Welcome to the second video of in Autochartist’s new series: Trading Lessons from the Market
Wizards.
What if you could read the principles for success from some of the world's greatest
traders?
Well you can, thanks to Jack Schwagers remarkable book - The Market Wizards.
The book is a series of interviews with some of the greatest traders from the last 40 years.
This lesson is “Developing a Method is Hard Work”
When beginning traders view professionally developed, traded, edited, and polished trades
online, the end products look quick and easy.
Viewers never see the thousands of hours that pros invested before recording a quick, easy
three-minute win.
If trading were easy, the world would be full of millionaires.
Each day, in the market, thousands of skilled professionals and institutional investors
trade against your positions.
Chairman of CAM Capital and the world’s largest interbank currency and futures trader,
Bruce Kovner, said, “If you don’t work very hard, it is extremely unlikely that you
will be a good trader.”
Acclaimed futures and hedge funds trader, Jack Schwager, in his Market Wizards Series,
interviewed dozens of the world’s most successful traders.
Despite diverse trader personalities and methods, the Market Wizards’ methods all converged
on ability to hustle.
Discussing the challenge of developing a method, Jack Schwager rhetorically asked an interesting
question: “Why are so many people attracted to trading?
Because,” he continued, “it seems like an easy way to make a lot of money.
But the fact is that the people who are really successful in trading are tremendously hard
workers.”
He went on to explain this, “dichotomy between perception and reality,” through an example:
“... no sane person would … [study] a book titled, Techniques of Brain Surgery,...
over the weekend, and, then, Monday morning [believe] he was ready to perform brain surgery.
The operative word here is sane—that is, no sane person would think that way.”
“Yet how many people .... [have read the] book,...
“How I Made $1,000,000 in the Stock Market Last Year,” .... over the weekend, and then,
Monday morning, [believed] that they [could] beat the market professionals at their own
game?”
“The line of reasoning in both examples is really quite similar.
But, while it is obvious that the thinking in the brain surgery scenario is deranged,
many people see nothing odd about the... the second scenario.”
He went on to explain that, in trading, a complete amateur might, for a time, beat the
50-50 odds of the market going either up or down.
People flipping coins, likewise, sometimes flip more heads than tails.
When that occurs, he explains, “the amateur traders who are right more than 50 percent
of the time when they are starting out will attribute their success to their superior
decision-making skills, rather than simply being a matter of chance.”
Another author who has studied successful professionals in many fields, Malcolm Gladwell,
in his 2008 book, Outliers, also understands the difficulty of professional method development.
Emphasizing the importance of “deliberate practice” and the "10,000-Hour Rule," he
said that it takes “roughly ten thousand hours of practice to achieve mastery in a
field.”
One very successful professional, boxing champion Mohammed Ali, clearly understood the importance
of deliberate practice and the 10,000-hour concept.
He started, as do many young boxers, with the basic strength, and speed.
Unlike many of his unsuccessful competitors, Ali had the determination and work ethic to
pound his way to the heavyweight title.
His trainer, Angelo Dundee, in a Muscle & Performance article, explained,...
“Ali stayed in Overtown, Miami because most times [black] guys couldn’t be on the beach.
And most of the time, he couldn’t get a ride, so he’d run across the MacArthur Parkway
— about six or seven miles — to and from the gym…
I never had to ask him to come to the gym.
He was there before I even got there.
As soon as he got there, he’d start working…
He was always first in and last to leave.
He’d even come to train when he wasn’t fighting.”
Like Mohammad Ali, Investing Championship Trader, Marty Schwartz, punched his way to
the championship.
Schwartz, while working as a securities analyst, lost money trading during a decade, but eventually
he fought his way to a successful trading method.
He described his work:
“Even now, I still put in about 12 hours a day.
I feel uncomfortable not doing the work.
I calculate a lot of mathematical ratios and oscillators, and I post my own charts.
My attitude is that I always want to be better prepared than someone I’m competing against.
The way I prepare myself is by doing my work each night.”
His training, he says, allows him…
“to perform at levels beyond... previous expectations.
Just as Amherst [College]... strengthened my mind, the Marines strengthened my body.
The two experiences convince me that I could do almost anything if I worked hard enough
and provided the groundwork for my successful trading.”
About 80- to 95% of traders never manage to develop a method that consistently turns a
profit against the market.
How badly do you want to be a trader?
Do you have the patience to follow the 10,000-Hour Rule before you turn a consistent profit?
As you develop your method, your deliberate practice should include:
A daily trading journal; Extensive backtesting;
Daily reading and studying; Sticking to a system and working hard at it,
rather than skipping from one system to another; and
Understanding the importance of your personal growth as a component of your trading success
Incorporate deliberate practice into your daily routine and encourage yourself with
the words of William J. O'Neil.
An optimistic entrepreneur, stockbroker, and writer, O’Neil founded the business newspaper,
Investor's Business Daily, and the stock brokerage firm, William O'Neil & Co. Inc.
He said,
“Great opportunities occur every year in America.
Get yourself prepared and go for it.
You will find that little acorns can grow into giant oaks.
Anything is possible with persistence and hard work.
It can be done, and you own determination to succeed is the most important element.”