Successful traders adapt and remain flexible in their trading approach, changing strategies and reversing positions based on market conditions.
Failure is a stepping stone to success for traders, who learn from setbacks and use them as opportunities to improve.
Constantly evolving and improving trading methods is crucial for success, with successful traders open to new ideas and strategies.
While most successful traders follow certain rules, there are some who challenge conventional wisdom and profit from contrarian positions.
Deep dives
Flexibility and Adaptation: Key Traits of Successful Traders
One of the common themes among successful traders is their ability to adapt and be flexible in their trading approach. They understand that markets change, and what worked in the past may not work in the present. This flexibility extends to their willingness to change strategies, exit losing trades, and even reverse their positions if the market proves them wrong. Traders like Ed Thorp and Jamie Mai showcase this trait by continuously evolving their trading methods based on market conditions, ensuring a higher probability of success.
Persistence and Learning from Failure
Many of the traders interviewed in the podcast have experienced failure at some point in their trading careers. However, what sets them apart is their ability to persevere and learn from their failures. They don't let early setbacks define their future success. An excellent example is Michael Marcus, who faced multiple failures before ultimately becoming a legendary trader. These traders understand that failure is a stepping stone to success and use it as an opportunity to improve their skills and strategies.
The Importance of Being Open to Change
Successful traders understand the need to constantly evolve and improve their trading methods. They are open to new ideas, insights, and strategies, and are not afraid to change their approach when necessary. Traders like Richard Dennis, Ed Thorp, and Paul Tudor Jones have demonstrated a willingness to adapt and change their trading techniques to stay ahead of the market. This flexibility and openness to change allow them to remain competitive and continue to generate consistent profits.
Breaking Rules and Going Against the Grain
While most successful traders follow certain rules and principles, there are some who challenge conventional wisdom and do the opposite of what is typically expected. Jimmy Balademus, a prop trader featured in Hedge Fund Market Wizards, stands out as a trader who breaks all the rules. He takes contrarian positions in markets that are skyrocketing, going against the grain and profiting from market reversals. Balademus's approach is unique and not recommended for inexperienced traders.
The Importance of Finding Your Own Trading Method
Jack Schwager emphasizes the importance of finding your own trading method, highlighting that there is no trading secret or one-size-fits-all approach. He advises traders to focus on developing a methodology that suits their personality and trading style, rather than trying to mimic someone else's strategy.
The Role of Complexity in Trading Approaches
Schwager discusses the role of complexity in trading approaches, noting that successful traders can use both simple and complex methods. He provides examples of highly quantitative and complex approaches that require sophistication to tease out an edge. On the other hand, he mentions that some traders achieve success by combining chart pattern recognition with effective risk management, which can be executed without great complexity.
The Importance of Having an Edge in Trading
Schwager emphasizes the necessity of having an edge in trading, stating that money management alone is not enough to ensure profitability. He explains that an edge can be defined as a consistent ability to make money without significant drawdowns. While an edge cannot be definitively proven, traders develop a sense of having an edge through consistent profitability and confidence in their trading approach.
The chances are you're already very familiar with this weeks guest, and if you're not - then I'll have to presume you're new to the realm of trading.
Jack Schwager is the author of a number of widely acclaimed financial books, including the timeless Market Wizards series - commonly referred to as all time favourites by many of our past guests.
As well as a bestselling author, Jack is widely recognised as an industry expert on markets, hedge funds and trading advice. He's also the co-founder of FundSeeder; a platform designed to find undiscovered trading talent, and connect successful traders with capital from investors.
During our interview we discuss Jack's lifetime involvement with markets, some of the key lessons he learnt firsthand from interviewing many of the worlds greatest traders, and so much more...
I hope you enjoy this interview, as much as I enjoyed hosting it. It was an absolute honour to speak with Jack for almost 90 minutes.
