If you have not yet read the Market Wizards Remembered Piece on Michael Marcus please do so now. The following video is never before seen or released information about Jack’s interview with Mr. Marcus and what he most remembers about the experience:

As the Chief Research officer of FundSeeder, Schwager plans to select traders discovered via FundSeeder as interview subjects for his next Market Wizards book, tentatively titled Undiscovered Market Wizards. If you would like an opportunity to be featured in this book or to be selected to manage investor capital, or if would just like to enjoy a great trading analytics platform free of charge, click on the link below to sign up for FundSeeder today.

MICHAEL MARCUS ON FOLLOWING YOUR OWN LIGHT AND READING THE MARKET

The Market Wizards series is a collection of books written by Jack Schwager that captures the philosophies, traits, experiences, and advice of great traders, seeking to draw out lessons that could help all traders from novices to professionals. The following is an excerpt from Jack about Michael Marcus. A new never before seen video recalling this interview will be hosted to FundSeeder later this week.

In Market Wizards, the first book of the series, Schwager interviewed Michael Marcus whose initial forays into trading were met with repeated failures. But Marcus never gave up, and he had an amazing innate talent as a trader. Once he combined this inner skill with experience and risk management, he was astoundingly successful. He took a trading job at Commodities Corporation. They initially funded his account with $30,000, and several years later added another $100,000. In about ten years time, Marcus turned those modest allocations into $80,000,000!—and that was with the firm withdrawing as much as 30% of his profits in many years to pay the company’s burgeoning expenses. The following excerpts from Market Wizards focus on the advice Marcus would give to novice traders and an example of how he reads the market.                                                                                                         

Do you think being a great trader is an innate skill?                 

I think to be in the upper echelon of successful traders requires an innate skill, a gift. It’s just like being a great violinist. But to be a competent trader and make money is a skill you can learn.                                 

Having been through the whole trading experience from failure to extreme success, what basic advice could you give a beginning trader or a losing trader?

The first thing I would say is always bet less than 5 percent of your money on any one idea. That way you can be wrong more than twenty times; it will take you a long time to lose your money. I would emphasize that the 5 percent applies to one idea. If you take a long position in two different related grain markets, that is still one idea.

The next thing I would advise is to always use stops. I mean actually put them in, because that commits you to get out at a certain point.                                                     

Do you always pick a point where you will get out before you get in?   

Yes, I have always done that. You have to.                                                                                                 

When you place an order to get into a position, is it accompanied by an order to get out?                                                     

That’s right. Another thing is that if a position doesn’t feel right as soon as you put it on, don’t be embarrassed to change your mind and get right out.                                                     

So, if you put the trade on and five minutes later it doesn’t feel right, don’t think to yourself, “If I get out this quickly, my broker will think that I’m an idiot.”

Yes, exactly. If you become unsure about a position, and you don’t know what to do, just get out. You can always come back in. When in doubt, get out and get a good night’s sleep. I’ve done that lots of times and the next day everything was clear.

Do you sometimes go back in right after you get out?                                                     

Yes, often the next day. While you are in, you can’t think. When you get out, then you can think clearly again.                                                     

What other advice would you give the novice trader?                                                     

Perhaps the most important rule is to hold onto your winners and cut your losers. Both are equally important. If you don’t stay with your winners, you are not going to be able to pay for the losers. You also have to follow your own light. Because I have so many friends who are talented traders, I often have to remind myself that if I try to trade their way, or on their ideas, I am going to lose. Every trader has strengths and weaknesses. Some are good holders of winners, but may hold their losers a little too long. Others may cut their winners a little short, but are quick to take their losses. As long as you stick to your own style, you get the good and bad in your own approach. When you try to incorporate someone else’s style, you often wind up with the worst of both styles. I’ve done that a lot.

Is it a problem because you don’t have the same type of confi­dence in a trade that isn’t yours?

Exactly. In the final analysis, you need to have the courage to hold the position and take the risk. If it comes down to “I’m in this trade because Bruce is in it,” then you are not going to have the courage to stick with it. So you might as well not be in it in the first place.

Do you still talk to other traders about markets?

Not too much. Over the years, it has mostly cost me money. When I talk to other traders, I try to keep very conscious of the idea that I have to listen to myself. I try to take their information without getting overly influenced by their opinion.

I assume that we are talking about very talented traders, and it still doesn’t make a difference. If it is not your own idea, it messes up your trading?

