How to be a winning trader

Speaker A: There's one trader in this book that says, I haven't invented a single thing. Nothing I do is new. I haven't invented a single thing. But, uh, what he's done is he's taken different things from different people and found out what works for him. So ultimately, you can learn from other people, you can take from other people, but ultimately you have to find things that you believe in that fit your personality. You got to make it your own. So don't think that you could just go and buy a system or copy somebody else's approach. And you're going to be successful because you won't have that conviction. You won't have their particular talents to make that strategy work. You've got to find your own, your own strategy, even if it's learned from other people. But whatever you put together as your methodology has to be your own.

Speaker B: You're listening to the Growth Manifesto podcast where we host in depth interviews with business leaders, authors, industry experts and entrepreneurs with a singular focus around business growth. At the end of each podcast, we want you to walk away inspired to think bigger, uh, and to have actionable takeaways you can apply to improve your business. Each episode is like a masterclass on a key topic. So make sure to browse the episodes to find the topics that are most relevant to your biggest business challenges today. This podcast is brought to you by Web Profits, a uh, digital growth consultancy that helps challenge your brands drive growth in a complex and fragmented digital landscape. You can find out more about Web Profits at, uh, Web Profits. IO uh, now let's get into it. This is Alex Klanthus and today we're talking with Jack Schwager is a legendary market historian, he's a trading psychology expert and he's the author of the iconic Market Wizards series. Jack is also the co founder and chief research officer at Funda. He's a portfolio manager at the adm, um, Investor Services, a, uh, Diversified Strategies Fund, and one of the most influential voices in modern trading. In this episode we talk about what the best traders do differently. We talk about trading psychology. He shares some insights from his latest book that is going to be coming out in the next year. And we also talk with Jack about what he's personally learned after decades of studying the top 1% of performers. I hope you enjoyed this episode and make sure to subscribe to get the latest episodes as soon as they're released. Subscribe now. Let's get into it. So Jack, how did you get the idea for this book? Yeah, uh, because this book called Market Wizards I've been given this book from three separate people, um, who are probably the most successful kind of people I know and they have the most amount of wealth and yet like this is the book that they suggest that everyone should read. And so how did you get the idea? Because it seems to have had a pretty big impact across the space.

Speaker A: Yeah, it has. And I say this reluctantly because it sounds like I'm just blowing my own horn here but I can't tell you how many hedge fund managers and very successful traders, you know, have told me that either when they got in the business the book was given to them or, or they've given out to their trainees. And so it's. Yeah, it's become kind of sort of a bible of some sort within a trading, within the. I guess success, what I call the successful trading community. Uh, and so the idea, everybody thinks that market wizards and we're talking for your audience the first market wizards book, there were a number of them but the first one that you're referring to, I wrote it in 1988. So we're talking 30, uh, 37 years now. So um, that that book was not my first book and people assume it was. My first book was actually an analytical book like a 750, 800 page analytical book on the futures markets. And the book did well for what it was. I didn't write it to do mass sales because the book that, that intense is just not intended for a big audience. I was just trying to write the best book out there in futures analysis anyway that did relatively well. And a few years later I got approached by a publisher and they wanted me to do, do uh, a whole series of fundamental type analytical books and you know, sort of be the editor in chief writer, you know, one in gold, one in grains, one, one on each type of market. And I had just to back up to do. The original book was pre, pre PCs at least they were just in the infancy and I did it without a PC and I had taken the sabbatical to do it and there was an enormous chore and I just, I said just no interest and doing that said I ever do another book. I uh, want to do something more mass audience. And uh, and I, they asked if I didn't you know, idea. I said yeah, you know and at the time I was a director of futures research which is a board full time job on its own and that's why I didn't do it. But I had this idea that I knew some really great traders and I thought gee, it Might be a fun idea to go around the country and interview like the best traders and uh, and see what differentiates them, sort of pick their brains. And that was kind of the catalyst. I mean I wanted to do the book but I didn't have the time. So that book got done, uh, nights and weekends other than the trips I took to interview the traders, which I kind of did some on weekends or I had day off here, there. But the, the bulk of the work which is taking all these interviews and transforming them to a book that I did really literally nights and weekends. I did spend some all nighters. I did kind of spend my weekends doing this. Uh, and that's how the first book came about. Uh, so I guess the origin is that I was prompted to do another book and I knew these great traders and that was the idea.

