the point, though.

I see the attitude of this emailer in trading book/product reviews all too often. For some reason these individuals think a book which doesn’t lay out a specific trading system or methodology is useless. This is a foolish, narrow-minded viewpoint. In fact, I’ll turn that thought process around.

Trading systems outlined in books are worthless (at best – very costly at worst) to the vast majority of traders.

Why do I say that? For the very simple reason that most trading systems won’t work for most people. I’m not saying the systems are not, or cannot be, profitable. They just have specific time frames or markets or risk characteristics which are suitable to only a relatively small number of traders. What works very well for one person won’t work nearly as well for most other people because we all come at the markets differently.

The value to be found in books and other educational resources is not in specific trading systems and like. It’s in how the resource guides us in the development of our own unique way of taking on the markets. The reason I always recommend the Market Wizards books is that the allow the reader to benefit from the experience of a group of highly successful traders, ones who had to overcome many of the hurdles we all face on our development path. In their interviews they share how they did that.

I know my own development as a trader (and eventual professional analyst) was seriously accelerated by reading the Market Wizards books. I was able to understand from their experiences the pitfalls I should watch out for and where there might be opportunities for me to pursue things. In that way they gave me much more than I would have ever gotten from some trading system.

(P.S.: If you haven’t already had the opportunity to see/hear Market Wizards author Jack Schwager speak about what he took away from those he interviewed for the books, then I suggest you check out Market Wizard Insights, available at no cost here.)

By John

Author of The Essentials of Trading

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