"Market Wizards" by Jack D. Schwager

Market Wizards: Interviews With Top Traders
by Jack D. Schwager

http://www.amazon.com/Market-Wizards-Interviews-Top-Traders/dp/1592802974/ref=pd_bbs_sr_1/103-6640961-8433428?ie=UTF8&s=books&qid=1176989354&sr=8-1

A highly recommended read, 4 stars. I'm steadily trying to work my way through a library of traders' "classics", and Market Wizards comes highly recommended from many sources. Wizards was author Jack Schwager's project to find and interview some of the best traders in the world back in the 1980s to try and glean the factors that made them successful. He includes a broad swathe: floor traders who measure their trades in minutes or seconds, long-term traders who measure trades in years, commodities, equities, currencies, rates, and all sorts of combinations of the above and more.

As with Murphy's Technical Analysis, Wizards has been around for a long time. Despite the newer edition, it is the same book that was first published in the mid-80s and its age shows. That is a positive and a negative. A negative because yes, markets have definitely changed, many of the specific strategies and issues of the day are no longer relevant even if they remain a sometimes fascinating historical look-back. But a positive because once one sifts through the differences of the eras, certain key principles stand the test of time. That to me is the real value of the book: seeing how a broad variety of traders, with sometimes polar-opposite personalities and strategies, all managed to list many common elements of success. The need for intensive research and strategy testing, the discipline to stick with a plan and not second-guess, self-confidence, conquering the fear of losing, money management, risk control, and coming up with a style of trading that works for your own personality.

It has been said that trading is a less than zero sum game, that on net everyone loses. I don't doubt that is true. But Schwager's book shows that there are elements of success that can allow the disciplined trader to beat the odds consistently over time. There is no magic formula, and these elements are not easy and require incredible discipline. But you walk away from Wizards with the definite impression that these traders are no statistical anomaly, that they have indeed earned their success through right application of difficult principles. Not through one strategy or formula, but by learning how to apply these principles to their personalities and then work, work, work. Then, at the end of the day as trader Ed Seykota says in the book (paraphrasing here, perhaps not the exact quote): 'everybody gets what they want from the markets'. If you don't want to put in the work, then you ultimately find something more important than winning and you subconsciously want to lose. If on the other hand you want to put in the work, then winning is what you ultimately want and through work, perseverence, and intelligence, you can extract your wins from an ever-changing market.