The Traders Journal

Mr. Market Wizard: Jack Schwager Speaks Part I

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ImagesA quick survey of the Amazon website lists over a dozen books written by Jack Schwager, but that is not what impresses me the most.  What I find worthy for some sort of listing in the Guiness Book of World Records is that in writing these volumes, he has gained access to the very secretive circle of world-class traders and gotten them to open up to him.  Jack Schwager is an interviewer extraordinaire and a trader himself.  As such, he’s managed to get into the minds of the most exceptionally profitable investors in the world, and he’s asked the questions we professional traders want asked.  Marvelous stuff. 

I was fortunate to hear Jack speak recently to a group of insiders at the International Federation of Technical Analysts in San Francisco.  It was a fascinating ride as he shared his knowledge of the jungle and described the proverbial “Swiss Army knife” that is successful investing.


 

  1. At the very top tier, the investors he’s interviewed don’t want to manage clients’ money and deal with client predilections, dramas and desires.  They have clients only until they can afford not to.
  2. The best traders are focused on varying bet sizes based on their calculations and the individual equities’ probability of success.  They bet more on positions that have a strong wind at their backs.
  3. If there is bad news or adverse results with respect to their equity and if the market shakes it off and barely moves down, these managers will add to their positions because they know that the market is telling them something valuable.
  4. The best managers manage to control their “tinkering tendencies”.  In Washington, DC, if it’s not broken, the government fixes it until it is.  On the other hand, the best traders do more of what works and less of what doesn’t work.  They stick to a winning methodology.  Common sense really.
  5. In the long run, it’s not the genius of investment ideas that produce consistent profits.  Trade implementation and execution is more important and will usually trump big ideas.
  6. All your trades fall into one of 4 baskets.  Keep track and make the necessary adjustments.  (a) Winning trades where you properly followed your disciplines – the best choice.  (b) Winning trades where you did not follow your disciplines.   (c) Losing trades where you followed your disciplines – okay.  (d) Losing trades where you did not follow your disciplines.
  7. Most individual investors place stops or sell positions based on how much pain they can endure.  Professional money managers place stops based on proof, not pain.  Where should the market not go?  If it does, it’s telling them they are wrong.  Since they have to stop being wrong, they sell.

Next week, I’ll present the second half of Jack Schwager’s talk.

Trade well; trade with discipline!
-- Gatis Roze

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Gatis Roze
About the authors: , CMT, holds an MBA from the Stanford Graduate School of Business and is a past president of the Technical Securities Analysts Association (TSAA). He is also the co-author of Tensile Trading: The 10 Essential Stages of Stock Market Mastery (Wiley, 2016). A full-time investor for over 25 years, Gatis has taught sold-out investment courses throughout the Pacific Northwest and beyond since 2000. Learn More

Grayson Roze
is the author of Trading for Dummies (Wiley, 2017) and Tensile Trading: The 10 Essential Stages of Stock Market Mastery (Wiley, 2016). He has worked in the financial services industry for StockCharts.com since 2012, and now serves as the Business Manager for the company. He holds a Bachelor's degree from Swarthmore College. Learn More
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