As usual, Jack D. Schwager never disappointed us. This book is full of insights and numerous live trading experiences from the so called "unknown". As expected, the author with his usual excellent interviewing style did his best to dig out informative side from traders. We as readers and traders surely benefited by reading this book.
There are few that featured in this book really caught my attention. First, Jason Shapiro. I love his contrarian way... a way that I had been practicing for so long without realized that it is a contradict way of life! His contrarian ways are best explained in the book on the topic of bubble. When everyone is talking about a bubble and nobody actually owes it, the bubble is there to stay. When somehow everybody started to owe the bubble, the bubble will burst without a hint. (Splendid idea on contrarian!) So, it is not the price that makes the market bottom on bearish or vice versa. It is all about participation. Make sense!!!
Reading Jack D. Schwager's books is always a nice thing to do. However, we as traders tend to have problem reading it. The main thing is we are sort of bias in our own way. Everything that moves along with our existing strategy tends to stay favor while we reading this book. In opposite, we will find hard to those ideas that never sounds appealing since day one. As such, a reader for Market Wizard series must stay focus and read this book with neutral state of mind. Having said that, the author as usual did well in his interviews. At times, the question asked can be some good point to be taken by readers. A good example is this: I actually find trendline breakout to be one of the most unreliable signals. But that perception is a consequence of knowing where to draw the trendline with the benefit of hindsight. Another good point from this book (which the previous series of market wizards also pointed out same perspective) is there are some opposite techniques being used by two different traders. Yet, it proved to work since the trades presented in this book are all successful traders. A good example is the contradict approach on trendline by Peter Brandt (use only horizontal breakout and never use trendline breakout) versus Jeffery Neumann (use only trendline breakout). End of the day, both methods work. That is the best part of trading. There is simply no single correct trading method!
Having read all market wizards by this author, I actually prefer all previous version compared to this. As usual, I will list out some good points below which are extracted from the book. However, this time around, I omitted few traders for the first time. This never happened when I read other market wizards. Well, there are two reasons. First, I simply do not agree with some of the idea presented. Secondly, I am in my 18 years into trading. So, perhaps I evolved along the way (I hope I am, haha) and there is nothing new under the sun. In view of that, I am going to rate this book at 6/10. Well, this book still served as one of the book that traders must read. However, one round of reading is adequate and there are not much surprises. Last but not least, listed below are some nice quotes from the book:
Peter Brandt:
He took much smaller positions than he could. If your could protect your capital, you would always have another shot.
A popcorn trade is what I call a trade that you have profit on and then ride it all the way back down to where you got in. I try to avoid popcorn trades now.
I used to trade patterns like symmetrical triangles and trendlines, which I no longer do. I only trade patterns where the breakout is through a horizontal boundary.
I don't want to know my open trade equity. So, I graph my equity based on closed trades only.
Optimizing your trading approach for the last series of trades is not a solution. I try to keep trading the same way. That's the only way I'll come out of a drawdown and get back on track.
Strong opinions, weakly hold. Have a strong reason for taking a trade, but once you are in a trade, be quick to cut if it doesn't behave as expected.
Jason Shapiro:
To make a contrarian trading approach work, a method for timing entry into the markets:
1. Taking positions counter to the extremes of speculator market positioning.
2. Timing the entry into such positions based on market action.
Watching financial TV programs can be useful in your trading - as a contrarian indicator!
Have stop loss on every positions.
Managing increased risk of higher correlation markets by reducing overall positions size and by seeking inversely correlated trades to add to the portfolio.
You know you can identify traders or commentators who are reliably wrong - a task far easier than finding those who are reliably right - then their opinions could well be useful in a contrarian sense.
Richard Bargh:
I used to have a habit that whenever I lost money in the market, I would spend less money. That type of attitude only causes your mindset and body to get tight, which stop you from trading well because you don't want to take any risk. A counterintuitive concept is to spend more when losing.
You don't have to exit a profitable trade all at once. Even if a trade reaches your target, it may make sense to keep a small portion of the positions, so you get some additional profit if the market keeps moving in the direction of original trade.
Missed trades can be more painful and more expensive than trading losses.
The damage from a bad trade often extends well beyond the loss on the trade itself. By shaking up a trader's confidence, such trades can lead to missing winning trades the trader would otherwise taken. The resulting missed profits can often exceeded the loss on the original trade.
Amrit Sall:
I now know that 90% of the time, the market is not going to provide any opportunities, and 10% of the time, I will make 90% of my profits.
In the past, I have tended to implement trading ideas in a single market. I now try to execute trade ideas in multiple correlated markets.
Traders have to ask themselves whether they can handle being right only 30% of the time, or do they feel they have to be right day after day?
Daljit Dhaliwal:
The reward/ risk ratio of a trade is dynamic and can change dramatically as the trade is held. Consider that you implement a trade, looking for a 300 point gain and risking in 100 point loss. If the market then moves 200 points in favor of the trade, the reward/ risk is now drastically different than when the positions was implemented. Dhaliwal manages the dynamic nature by taking partial profits. He argues that holding the entire position until it is exited is an attempt to be 100% right, at the risk of being 100% wrong. Taking partial profits as a trade moves in your favor not only responds to the fact that the reward/ risk of the trade is changing, but it is also another risk management tool. Another way of adjusting to the changing reward/ risk of a trade is to tighten the protective stop.
John Netto:
I want to be focus and still feel some anxiety when adding positions. In contrast, if I exhale in relief after a positions has gone my way and feel too relaxed, that is a warning sign of a possible impending market reversal.
When you lose money in the market, let it go. Be on guard against the urge to make money back by taking previously unplanned trades.
Jeffrey Neumann
Neumann enters his trade at the very point of breakouts from long downtrend lines - the earliest possible technical signal of a trend transition. Of course, this type of entry point often results in buying multiple false breakouts before a valid breakout occurs. But, Neumann gets out immediately if the breakout doesn't follow through.
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