Speaker B: So uh, you were the director of the futures, um, research.

Speaker A: Right.

Speaker B: And so you were already essentially kind of in the industry.

Speaker A: Yes.

Speaker B: And then you started just to publish some books. And so the first book is, was like, like a more kind of technical book and the second one just was a more of a mass market book. In constructing the second book, how did that change how you invested and how you traded?

Speaker A: Well, I guess it sort of happened, you know, simultaneous. Uh, I by that point had some experience on my own and I don't know how much of it was the influence of the book and how much was just experience. But there was one, there was one line I can think of back of one line with Bruce Governor, uh, of Caxton Corp. And you know, I interviewed him back in the earlier days when he was trading for Commodities Corp. And he had one line where he said I always know where I'm going to get out before I get in. Which to me is probably my favorite line from all the market wizard books I've written. And one which in one sentence captures so much wisdom. Uh, so I kind of do live, you know, any trading I do, I live by that rule. So if I do an order, uh, I put in a stop at the same time. And there's so many reasons why that's a good idea. We can go into it if you want. But that, that is like a good example of something that I can think of, think of a direct line in the book and, and affects my trade. There have been other instances. I remember for example Marty Schwartz saying in our interview, if you're ever really worried about a uh, trade, let's say the market closes really strong on a, on a Friday and you're short. That type of situation. But if you're ever really worried about a situation and then the market opens up, you know, typically this would be over a weekend situation, but could be overnight. And then the market opens up and the market lets you off the hook. To use his exact words, the market lets you off the hook. Don't get out. And that has occurred a couple of times, you know, in my, in own trading where I remember like one instance, uh, S P was in some sort of broad range and I was selling into what I anticipated would be resistance. And um, as I most, I was scaling in, I was almost totally and not completely. And a report came out and uh, it was one of those unemployment reports that there was just nothing, nothing positive for the market. You know, usually they pull out. Well this is one. But everything about it was negative for the market and the market sold off. And I think, oh yeah, I got it. You know. And then sort of about a couple hours before the closes stopped going down, started going up, kept on going up and actually closed up on the day or something like that. And I remember, I said, uh, you know, I remember feeling better in the water in this one. My son was over the weekend, I was telling him the straight, I'm done in order. Then Sunday night the market opens up and it opens up lower and I swear I think of Schwartz's wine and I said okay, I'm not going to do anything. And sure enough the market, the market, you know, kept on going down. So.

Speaker B: Right.

Speaker A: So the instances where things happen in the markets and I think back, uh, of things I got from the interviews, I mean there have been others, but those are a couple examples.

Speaker B: A big part of what you talk about is well, the big thread seems to be psychology. Yeah. So there's certain strategies of course. Right. And everybody has kind of different strategies. But it does seem that the consistent. A characteristic of these super successful traders um, is their psychology. And so what did you find in terms of the like the type of psychology that these kind of super successful people, uh, had?

