Market Wizards: Interviews with Top Traders

by Jack D. Schwager

In some sense, efficient market hypothesis proponents are like the proverbial man looking for dropped car keys in the parking lot under the lamppost because that is where the light is.

Everyone having the same information does not imply that everyone will use information with equal efficiency.

The first rule of trading—there are probably many first rules—is don’t get caught in a situation in which you can lose a great deal of money for reasons you don’t understand.

First, I have the ability to imagine configurations of the world different from today and really believe it can happen. I can imagine that soybean prices can double or that the dollar can fall to 100 yen. Second, I stay rational and disciplined under pressure.

When you compare the trainees that made it to the majority who did not, do you find any distinguishing traits? They are strong, independent, and contrary in the extreme. They are able to take positions others are unwilling to take. They are disciplined enough to take the right size positions. A greedy trader always blows out. I know some really inspired traders who never managed to keep the money they made. One trader at Commodities Corporation—I don’t want to mention his name—always struck me as a brilliant trader. The ideas he came up with were wonderful; the markets he picked were often the right markets. Intellectually, he knew markets much better than I did, yet I was keeping money, and he was not.