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

The Undiscovered Market Wizards Search

Jack Schwager is one of the co-founders 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.

TRADING LESSONS FROM MARTY SCHWARTZ

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 Marty Schwartz. 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 Marty Schwartz, a short-term technical trader who had run a $40,000 account into over $20 million while never realizing a drawdown of more than 3% (based on month-end data) in the process. Schwartz took pains to point out that his two worst months—losses of 3% and 2%—were the months his children were born and he was unavoidably distracted.  During this period, he had entered ten public trading contests. Nine of these were four-month contests in which he averaged a 210% return nonannualized! In his single one-year contest, he scored a 781% return. The following excerpts from Market Wizards focus on Schwartz’s trading rules and his advice to traders.                                                                                                                       

From time to time, you have alluded to your trading rules. Can you list them?

[Reading from a list and extemporizing] I always check my charts and the moving averages prior to taking a position. Is the price above or below the moving average? That works better than any tool I have. I try not to go against the moving averages; it is self-destructive.

Has a stock held above its most recent low, when the market has penetrated its most recent low? If so, that stock is much healthier than the market. Those are the types of divergences I always look for.

Before putting on a position always ask, “Do I really want to have this position?”

After a successful period, take a day off as a reward. I’ve found it difficult to sustain excellent trading for more than two weeks at a time. I’ve had periods where I can be profitable for twelve days in a row, but eventually you just get battle fatigue. So, after a strong run of profits, I try to play smaller rather than larger. My biggest losses have always followed my largest profits.

This next rule is a major problem for me; I’m always trying not to break it. The rule: Bottom fishing is one of the most expensive forms of gambling. It’s OK to break this rule on occasion if you have sufficient justification. For example, today, I bought the S&Ps when they were down sharply. Two weeks ago, I had written down the number 248.45 as the best entry for the S&P. The low today was 248.50. Consequently, I was able to buy into weakness today and make a good deal of money. I had a plan, I carried it out, and it worked. It doesn’t always work. It was risky, but I wasn’t pyramiding wildly into it, and I knew how much I was risking.

That brings me to my next rule: Before taking a position, always know the amount you are willing to lose. Know your “uncle point” and honor it. I have a pain threshold, and if I reach that point, I must get out.

When T-bonds and T-bills differ in respect to their individual relationship between price and the moving average—one above the moving average, the other below—have no position until one confirms the direction of the other. [Generally speaking, a price above its moving average implies a price uptrend, while the reverse case implies a price downtrend.]

Then, the last words I have at the bottom of the page are: Work, work, and more work.                                              

Is there anything to add to that list?

The most important thing is money management, money management, money management. Anybody who is successful will tell you the same thing.

The one area that I am constantly trying to improve on is to let my gains run. I’m not able to do that well. I’m always working on it. To my dying day, I’ll probably still be working on it.                                                             

Is that because you do something wrong?

I just love to take profits. I hear music when the cash register rings. The irony is: How can I be willing to risk 400 points on the downside and only take 200 points of a 1,000-point move on the upside?                                                             

On the risk side, you have a method, a plan. Have you experimented with trying to use similar discipline on the profit side?

Yes, but I haven’t been able to perfect it. I have had varying degrees of success, but it is my greatest criticism of myself.                                                             

Why the difficulty in this area?

I think it all relates to my fears of some cataclysmic event. I’m like W. C. Fields: I have several bank accounts and a few safe deposit boxes with gold and cash. I’m extremely well diversified. My thought process is that if I screw up in one place, I’ll always have a life preserver someplace else.                                                             

Any other rules you can think of?

Yes. If you’re ever very nervous about a position overnight, and especially over a weekend, and you’re able to get out at a much better price than you thought possible when the market trades, you’re usually better off staying with the position. For example, the other day I was short the S&P and got nervous because the bond market was very strong on the night session. The next morning, the stock market was virtually unchanged. I was so relieved that I could get out without a loss, I covered my position. That was a mistake. A little later that day, the S&P collapsed. When your worst fears aren’t realized, you probably should increase your position.                                               

Have you ever tried training people to be traders working for you?

I hired four people, but nobody lasted. They all became intimidated. I tried to clone myself and it didn’t work. I taught them all my methodologies, but learning the intellectual side is only part of it. You can’t teach them your stomach.                                               

Why do most traders lose money?