Speaker A: Yeah, there are, there are common traits in terms of psychological attitude and emotional makeup and all of that. One thing that's common is that really successful traders seem to be much more immune from emotion when things are going against them than you or I or most people would be. I remember Paul Tudor Jones and this. He wasn't speaking about himself. He was talking about Eli Tullis who was a cotton merchant. That was his mentor and he would relate. He related in our interview, this is one of the things that made a big impression in his life, in his career. And he talked about how he was free, alive one day and, and marketers really went against him. He had a terrible day, lost millions or whatever. And he had some guests in that afternoon. And Paul says, you know, like you would never know. The guy lost a dime that day. He just, he was completely just normal. Uh, and that sort of made that impression on him. And I find a lot of these traders, they could be in these extreme situations and just are very cool and controlled. And I think a lot of that is, is inherent. It's inbred. Uh, I'm doing another book right now and uh, one of the traders, and maybe the best trader in this book I'm working on, maybe the best trader, uh, the most successful trader I've ever interviewed, I'll go that far. And he talking about, well, what made him, what makes him different. And he mentioned a couple of things. You know, one was no, intense. The ability of being intensely focused, which is another common trait, by the way. And one he said is he just has this, he's just born with this thing of being extremely calm. Like he doesn't get phased by anything. And he says it's, it's just the way I was born, just my genes. It's not, he's not saying it's anything that he deserves or did or. But, you know, it's a trait people ask, you know, are great traders born and made. And uh, I think to some real extent they are born, they have the right psychological makeup or they have the right sort of intuitive sense to be able to pick up things that other people miss. But they have some traits that just make them unusually, uh, suited to be traitors. And so those are a couple of things, like I said, you know, focus, uh, uh, emotionally emotional calmness. Then there's other things like the ability to be very disciplined. Uh, so it's, you have to, you have to be rigorous. You can't deviate from your, from what you know, other rights, the right actions and whatever your methodology is. And if you do, the market will usually get you so to have the discipline, even when it's difficult to follow your own rules. And even great traders don't always manage to do that, but they do have a better ability to do that than most people. And um, I'll mention one more, and that's flexibility. Really good traders are able to change their, their, their minds on a, on a dime. They're able to turn on the dime, uh, which most people can. Most people hope their position is going to work. And if they're really good, if they're good traders and it's not and they realize that they're in the wrong position, they'll get out. Uh, but the really great traders can not only get out, but if they realize they're wrong, they can flip the other way. And yeah, I don't want to take up the whole interview and answer this

Speaker B: question, but this is a really good question because the psychology is the thing, because everyone has systems, everyone has strategies. There's uh, so much software out there and the technical indicators and, and there's all these different things and then. But, but it's all about the trading strategy and the discipline. Just when things are not going your way. Right. Which is, uh. So you said something, uh, interesting. Um, uh, that the markets are never wrong. Um, except opinions often are. Right. And so this is a thing where kind of the market has a way to show you what's the truth and it's oftentimes not what the consensus thinks. Right. And so these successful traders seem to be able to win what everyone else is losing. All right, and so how do you think that is? Or why do you think that they, uh, can actually succeed, um, at times that the majority can't and the majority are also experience, um, like they have all of, uh, the same information. It's the same exact market. And yet some people can succeed in that market and some, and the majority just don't.

Speaker A: Yeah. So part of it is what I started saying, the last question was this. Flexibility. This a. The ability to, to change their mind and not get hung up on hope like a lot of other traders do. Uh, so, uh, they, they may have an opinion or the best quote here. Peter Brandon in In Unknown Market Wizards has a line. His motto is sort of, uh, strong opinions, weakly held, you know, weak, weak weekly. So what he's saying, basically he has a strong opinion when he goes into the trade, but market doesn't have to do much for him to abandon that opinion. So, you know, that's the ability to, as he says, to, to be a weak holder of your opinion is, is, is a, is a good trait because it allows really good traders to get out of positions before they do much damage.

Speaker B: Yeah. And so was there something that you found, um, that was something which you didn't expect? Yeah. So some approach or some type of thinking or was it all kind of what you thought and it was just. Yeah. That they were executed just better.

Speaker A: And I'll tell you, uh, the thing that was most unexpected, which kept on coming up amazingly in Every book, multiple interviews. So you figure you're interviewing these guys who are really the uh, just far superior performance track records to even successful, you know, traders. And you figure, you know, well they, they probably were always okay or they, but so many of, so many of them blew up not once, not twice or even three times, you know. So I was surprised how many of these traders who were ultimately super successful, actually not all of them, of course, but a fair minority of them uh, paddle multiple, multiple failures before they finally got it right. And in some cases the stories are so extreme that you just think, gee, anybody else would have given up, you know, why the hell did they? And I asked that any of you. Didn't you think that maybe you just weren't cut out for this, you should, you know, you should give up. I mean, so, so that, that is what I surprising and I mentioned that trader that the book I'm writing now, he actually, that chapter will be called the Fifth Time is the Charm because he literally blew up four times before he became enormously successful.

