Site Sponsors

Book Review - Stock Market Wizards: Interviews with America’s Top Stock Traders By Jack Schwager

By Mark Etzkorn

Article Contributed by Active Trader Magazine

With Stock Market Wizards, author Jack Schwager has created a trilogy of books (Market Wizards and The New Market Wizards being the other two) dedicated to analyzing the careers and trading approaches of top market players. This book, like its predecessors, gives readers the opportunity to peek over the author’s shoulder as he talks to traders and investors in their natural habitats. The lessons these discussions bring to light are relevant both to traders and long-term investors seeking insight into the way markets work.

The subjects range from junior high dropouts to PhDs (and one M.D. — Ari Kiev, a contributing editor to Active Trader) . One of the most important lessons — maybe the primary lesson — of the book (and the other Wizards books) is that every trader must find his or her own trading style. The traders here run the gamut from fund manager to arbitrageur to individual S&P trader. If nothing else, by examining the lives and techniques of a diverse group of traders, Stock Market Wizards gives readers plenty of food for thought about the range of viable trading approaches and what might feel right for them.

Unfortunately, not all the subjects are especially generous with details, but this is about as close as most of us are likely to get to these traders, some of whom are quite media shy. What we learn is that persistence, determination (even obsessiveness) and independence unite most successful traders, but these traits do not necessarily account for all their success.

Rather than strategies, the book focuses on investment approaches and philosophies. There are no “buy here when indicator A does this and sell when indicator B does that” discussions. Nonetheless, there is plenty of advice directly from the traders regarding the principles they follow, as well as specific criteria for entering trades (e.g., some of the material in the Stuart Walton and Mark Cook chapters).

The book’s free-flowing approach — the interviews range from the traders’ personal backgrounds and career paths to anecdotes of specific trades and discussions of larger trading philosophies — may put off less-patient readers. Some of this material will seem tangential to those who want to get down to the buying and selling nitty-gritty.

However, for readers interested in how a great trader gets that way, the personal information can be quite revealing, especially in terms of documenting the diverse (and non-financial) backgrounds of many of the traders, and the failure(s) some of them experienced early in their careers. The book shows that while exceptional traders might have intrinsic talent, that talent doesn’t necessarily blossom overnight. It has to be cultivated, in many cases over long periods of time. Most of the subjects talk frankly about their mistakes, underscoring the hard work necessary to become a successful trader.

The summaries that conclude each chapter are one of the book’s most attractive features. Schwager highlights each subject’s unique traits, gives his impression of the reasons for each trader’s success and summarizes core trading principles. He also wraps up the book with a list of 65 trading principles and rules that distill the lessons of the interviews.

What sets the traders in Stock Market Wizards apart from the mass of ordinary traders and investors? Schwager himself thinks there is an element of innate talent that separates exceptional traders from merely profitable ones — a sentiment, interestingly, not shared by at least one of his subjects, Stuart Walton, who thinks anyone can acquire the necessary skills to excel.

If you’re interested in trading system analysis, look elsewhere. But, if you’re interested in hearing top traders talk about their lives, how they think about the market, what they do for a living and what pushed them to the top, you’ll enjoy and learn from this book.