The New Market Wizards by Jack D. Schwager

Author:Jack D. Schwager [Schwager, Jack D.]
Language: eng
Format: epub
Published: 2012-09-19T16:00:00+00:00

At the core, the quality of open-mindedness is responsible for Blake’s success and, for that matter, his entire career. For many years, Blake sincerely believed that the markets were random. When confronted with contradictory evidence, he didn’t dig in his heels and argue his position—the reflexive response most people would have in such a situation. Instead, he researched the question, and when the evidence suggested that his prior views had been wrong, he changed his mind. The ability to change one’s mind is probably a key characteristic of the successful trader. Dogmatic and rigid personalities rarely, if ever, succeed in the markets.

Another attribute that has allowed Blake to excel is his adaptability. The markets are a dynamic process, and sustained trading success requires the ability to modify and even change strategies as markets evolve. Blake began by trading municipal bond funds. However, when the reliability and profitability of his approach in that sector started to diminish, he didn’t just blindly keep repeating the same strategy that had worked for him in the past. Instead, he used the changing market conditions as a spur to start an intensive research project, which eventually yielded an entirely new and even more effective approach. When hourly switching became available in the Fidelity sector funds, he altered his methods accordingly. Then, when Fidelity made it virtually impossible to use its funds for switching strategies (by imposing prohibitively high fees), Blake switched to different fund families and different strategies. Blake’s ability to adapt has allowed him to maintain a remarkable consistency of performance, despite profound changes in his trading environment.

Perhaps Blake’s most important message lies in his amazingly consistent track record, which provides compelling empirical evidence that the markets are indeed nonrandom. Of course, this nonrandomness is hardly blatant. If it were, we would all be millionaires. However, Blake’s ability to win in an astounding twenty-five months for every month he loses, allows us to say “Yes, Virginia, the markets can be beat.”

How can the markets be beat? Certainly not by buying the answer. Even if the answer were for sale, the odds are that it wouldn’t fit your personality and that you wouldn’t have the confidence to follow it. Essentially, there are no shortcuts. Each trader must find his or her own solution to the market puzzle. Of course, most such research efforts will end in failure. If, however, you are able to uncover nonrandom market patterns and can convincingly demonstrate their validity, only two steps remain to achieve trading success: Devise your trading rules and then follow your trading rules.

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