Speaker B: That seems to be a common story for any um, kind of self made, kind of successful person. Right? It seems to be the same in business, um, where your first business is not going to be the one, the third business is probably not even going to be the one. And so maybe the fourth or fifth one. And so it seems the same for trading, but for trading you lose a lot of money. And so every time that that is going to blow up. And that can happen in business but for these people who are succeeding at the highest levels, they'd probably have to crash pretty hard before they hit that highest level. And so what was the biggest amount of money that was kind of just lost as a part of these experiences, let's call them of learning?

Speaker A: Well, well the good thing is in these blow ups, usually the amounts are not large because they're at the beginning of their careers. So it's everything they have. But it's a small, you know, it's not a huge amount.

Speaker B: It's funny though because it's everything they have. Uh, and that still applies. It's just a larger amount of money, the more money that you have, but it's still everything, you know. And so in some cases start again every time.

Speaker A: Right. In some cases it's only you know like $5,000 multiple times. In some cases, like the trader I've been talking about for this book, in his case it were fifty thousand dollar chunks he was borrowing from his, you know, from his dad, you know, so.

Speaker B: Wow.

Speaker A: Yeah.

Speaker B: So come On Dad, I just need one more. Okay, it's 200k. Trust me, on the next one is going to be good. Um, and then he probably came. Well, and then he's come good, hasn't he?

Speaker A: Yeah, yeah. And in his case, he got to the point where he said one last time, he promised himself, this is the last time I borrow, you know, could ask my dad. And he lost that. But he was also the last time

Speaker B: he said, all right, this is going to be the. And then he lost that one too. And then he still came back again after that 50 again.

Speaker A: And uh, but he was, what he was doing was he was making money, making money money and then blow it all on one trade. But he was doing this deep research and he was posting it on this online trading community and he, there was like a niche in that community of the best traders and I guess they talk among themselves and he had mentioned why he's not trading, you know, and one of the traders, uh, just say, you know, I'll loan you 50 here, I'm going to loan you $50,000. Pay it back whenever you want. No, you know, because he had gotten value out of the research and M, that was actually, that was the one that made it.

Speaker B: Wow. I don't think we know his name, but are you able to just think on how much that he made as a result of that last 50?

Speaker A: Well, that, that 50. But first of all, nobody will ever know his name except me and my co. I have a co author in this book, George Coyle. Nobody will know his name because this is the first time, the only way he agreed to do it, he didn't want the notoriety and the only way he agreed to do it was to be anonymous. Uh, of course we verified his track records, but he wanted his name to be anonymous. And uh.

Speaker B: Okay, so what did he turn that 50k into then since he's anonymous right now?

Speaker A: As of now, it's about 500 million.

Speaker B: 500 million?

Speaker A: Yes.

Speaker B: And what kind of a time frame? Like in, like.

Speaker A: Yeah, actually about, let me think, uh, just under 10 years.

Speaker B: Under 10 years, pretty good. That's, um, that's better than most startups, you know, that's a very good trading record. And, and so his father has gotten his money back now, plus interest, plus. So let me ask you, um, you have been interviewing, um, successful traders since like the 80s, right? And so the first book was 1988. Oh, sorry. The second book was 1988. But the first kind of mass market book, um, it was 1988, which is um, was that 36 years? Is that the right math? 36 years ago. 37 years ago, yeah. And so you've interviewed.

Speaker A: It was published in 89, I wrote it in 88 was published.

Speaker B: Uh, so you've interviewed a fair few people over that time. How much has stayed the same? How much has changed?