Right. You need to be aware that the world is very sophisticated and always ask yourself: “How many people are left to act on this particu­lar idea?” You have to consider whether the market has already dis­counted your idea.

How can you possibly evaluate that?

By using the classic momentum-type indicators and observing mar­ket tone. How many days has the market been down or up in a row? What is the reading on the sentiment indexes?

Can you think of any good examples of market tone tipping you off on a trade?

The most classic illustration I can think of is one of the soybean bull markets in the late 1970s. At the time, soybeans were in extreme short­age. One of the things pushing the market up was the weekly gov­ernment report indicating strong export commitments and sales.

I was holding a heavy long position in soybeans and someone from Commodities Corporation called me with the latest export figures. He said, “I have good news and I have bad news.” I said, “OK, what is the good news?” “The good news is that the export commitment figure was fantastic. The bad news is that you don’t have a limit position [the maxi­mum permissible speculative position size].” They were expecting the market to be limit-up for the next three days.

Actually, I wound up being a little depressed that I didn’t have a larger position. The next morning, I entered an order to buy some more con­tracts on the opening, just in case I got lucky and the market traded before locking limit-up. I sat back to watch the fun. The market opened limit-up as expected. Shortly after the opening, I noticed a lot of ticks being recorded, as if the market was trading at the limit-up. Then prices eased off limit-up just as my broker called to report my fills. The market started trading down. I said to myself, “Soybeans were supposed to be limit-up for three days, and they can’t even hold limit-up the first morning.” I immediately called my broker and frantically told him to sell, sell, sell!

Did you get out of your whole position?

Not only that, but I was so excited that I lost count of how much I was selling. I accidentally wound up being short a substantial amount of soybeans, which I bought back 40 to 50 cents lower. That was the only time I made a lot of money on an error.

The Undiscovered Market Wizards Search

Jack Schwager is one of the cofounders of FundSeeder (fundseeder.com) a new online technology company that provides traders with a free graphic and analytics platform, as well as offering traders worldwide the opportunity to get discovered. FundSeeder’s technology allows traders to verify their track records, benefit from performance analytics and risk management tools, access an emerging manager support structure, find potential trader employment opportunities and, if regulated, connect with investors.

As the Chief Research officer of FundSeeder, Schwager plans to select traders discovered via FundSeeder as interview subjects for his next Market Wizards book, tentatively titled Undiscovered Market Wizards. If you would like an opportunity to be featured in this book or to be selected to manage investor capital, or if would just like to enjoy a great trading analytics platform free of charge, click on the link below to sign up for FundSeeder today.

If you have not yet read the Market Wizards Remembered Piece on Ed Thorp please do so now. The following video is never before seen or released information about Jack’s interview with Thorp and what he most remembers about the experience:

As the Chief Research officer of FundSeeder, Schwager plans to select traders discovered via FundSeeder as interview subjects for his next Market Wizards book, tentatively titled Undiscovered Market Wizards. If you would like an opportunity to be featured in this book or to be selected to manage investor capital, or if would just like to enjoy a great trading analytics platform free of charge, click on the link below to sign up for FundSeeder today.

THORP ON OPTIMAL BET SIZE AND THE KELLY CRITERION

The Market Wizards series is a collection of books written by Jack Schwager that captures the philosophies, traits, experiences, and advice of great traders, seeking to draw out lessons that could help all traders from novices to professionals. The following is an excerpt from Jack about Ed Thorp. A new never before seen video recalling this interview will be hosted to FundSeeder later this week.

In Hedge Fund Market Wizards, the fourth book of the series, Schwager interviewed Edward Thorp, a math professor turned hedge fund manager whose track record must certainly stand as one of the best of all time. His original fund, Princeton Newport Partners, achieved an annualized gross return of 19.1 percent (15.1 percent after fees) over a 19-year period. Even more impressive was the extraordinary consistency of return: 227 out of 230 winning months and a worst monthly loss under 1 percent. A second fund, Ridgeline Partners, averaged 21 percent annually over a 10-year period with only a 7 percent annualized volatility.

Before he ever became interested in markets, Edward Thorp’s avocation was devising methods to win at various casino games—an endeavor widely assumed to be impossible. After all, how could anyone possible devise a winning strategy for games in which the player had a negative edge? One might think that a math professor would be the last person to devote time to such a seemingly futile goal. Thorp, however, approached the problem in a completely unconventional manner. For example, in roulette, Thorpe, along with Claude Shannon (known as “the father of information theory”), created a miniature computer that used Newtonian physics to predict the octant of the wheel in which the ball was most likely to land. In blackjack, Thorp’s insight was that by betting more on high-probability hands than on low-probability hands, it was possible to transform a game with a negative edge into a game with a positive edge. His book, Beat the Dealer, was a best seller and changed the way casinos operate.

