Tuesday, September 30, 2014

"Stock Market Wizards Take Losses."

"Market Wizards" by Jack Schwager is probably the best book on trading that I have ever read.  It has had the most influence on my development as a trader.

I feel so strongly about this book that I would probably not hire someone to work for me that had not read this book.  So today for my "Trader Ten Minutes" I simply browsed my old paper copy of the book and re-read my brief notes from the book.


  1. There is no single true path. 
  2. The universal trait is discipline.
  3. Trade your personality.
  4. Failure and perseverance are part of every successful trader's life.
  5. Great traders are flexible.
  6. It takes time to become a successful trader.
  7. Keep a record of your market observations.
  8. Develop a trading philosophy.
  9. What is your edge?  Big picture tech, change, on the cusp, understand big trend before others, shifts.
  10. Confidence is important, and you build it from hard work.
  11. Hard work.
  12. Obsessiveness.
  13. Market wizards are innovators, not followers.
  14. To be a winner you have to be willing to take a loss!
  15. Risk control.  Stop-loss, or reducing position size, limit initial position size, short selling.
  16. You can’t be afraid of risk
  17. Some limit downside by focusing on undervalued stocks. (but still can drop.)
  18. Value alone is not enough.  Need catalysts.
  19. The importance of catalysts.
  20. Focus not only on when to get in, but when to get out

What really surprised me when reading the book was that each trader in the book had a very different philosophy and method of trading, but they almost all cited the importance of taking losses.  They all were rather quick to cut losses and focused a lot on controlling risks when trades went bad.

This one idea has really stuck with me.

The book is available on Amazon in a variety of formats. (It's also available in a bootlegged free PDF copy on the web if you want to cheat Schwager out of his royalty for writing this masterpiece. You decide.)

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