Speaker A: You know, the markets have changed enormously. Right, but we both know that. I mean the, in fact, the changes have been so enormous. You've gone back in those days, back in the first Market Wizards book, uh, I was interviewing a lot of futures traders. We're talking about trading pits, right? Those things virtually don't exist anymore. And we've gone all electronic trading at the time. I did the first book where I was talking to people whose careers predated. Well, we had PCs in the 80s. They just came beginning. Early 80s, I guess, was sort of the beginning, but they weren't. Uh, you still were dealing situations where people didn't have computers on their desk. You didn't have char back in those days. We're talking, you'd get a chart book once a week and that type of thing. And forget about all the Internet. There's no Internet, right? Uh, uh, and so we're talking largely pre PC, no Internet, uh, and um, you know, no electronic trading. So those are enormous. And also that predates, you had hedge funds kind of very minor influence. We've gone from that now to supercomputers, AI quant, uh, multiple quant firms with several hundred, several hundred PhDs in math working for them or physics or astrophysics or whatever those computer science, etc. So we've gone from that world to this world. And so there have been enormous changes. However, the people I interview, you wouldn't know that the financial world has changed so much. So many things don't really change. And amazingly the. This book, for example, I'm working on now, as was the last book, were solo traders not, not hedge funds. You're just, just guys on their own, uh, trading from their home office or whatever. And uh, you would think single traders like that would have no chance. How does a trader like that compete against a hedge fund with 200 points? Right. It just doesn't seem possible. And not only they competing, but they're like getting these track records that are just miles better than what these big firms are doing. Of course they have the advantage of starting small and so not having to trade billions is itself an advantage, of course. But uh, still, I find it amazing that of all these changes we've seen, which would seem to argue against the individual trader having a chance. I'm finding trade individual traders now that are as good, if not better than I've ever found before.

Speaker B: And are you finding that they're approaching the data in a different kind of way than other people or than other companies are? Because there's an enormous amount of information available. Um, so a solo trader these days has so much more information than anyone just could have had, like in the 90s even. Right. And so how much information is it and how much is it strategy and how much is it psychology?

Speaker A: The strategies actually in many cases are not terribly complex. I mean, they're not complex. They're, they're basic. So there might be a strategy like, um, waiting, you know, looking for stocks that have these enormous three, four, five day moves up. Uh, you know, and a lot of those stocks, they get these up moves and they collapse again. So, so in an. For a couple of these, few of these traders, at least part they're in one of their early strategies. And sometimes the strategy they still use is going short into these really powerful rallies. But of course they've studied them, uh, they've studied thousands of these examples and, and have developed a sense of where to enter these trades and how to protect themselves and so forth. So it's a trade that is very simple in terms of. You could, you know, just explain what it is. Right. It's very simple. But to actually do it. So you're gonna go, you're gonna go, uh, sell a Stock that's up 500% in the last few days. So that's a lot of people, not many people could do.

Speaker B: That's the hard part, isn't it? Yeah, that's the thing is when everyone is going one direction, for you to go the opposite. Just when everything is going like, it's what. Yeah, so I think, yeah, that is, that does seem to be the conviction, doesn't it? Is that they go against the market at the right time and they set up the right, uh, kind of settings just so they can basically exit quickly and something.

Speaker A: Give another example and some other traders or one trader in particular, I'll think of, uh, sort of buying breakouts. But they've got it defined. It has to be a stock that has a really big up move on the opening. It's a stock that has super high volume on that day. It has to be m. It has to be a meaningful news. So he's got, you know, these, all these, you know, these rules that define what kind of breakout it is. Because if you buy Every breakout, it's not going to work because you get so many false breakouts. But these define which breakouts really to pay attention to. And you know, so the strategy is simple. But he's defined a way to make that breakout strategy work. Uh, even though it's not a very complex and everybody kind of has to find their, their own patterns or their own strategies that, that work for them.

Speaker B: And I guess for the person who you're speaking about, it turned 50k into 500mil. So. Well, not that a few times.

Speaker A: This is another trade. I was thinking when I was giving you the breakout example, that was another trader, but you know, still.

Speaker B: Okay. Uh, but I guess what's interesting is that it's like McDonald's. You don't need a lot. It's just a simple system, a simple algorithm. It just works for you. Right. And that can cost a lot to figure out because to learn you're probably going to have to have some losses. Um, but they stick with it and they have the commitment that they believe still that it can work and, and they just kind of continue at it.