Thorp’s insight about the importance of bet size has important ramifications for trading as well: varying position size could improve performance. By analogy to blackjack, trading larger for higher-probability trades and smaller, or not at all, for lower-probability trades could even transform a losing strategy into a winning one. Although in trading, probabilities cannot be accurately defined, as they are in blackjack, traders can often still differentiate between higher and lower probability trades. For example, if a trader does better on high-confidence trades, then the degree of confidence can serve as a proxy for the probability of winning. The implication then is that instead of risking an equal amount on each trade, more risk should be allocated to higher-confidence trades and less to lower-confidence trades.

In the excerpt from Hedge Fund Market Wizards below, Schwager and Thorp discuss optimal bet size and the Kelly Criterion.

For purposes of background, the Kelly Criterion is the fraction of capital to wager to maximize compounded growth of capital. Even when there is an edge, beyond some threshold, larger bets will result in lower compounded return because of the adverse impact of volatility. The Kelly Criterion defines this threshold. The Kelly Criterion indicates that the fraction that should be wagered to maximize compounded return over the long run equals:

F = P_W – (P_L/W)

where,

F = Kelly Criterion fraction of capital to bet

W = Dollars won per dollar wagered (i.e., win size divided by loss size)

P_W = Probability of winning

P_L = Probability of losing

When win size and loss size are equal, the formula reduces to:

F = P_W – P_L

For example, if a trader loses $1,000 on losing trades and gains $1,000 on winning trades, and 60 percent of all trades are winning trades, the Kelly Criterion indicates an optimal trade size equal to 20 percent (0.60 – 0.40 = 0.20).

As another example, if a trader wins $2,000 on winning trades and loses $1,000 on losing trades, and the probability of winning and losing are both equal to 50 percent, the Kelly Criterion indicates an optimal trade size equal to 25 percent of capital: 0.50 – (0.50/2) = 0.25).

Proportional overbetting is more harmful than underbetting. For example, betting half the Kelly Criterion will reduce compounded return by 25 percent, while betting double the Kelly Criterion will eliminate 100 percent of the gain. Betting more than double the Kelly Criterion will result in an expected negative compounded return, regardless of the edge on any individual bet.

The Kelly Criterion implicitly assumes that there is no minimum bet size. This assumption prevents the possibility of total loss. If there is a minimum trade size, as is the case in most practical investment and trading situations, then ruin is possible if the amount falls below the minimum possible bet size.

How important was determining the optimal bet size in your trading success? How and why did you decide to use the Kelly Criterion as the method for determining bet size?

I learned about the Kelly Criterion from Claude Shannon back at MIT. Shannon had worked with Kelly at Bell Labs. I guess Shannon was the leading light at Bell Labs and Kelly was perhaps the second most significant scientist there. When Kelly wrote his paper in 1956, Shannon refereed it. When I told Shannon about my blackjack betting system, he told me to look at Kelly’s paper in deciding how much to bet because in favorable situations, you will want to bet more than in unfavorable situations. I read the Kelly paper, and it made a lot of sense to me.

The Kelly Criterion of what fraction of your capital to bet seemed like the best strategy over the long run. When I say long run, a week playing blackjack in Vegas might not sound very long. But long run refers to the number of bets that are placed, and I would be placing thousands of bets in a week. I would get to the long run pretty fast in a casino. In the stock market, it’s not the same thing. A year of placing trades in the stock market will not be a long run. But there are situations in the stock market where you get to the long run pretty fast—for example, statistical arbitrage. In statistical arbitrage, you would place tens or hundreds of thousands of trades in a year. The Kelly Criterion is the bet size that will produce the greatest expected growth rate in the long term. If you can calculate the probability of winning on each bet or trade and the ratio of the average win to average loss, then the Kelly Criterion will give you the optimal fraction to bet so that your long-term growth rate is maximized.

