The New Market Wizards: Conversations with America's Top Traders

by Jack D. Schwager

Your hypothesis implies that most traders would be better off throwing darts than using their existing method—a provocative thought. How do you explain this phenomenon? The market behaves much like an opponent who is trying to teach you to trade poorly. I don’t want to suggest that the market actually has intentions, because it doesn’t. An appropriate analogy is evolutionary theory, in which you can talk as though evolution has a purpose. For example, birds evolved wings in order to fly. Technically, that’s wrong. Birds aren’t Darwinians, and you can be sure no bird or protobird ever intended to evolve a wing. Nevertheless, natural selection acts very much like it intends for species to evolve things that are beneficial. You can talk about the markets in a similar fashion. Anybody who has traded for a while begins to feel that the markets have certain personal characteristics. Very often the feeling you get is that “they are out to get you,” which is simply a personalization of the process. This illusion is well founded. The market does behave very much like a tutor who is trying to instill poor trading techniques. Most people learn this lesson only too well.