Because they would rather lose money than admit they’re wrong. What is the ultimate rationalization of a trader in a losing position? “I’ll get out when I’m even.” Why is getting out even so important? Because it protects the ego. I became a winning trader when I was able to say, “To hell with my ego, making money is more important.”                                              

What do you tell people who seek your advice?

I always try to encourage people that are thinking of going into this business for themselves. I tell them, “Think that you might become more successful than you ever dreamt, because that’s what happened to me.” I have the freedom I always wanted, both financially and structurally. I can go on vacation at any moment. I live in Westhampton Beach half of the year and in New York the other half. I have a wonderful lifestyle. My kids think all fathers work at home.                                               

What is the best advice you can give to the ordinary guy trying to become a better trader?

Learn to take losses. The most important thing in making money is not letting your losses get out of hand. Also, don’t increase your position size until you have doubled or tripled your capital. Most people make the mistake of increasing their bets as soon as they start making money. That is a quick way to get wiped out.                                       

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.

In November of last year FundSeeder’s Chief Research Officer Jack Schwager teamed up with fellow trading industry legend Peter Brandt for a three part interview series.   To kick off the weekend please consider the second portion of Jack and Peter’s interview conversation. If you have not yet had time to watch the first section of the interview you may do so here. Stay tuned next week for the last portion of the series!

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 Seykota please do so now. The following video is never before seen or released information about Jack’s interview with Mr. Seykota and what he most remembers about the experience:

The Undiscovered Market Wizards Search

Jack Schwager is one of the co-founders 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.

We’re back! We hope everyone had a great holiday season and wonderful New Year! Everyone at FundSeeder is excited and looking forward to a great 2017. Now that people are properly settled back in from the holiday season it’s time for this week’s Market Wizard Remembered – Ed Seykota.

If you are not familiar with the series please check out this summary post from a couple weeks ago.  The Market Wizards series is a collection of books written by FundSeeder Co-founder and CRO 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.

SEYKOTA ON THE LINK BETWEEN PSYCHOLOGY AND TRADING

In Market Wizards, the first book of the series, Schwager interviewed Ed Seykota, an MIT graduate in electrical engineering who developed the first commercial computerized trading systems for managing clients’ money in the futures markets. Seykota became frustrated with his firm’s management interference in trading and second-guessing the signals of his system, which had deleterious effects on performance. He left to trade his own account and those of a few select clients, achieving remarkable returns. The following excerpts from Market Wizards focus on the role of psychology in trading.                                        

What are the elements of good trading?

The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance.                                            

Very few traders have enjoyed the spectacular success you have. What makes you different?

I feel my success comes from my love of the markets. I am not a casual trader. It is my life. I have a passion for trading. It is not merely a hobby or even a career choice for me. There is no question that this is what I am supposed to do with my life.                                              

What are the trading rules you live by?

1. Cut losses.
2. Ride winners.
3. Keep bets small.
4. Follow the rules without question.
5. Know when to break the rules.                                               

Your last two rules are cute because they are contradictory. Seriously now, which do you believe: Follow the rules, or know when to break the rules?

I believe both. Mostly I follow the rules. As I keep studying the markets, I sometimes find a new rule that breaks and then replaces a previous rule. Sometimes I get to a personal breakpoint. When that happens, I just get out of the markets altogether and take a vacation until I feel that I am ready to follow the rules again. Perhaps some day, I will have a more explicit rule for breaking rules.

I don’t think traders can follow rules for very long unless they reflect their own trading style. Eventually, a breaking point is reached and the trader has to quit or change, or find a new set of rules he can follow. This seems to be part of the process of evolution and growth of a trader.                                                                                       

How important is gut feel?

Gut feel is important. If ignored, it may come out in subtle ways by coloring your logic. It can be dealt with through meditation and reflection to determine what’s behind it. If it persists, then it might be a valuable subconscious analysis of some subtle information. Otherwise, it might be a dangerous sublimation of an inner desire for excitement and! not reflect market conditions. Be sensitive to the subtle differences between “intuition” and “into wishing.”                                               

What effect has trading had on your personal life?

My personal life is integrated with my trading life.                                               

Is the joy of winning as intense as the pain of losing?

The joy of winning and the pain of losing are right up there with the pain of winning and the joy of losing. Also to consider are the joy and pain of not participating. The relative strengths of these feelings tend to increase with the distance of the trader from his commitment to being a trader.                                              

When you made your first few million, did you lock some of it away to avoid the Jesse Livermore experience? [Livermore was a famous speculator of the early twentieth century who made and lost several fortunes.]