The Kelly Criterion will give you a long-term growth trend. The percentage deviations around that trend will decline as the number of bets increases. It’s like the law of large numbers. For example, if you flip a coin 10 times, the deviation from the expected value of five will by definition be small—it can’t be more than five—but in percentage terms, the deviations can be huge. If you flip a coin 1 million times, the deviation in absolute terms will be much larger, but in percentage terms, it will be very small. The same thing happens with the Kelly Criterion: in percentage terms, the results tend to converge on the long-term growth trend. If you use any other criterion to determine bet size, the long-term growth rate will be smaller than for the Kelly Criterion. For betting in casinos, I choose the Kelly Criterion because I wanted the highest long-term growth rate. There are, however, safer paths that have smaller drawdowns and a lower probability of ruin.

I understand that if you know your edge and it is precisely defined—which of course is not true in the markets—then the Kelly Criterion is the amount you should bet to maximize the compounded return and that betting either a smaller or larger fraction will give you a smaller return. But what I don’t understand is that the Kelly Criterion seems to give all the weight to the return side. The only way the Kelly Criterion reflects volatility is through its impact on return. Besides the fact that people are uncomfortable with high volatility, there is the very practical consideration that your down-and-out point is not zero as the Kelly Criterion implicitly assumes, but rather your maximum tolerable drawdown. It seems to me that the criterion should be what maximizes growth subject to the constraint of minimizing the risk of reaching your cutout point.

Suppose you have a bankroll of $1 million and your maximum tolerable drawdown is $200,000. Then from the Kelly Criterion perspective, you don’t have $1 million in capital, you have $200,000.

So, in your example, you still apply the Kelly Criterion, but you apply it to $200,000. When you played blackjack, did you apply the Kelly Criterion straightforward?

Yes, assuming I was sure the dealer was not cheating, because my objective was to make the most money, in the least time.

What about when you managed the fund?

When I managed the fund, I wasn’t forced to make a Kelly Criterion decision. If you use hedges to theoretically neutralize your risk, then the Kelly Criterion might well imply using leverage. In Princeton Newport Partners where all positions were hedged, I found that I couldn’t leverage up my portfolio as much as the Kelly Criterion said I should.

Because?

Because the brokerage firms wouldn’t give me that much borrowing power.

Does that imply that you would have traded the Kelly Criterion if it was feasible in a practical sense?

I probably wouldn’t have because if you bet half the Kelly amount, you get about three-quarters of the return with half the volatility. So it is much more comfortable to trade. I believe that betting half Kelly is psychologically much better.

I think there is a more core reason why betting less than the Kelly amount would always be the rational decision in the case of trading. There is an important distinction between trading and playing a game such as blackjack. In blackjack, theoretically, you can know the precise probabilities, but in trading, the probability of winning is always an estimate—and often a very rough one. Moreover, the amount of extra gain forgone by betting less than the Kelly Criterion is much smaller than the amount that would be lost by betting more than the Kelly Criterion by the same percentage. Given the uncertainty of the probability of winning in trading combined with the inherent asymmetry in returns around the Kelly fraction, it would seem that the rational choice is to always bet less than the Kelly Criterion, even if you can handle the volatility. In addition, there is the argument that for virtually any investor, the marginal utility of an extra gain is smaller than the marginal utility of an equal percentage loss.

That’s true. Say I am playing casino blackjack, and I know what the odds are. Do I bet full Kelly? Probably not quite. Why? Because sometimes the dealer will cheat me. So the probabilities are a little different from what I calculated because there may be something else going on in the game that is outside my calculations. Now go to Wall Street. We are not able to calculate exact probabilities in the first place. In addition, there are things that are going on that are not part of one’s knowledge at the time that affect the probabilities. So you need to scale back to a certain extent because overbetting is really punishing—you get both a lower growth rate and much higher variability. Therefore, something like half Kelly is probably a prudent starting point. Then you might increase from there if you are more certain about the probabilities and decrease if you are less sure about the probabilities.

The Undiscovered Market Wizards Search

Jack Schwager is one of the cofounders of FundSeeder (fundseeder.com) a new online technology company that provides traders with a free graphic and analytics platform, as well as offering traders worldwide the opportunity to get discovered. FundSeeder’s technology allows traders to verify their track records, benefit from performance analytics and risk management tools, access an emerging manager support structure, find potential trader employment opportunities and, if regulated, connect with investors.

As the Chief Research officer of FundSeeder, Schwager plans to select traders discovered via FundSeeder as interview subjects for his next Market Wizards book, tentatively titled Undiscovered Market Wizards. If you would like an opportunity to be featured in this book or to be selected to manage investor capital, or if would just like to enjoy a great trading analytics platform free of charge, click on the link below to sign up for FundSeeder today.

