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The Basics Trader Resources Trading Tips

More than just basic free trading advice

In the process of preparing for the review of Hedge Fund Market Wizards I posted yesterday I went back and read some of the reviews of prior Market Wizards books. I have long been an advocate of the series, and remain so with the addition of the new book, it’s worth seeing what those who don’t agree have to say. Their arguments against one or more of the books help me produce a better review.

Now folks are going to have their own opinions. I’ve got no problem when people disagree with me. I did, however, see a couple of repeated version of the following comment that I have a problem with:

I dont understand what really gets those books so many positive reviews. Seems people dont surf internet to get some basic free trading rules like “Let your winners run”, “Cut your losers”, “Dont add to losing positions” etc etc.

Its all virtually the same FREE information spoken by different people!

That one came from a 2010 review of [easyazon-link asin=”1592803377″]The New Market Wizards[/easyazon-link]. I saw similar comments from other reviewers of the different books, so it’s not just one person’s view.

Has it never occurred to these folks that the Market Wizards books are a major (perhaps the major) source for those rules? Obviously not.

Yes, there is a great deal in these books which can be called common knowledge at this point. It wasn’t so common back when the books first started coming out. Believe me. I was a new developing trader in those days. This was eye-opening stuff.

It’s a question of context, though. Reading that you should cut your losses on some website, in a forum, on in a book about trading is one thing. Getting the same advice from someone who can tell you why and provide you with vivid examples of what happens when you don’t from their own experiences is a whole different thing.

But the Wizards books are about more than learning rules. They can also be a great way for someone trying to find their niche in the markets to get a broad survey of different ways successful traders approach and think about the markets, potentially giving the reader something they can latch on to for their own trading.

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Trading Book Reviews

Book Review: Hedge Fund Market Wizards

[easyazon-link asin=”1118273044″][/easyazon-link]It’s been a while since Jack Schwager has treated us to a collection of the insights and experiences of a collection of successful market participants, but he’s back with [easyazon-link asin=”1118273044″]Hedge Fund Market Wizards[/easyazon-link]. This is the fourth installment in the series which started with [easyazon-link asin=”1118273052″]Market Wizards[/easyazon-link] in 1989, added [easyazon-link asin=”1592803377″]The New Market Wizards[/easyazon-link] a couple years later, and got market-specific with [easyazon-link asin=”1592803369″]Stock Market Wizards[/easyazon-link] as the third of the sequence. I will admit that I wasn’t blown away by the latter book, but have long rated the first two very highly. I actually interviewed Schwager back in 1992 in his office at Prudential Securities (if I’m remembering correctly). His advice to me at the time when I asked was to learn computer programming to facilitate system development and testing, perhaps reflecting his own thinking toward taking a more systematic approach to the markets at that time.

Before I get into my thoughts, I think sharing the author’s own words will go a long way toward establishing expectations for the book as I’ve found that those few folks who have panned the series have only really done so because they went into reading the books with a mistaken view of what they would get.

“Readers who are looking for some secret formula that will provide them with an easy way to beat the markets are looking in the wrong place. Readers who are seeking to improve their trading abilities, however, should find much that is useful in the following interviews.” (from the Preface)

And of course interviews is what the book is all about. There are 15 in this latest variation on the Market Wizards series, each with its own introduction and concluding summary of key takeaways. Again, we have a diverse collection of money managers represented. They are grouped in to “macro”, “multistrategy”, and “equity” categories. I wouldn’t call this as broad a set of discreet categorizations as we saw in the earlier books, but this probably reflects the way trading and money management has evolved in the 20+ years since the first book came out.

I think those who have read one or more of the prior books will find some subtle differences in this new edition. It is clear Schwager is more confident in both his interviewing and his own views on trading and markets. There is more editorializing in this book than I remember from the others. At the same time, the author isn’t shy at all about drilling down on subjects and pressing interviewees to get the most out of them. This adds to the quality of the end product.

I was actually somewhat surprised how into the book I got personally. As an experienced traders, I found a kind of affirmation from some of the interviews (Colm O’Shea especially reflected a great deal of my own thinking as it has developed over the years). There were also a few “I never really thought about it like that” moments to give me new things to ponder, which is a plus.

I think having a significant recent (financial crisis) event central to the interviews helps. It also creates the same kind of contextual linkage the Crash of 1987 had for the interviews in the first book. This common reference point for readers makes it easier to be engaged by the text. It also helps developing readers from an application perspective in terms of allowing readers to have “Oh, yeah. I see what he was doing there” type of realizations.