I feel the Livermore experience was a function of his psychology and had little to do with the location of his assets. In fact, I remember reading that Jesse Livermore used to lock some of his winnings away and then find a key when he needed to get at them. Therefore, locking up winnings would be necessary to emulate his experience, not to avoid it. Furthermore, you would probably also need to overtrade and have wipeouts, while you simultaneously fired up your emotions with the burning desire to “win it right back.” Acting out this drama could be exciting. However, it also seems terribly expensive. One alternative is to keep bets small and then to systematically keep reducing risk during equity drawdowns. That way you approach your safe money asymptotically and have a gentle financial and emotional touchdown.                                               

I notice there is no quote machine on your desk.

Having a quote machine is like having a slot machine on your desk— you end up feeding it all day long. I get my price data after the close each day.                                              

Why do so many traders fail in the marketplace?

For the same reason that most baby turtles fail to reach maturity: Many are called and few are chosen. Society works by the attraction of the many. As they are culled out, the good ones are left, and the others are released to go try something else until they find their calling. The same is true for other fields of pursuit.                                               

What can a losing trader do to transform himself into a winning trader?

A losing trader can do little to transform himself into a winning trader. A losing trader is not going to want to transform himself. That’ s the kind of thing winning traders do.                                               

How would you rate the relative importance between psychology and market analysis to successful trading?

Psychology motivates the quality of analysis and puts it to use. Psychology is the driver and analysis is the road map.                                              

You have focused a lot on the field of psychology. Can you tell by talking to a person whether that person would probably be a winning or losing trader?

Yes, the winning traders have usually been winning at whatever field they are in for years.                                              

What traits do you look for to identify the winning trader personality?

1. Не/she loves to trade; and 2. Не/she loves to win.                                            

Don’t all traders want to win?

Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.

I know one trader who seems to get in near the start of every substantial bull move and works his $10 thousand up to about a quarter of a million in a couple of months. Then he changes his personality and loses it all back again. This process repeats like clockwork. Once I traded with him, but got out when his personality changed. I doubled my money, while he wiped out as usual. I told him what I was doing, and even paid him a management fee. He just couldn’t help himself. I don’t think he can do it any differently. He wouldn’t want to. He gets a lot of excitement, he gets to be a martyr, he gets sympathy from his friends, and he gets to be the center of attention. Also, possibly, he may be more comfortable relating to people if he is on their financial plane. On some level, I think he is really getting what he wants.

I think that if people look deeply enough into their trading patterns, they find that, on balance, including all their goals, they are really getting what they want, even though they may not understand it or want to admit it.

A doctor friend of mine tells a story about a cancer patient who used her condition to demand attention and, in general, to dominate others around her. As an experiment prearranged with her family, the doctor told her a shot was available which would cure her. She constantly found excuses to avoid appearing for the shot and eventually avoided it entirely. Perhaps her political position was more important than her life. People’s trading performance probably reflects their priorities more than they would like to admit.

I think that some of the most flamboyant and interesting traders are playing for more than profits alone; they are probably also playing for excitement. One of the best ways to increase profits is to do goal setting and visualizations in order to align the conscious and subconscious with making profits. I have worked with a number of traders in order to examine their priorities and align their goals. I use a combination of hypnosis, breathing, pacing, visualization, gestalt, massage, and so forth. The traders usually either (1) get much more successful, or (2) realize they didn’t really want to be traders in the first place.                                               

Surely, some people lose because they lack the skill, even though they really want to win.

It is a happy circumstance that when nature gives us true burning desires, she also gives us the means to satisfy them. Those who want to win and lack skill can get someone with skill to help them.                                               

I sometimes have dreams related to the impending direction of a market. Although these dreams tend to be very infrequent, uncannily they often prove right. Have you had any similar experiences?

I know several people who claim to have market insights during dreams. I think one of the functions of dreams is to reconcile information and feelings which the conscious mind finds intractable. For instance, I once told a lot of my friends that I expected silver to keep on going up. When it went down instead, I ignored the signs and tried to tell myself it was just a temporary correction. I stood to lose face and money. I couldn’t afford to be wrong. Around that time, I had dreams of being in a big, shiny, silver aircraft that stalled out and started going down toward an inevitable crash. I eventually dumped my silver position, even went short, and the dreams stopped.

How do you judge success?

I don’t judge success. I celebrate it. I think success has to do with finding and following one’s calling regardless of financial gain.                                     

Are You the Next Market Wizard?

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.