If you have not yet read the Market Wizards Remembered Piece on Paul Tudor Jones please do so now. The following video is never before seen or released information about Jack’s interview with Jones and what he most remembers about the experience:

As the Chief Research officer of FundSeeder, Schwager plans to select traders discovered via FundSeeder as interview subjects for his next Market Wizards book, tentatively titled Undiscovered Market Wizards. If you would like an opportunity to be featured in this book or to be selected to manage investor capital, or if would just like to enjoy a great trading analytics platform free of charge, click on the link below to sign up for FundSeeder today.

WHAT PAUL TUDOR JONES LEARNED FROM HIS WORST TRADE EVER

The Market Wizards series is a collection of books written by Jack Schwager that captures the philosophies, traits, experiences, and advice of great traders, seeking to draw out lessons that could help all traders from novices to professionals. The following is an excerpt from Jack about Paul Tudor Jones. A new never before seen video recalling this interview will be hosted to FundSeeder later this week.

In Market Wizards, the first book of the series, Schwager interviewed Paul Tudor Jones, who starting out his career as a broker. After successfully trading his own account, Jones launched his own fund in 1984. By the time he was interviewed for Market Wizards four years later, his fund had realized a more than 17-fold return since its inception. Jones continued on to become one of the most successful hedge fund managers of all time. The following excerpt from Market Wizards focuses on Paul Tudor Jones’s worst trade and what he learned from that experience.

You have done tens of thousands of trades. Is there any single trade that stands out?

Yes, the 1979 cotton market. One learns the most from mistakes, not successes. I was a broker back then. We had lots of speculative accounts and I was long about 400 contracts of July cotton. The mar­ket had been trading in a range between 82 and 86 cents, and I was buying it every time it came down to the low end of that range.

One day, the market broke to new lows, took out the stops, and immediately rebounded about 30 or 40 points. I thought the reason the market had been acting so poorly was because of the price vulnerabil­ity implied by the proximity of those well-known stops. Now that the stops had been touched off, I thought the market was ready to rally.

I was standing outside the ring at the time. In an act of bravado, I told my floor broker to bid 82.90 for 100 July, which at the time was a very big order. He bid 90 for 100, and I remember the Refco broker came running across the pit screaming, “Sold!” Refco owned most of the certificated stock at that time [the type of cotton avail­able for delivery against the contract]. In an instant I realized that they intended to deliver against the July contract, which then was trading at about a 4-cent premium to the October contract. It also dawned on me that the whole congestion pattern that had formed between 82 and 86 cents was going to be a market measurement for the next move down [the break from 82 cents was going to equal the width of the prior 4-cent trading range].

So you knew you were wrong immediately?

I saw immediately that the market was going straight down to 78 cents, and that it was my blood that was going to carry it there. I had come in long 400 contracts, entered another 100 as a day trade, and a final 100 on that macho-type bid that I should never have made.

So you realized instantly that you wanted to be out.

No, I realized instantly that I wanted to be short.

How fast did you react?

Almost immediately. When the Refco broker shouted, “Sold,” every­one in the ring turned around and looked at me, because they knew what I was trying to do. The guy standing next to me said, “If you want to go to the bathroom, do it right here.” He said I looked three shades of white. I remember turning around, walking out, getting a drink of water, and then telling my broker to sell as much as he could. The market was limit-down in sixty seconds, and I was only able to sell 220 contracts.

When did you get out of the rest of your position?

The next morning the market opened 100 points lower and I started selling from the opening bell. I sold only about 150 contracts before the market locked limit-down again. By the time it was all over, I ended up selling some contracts as much as 4 cents below the point I first knew the position was no good.

Even though you reacted fairly quickly, you still took a big hit. In retrospect, what should you have done?

First of all, never play macho man with the market. Second, never overtrade. My major problem was not the number of points I lost on the trade, but that I was trading far too many contracts relative to the equity in the accounts that I handled. My accounts lost something like 60 to 70 percent of their equity in that single trade.

Did that particular trade change your whole trading style in terms of risk?

Absolutely. I was totally demoralized. I said, “I am not cut out for this business; I don’t think I can hack it much longer.” I was so depressed that I nearly quit.

How many years had you been in the business at that time?

Only about three and a half years.

Had you been successful up to that point?

Relatively. Most of my clients had made money, and I was an impor­tant producer for my company.

How about someone who had given you $10,000 at the begin­ning of the three-year period?

They were probably up about threefold.

So everyone who was with you for a long time was still ahead of the game?