There are a couple of interviewees in this book who present a challenge to individual investors in that they operate in markets where no individual really can take part (there is plenty of good footnoting to support explanations and definitions of subjects discussed). Most of them, though, operate in ways largely applicable by individuals, and even those who don’t still offer insights into how they are thinking about the strategies they are employing and the way they are positioning themselves in the market.

And really that’s really the crux of what’s on offer in [easyazon-link asin=”1118273044″]Hedge Fund Market Wizards[/easyazon-link].

It’s about hearing how successful traders think about risk, strategy, research, and everything else that goes into their efforts – getting inside their heads. There are a couple of more systematic traders in the group who don’t share much in the way of specifics, but the rest (who I would largely describe as being discretionary types) seem to have no problem at all in talking pretty specifically about the kind of technical and/or fundamental cues they look for to find good trades. If you’re after “I buy when the 15-day average crosses the 30-day” type of rules, you’re not going to find any. Most of the gentlemen interviewed (it’s all men in this one), though, are very open about the way they look for trades, manage positions, etc. For this reason, I believe there is a lot of value to be had here for new and developing traders.

Schwager ends the book with his own takeaways from all the interviews he’s done through these books. Those 40 observations alone are worth getting a copy of [easyazon-link asin=”1118273044″]Hedge Fund Market Wizards[/easyazon-link], especially knowing from whence they came. There’s also a very good epilogue written by his son talking about his own introduction to the Market Wizards concepts and their presentation which is well worth reading.

The bottom line is I think this is a good read no matter where you are on the spectrum of market experience.

Make sure to check out all my trading book reviews.

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Trader Resources

If You Haven’t Already…

I strongly advise you to check out the 90-minute seminar John Murphy did entitled Applying Technical Methods in Today’s Trading and the Market Wizards Insights seminar videos available here. They are only available for a limited time, and I’m pretty sure that time is running short, so make sure to give them a look right away (no cost).

John Murphy is author of Technical Analysis of the Financial Markets, widely considered the bible of technical analysis. He was highly respected during his years working on television in the early days of CNBC, especially being the main pioneer of inter-market analysis, and continues that work today as the Chief Technical Analyst for StockCharts.com. I personally consider him one of the best in the business and remember eagerly awaiting his segments when I was a young trader and analyst.

The market wizards video features Jack Schwager, author of two books I always recommend to traders: Market Wizards and The New Market Wizards. Both offer a lot of great information and advice, and are extremely motivational as well. Jack periodically does seminars on the subject of the lessons to be learned from the Wizards. I’ve had the opportunity to see them on a couple of occassions. Obviously, there’s a lot of overlapping content from the books, but it’s more than that. Jack is a very good speaker and in his seminars he presents in a really accessible way the lessons and themes he’s learned from the traders and money managers he sat down with.

I can’t be more positive in my recommendation that you check out these two seminar recordings if you haven’t already done so. You will learn something.

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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.)

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Trader Resources

Learning from the Market Wizards

Two books I always recommend to traders are Market Wizards and The New Market Wizards. Both offer a lot of great information and advice, and are motivational to boot. I actually had the opportunity to meet and interview the books’ author, Jack Schwager, back in 1992 when he was working for Prudential Securities (if I remember correctly) on the research side. He’s an interesting individual and has a great deal to offer traders as a result of his interaction with all those he profiled in his book.

Jack periodically does seminars on the subject of the lessons to be learned from the Wizards. I’ve had the opportunity to see them on a couple of occasions. Obviously, there’s a lot of overlapping content from the books, but it’s more than that. Jack is a very good speaker and in his seminars he presents in a really accessible way the lessons and themes he’s learned from the traders and money managers he sat down with.

If you haven’t already had the opportunity to see/hear Jack speak, then I suggest you check out Market Wizard Insights, available at no cost here.

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Best Of Trader Resources

The Trader’s Wish List

Welcome to my Trader’s Wish List of good books, audio and video content, and other resources. The list comprises a dozen posts, each with somewhat different themes.

Here’s how they break down:

Entry #1: Books by Brett Steenbarger

Entry #2: The Market Wizards Collection of Books, Audio, and Video

Entry #3: Liar’s Poker – a view from the inside

Entry #4: Paul Erdman Books – great financial fiction

Entry #5: The Darker Side of the Markets – stories of the bad boys

Entry #6: Trading and Markets Movies – drama to comedy

Entry #7: Market Profile

Entry #8: Trading Fiction – great stories around trading

Entry #9: George Soros and Jim Rogers – two of trading’s biggest icons

Entry #10: Risk and Money Management

Entry #11: Metastock – fantastic charting and system development software

Entry #12: Everything Else!

By all means, feel free to add your comments, thoughts, suggestions, and whatnot. What do you like, don’t like, recommended, advise against, enjoy, hate?