Yes, but I had to suffer some intense drawdowns during the interim. That cotton trade was almost the deal-breaker for me. It was at that point that I said, “Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?”

That was when I first decided I had to learn discipline and money management. It was a cathartic experience for me, in the sense that I went to the edge, questioned my very ability as a trader, and decided that I was not going to quit. I was determined to come back and fight. I decided that I was going to become very disciplined and businesslike about my trading.

Did your trading style change radically from that point on?

Yes. Now I spend my day trying to make myself as happy and relaxed as I can be. If I have positions going against me, I get right out; if they are going for me, I keep them.

I guess you not only started trading smaller, but also quicker?

Quicker and more defensive. I am always thinking about losing money as opposed to making money. Back then, in that cotton trade, I had a vision of July going to 89 cents and I thought about all the money I was going to make on 400 contracts. I didn’t think about what I could lose.

Do you always know where you are getting out before you put a trade on?

I have a mental stop. If it hits that number, I am out no matter what.

How much do you risk on any single trade?

I don’t break it down trade by trade. All the trades I have on are inter­related. I look at it in terms of what my equity is each morning. My goal is to finish each day with more than I started. Tomorrow morn­ing I will not walk in and say, “I am short the S&P from 264 and it closed at 257 yesterday; therefore, I can stand a rally.” I always think of it in terms of being short from the previous night’s close.

Risk control is the most important thing in trading. For example, right now I am down about 6 1/2 percent for the month. I have a 3 1/2   per­cent stop on my equity for the rest of the month. I want to make sure that I never have a double-digit loss in any month.

One aspect of your trading style is a contrarian attempt to buy and sell turning points. Let’s say you are looking for a top and go short with a close stop when the market reaches a new high. You then get stopped out. On a single trade idea, how many times will you try to pick a turning point before you give up?

Until I change my mind, fundamentally. Otherwise, I will keep cut­ting my position size down as I have losing trades. When I am trading poorly, I keep reducing my position size. That way, I will be trading my smallest position size when my trading is worst.

What are the trading rules you live by?

Don’t ever average losers. Decrease your trading volume when you are trading poorly; increase your volume when you are trading well. Never trade in situations where you don’t have control. For example, I don’t risk significant amounts of money in front of key reports, since that is gambling, not trading.

If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in. There is nothing better than a fresh start.

Don’t be too concerned about where you got into a position. The only relevant question is whether you are bullish or bearish on the position that day. Always think of your entry point as last night’s close. I can always tell a rookie trader because he will ask me, “Are you short or long?” Whether I am long or short should have no bearing on his market opinion. Next he will ask (assuming I have told him I am long), “Where are you long from?” Who cares where I am long from. That has no relevance to whether the market environment is bullish or bearish right now, or to the risk/reward balance of a long position at that moment.

The most important rule of trading is to play great defense, not great offense. Every day I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum possible drawdown. Hopefully, I spend the rest of the day enjoying positions that are going in my direction. If they are going against me, then I have a game plan for getting out.

Don’t be a hero. Don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.

Jesse Livermore, one of the greatest speculators of all time, report­edly said that, in the long run, you can’t ever win trading markets. That was a devastating quote for someone like me, just getting into the business. The idea that you can’t beat the markets is a frightening prospect. That is why my guiding philosophy is playing great defense. If you make a good trade, don’t think it is because you have some uncanny foresight. Always maintain your sense of confidence, but keep it in check.

But you have been very successful for years. Aren’t you more confident now than you were before?

I am more scared now than I was at any point since I began trading, because I recognize how ephemeral success can be in this business. I know that to be successful, I have to be frightened. My biggest hits have always come after I have had a great period and I started to think that I knew something.

The Undiscovered Market Wizards Search

Jack Schwager is one of the cofounders of FundSeeder (fundseeder.com) a new online technology company that provides traders with a free graphic and analytics platform, as well as offering traders worldwide the opportunity to get discovered. FundSeeder’s technology allows traders to verify their track records, benefit from performance analytics and risk management tools, access an emerging manager support structure, find potential trader employment opportunities and, if regulated, connect with investors.

As the Chief Research officer of FundSeeder, Schwager plans to select traders discovered via FundSeeder as interview subjects for his next Market Wizards book, tentatively titled Undiscovered Market Wizards. If you would like an opportunity to be featured in this book or to be selected to manage investor capital, or if would just like to enjoy a great trading analytics platform free of charge, click on the link below to sign up for FundSeeder today.