Speaker A: Um, yeah, and it's almost, I would add, it's almost never, it's almost never the initial strategy to start out with.

Speaker B: So it's almost never the initial strategy start with.

Speaker A: Right. So, so it's, it, it seems like every, almost everybody has to go through a process where they started. Marcus. They start trying to do things and whatever they start with usually doesn't work. And uh, and then they eventually figure out other things that do work.

Speaker B: It sounds like the story of all successful people, um, who actually succeed. Right. Is like they start with the plan. Plan fails at the first step and they have to kind of adapt super quickly, uh, constantly, all the time. And so it sounds like that is the common thing. So, uh, let me ask you a question. Yeah. Um, so if, ah, ah, so with all the information that you have now. Yes. If you had all this at the beginning of your, um, at the beginning of your career as, what would you have done kind of differently? You know, because, because now there's so much information which you have about kind of how certain people have done certain things. Uh, what would you have done a bit differently had you known everything that you know?

Speaker A: Now the main thing I would do, first of all, I started out personally fundamentally oriented because that was my background. Uh, I was originally a fundamental analyst and, and being a research director, a lot of it was fundamental. But I also at that point started picking up technical. So for me I ended up finding out that uh, we can go into it if you want. But for me personally I have problems with the fundamental side. I uh, found it very difficult to marry that with of risk control. So if I ended up gravitating, you know to purely technical. So if I was starting out I would start out with technical. Personally I would start off tactical as opposed to fundamental. And the other thing it took for the first few years when I was trading and trading was never my, I was never a trader. I uh, was always doing other stuff. Trading was nothing more than a side thing that I do when I had time. I, I didn't have any knowledge or a feel for or understanding of risk management. And so that uh, emphasis emphasizing risk manager from the very beginning uh would be something that I would do. So the rule I said always know where you're going to get out before you get in. Having a stop in every time I put in a trade. I would do that from the very beginning. It took me a long time until I realized that's what I should be doing. Uh, having said that um, I would point out that I'm not, I am not a good trader myself. I, I just know stuff and I trade. Like I say I don't. I uh also realize I should say that one of the important things here is uh, you have to really have a passion for trading. That's another thing that comes out. You really, if you talk to these people, they are really passionate about trading. They m. They love the endeavor. They're. They almost live to trade to use a phrase that have to come across. And I never had that feeling. So to me uh, I don't have the particular right makeup like I talked about the importance of being able to be calm and non emotional. I'm not common on emotion. You have to be patient. Patient uh, to wait for the right trades. Patient to stay with the right traits. Again, I'm impatient. I'm a very by nature an impatient person. A lot of my inborn traits are not conducive to trading. And north side I never did have that passion for trading. I like the idea of being expert at it but I realized hey, I'm not expert at it. This isn't the. I'm good at putting together. Let's say I'm good at writing books and I, I feel I have a superior edge there. But I don't feel that way about trading. So trading has never been my main thing. It's ironic. I write books about great traders. I write books that people tell me got them in the business and, and they made them successful. But for myself, the, it's never been that path. But that's because I've never seen trading as my life, my life goal or ambition. And because I recognize we. I think here's an important thing in general, I think people, people say follow your passion and that's only half right. And uh, for me, again, I didn't have the passion for trading to begin with. But it's not only enough to follow your passion. You actually have to find something that, that you really like following your passion, but that you also have skill at. You need both. So I think we all have different skills and talents and if you stick to what you're good at, you'll be a lot happier than if you try to do something that you're not. That you have no particular edge. I have no particular edge as a trader. I just, my edge is I know, I know a lot about trading and so maybe I could be net profitable where, where I'd be a loser for sure if I didn't have that knowledge because my natural instincts are terrible. But, um, but I'm not skilled at it. I don't have that. And I think to be happy you should be doing something that you're skilled at. And in my case I kind of felt books, I did a good. And I'm uh, happy with those and hey, okay, fine, that's, that's what I see my mission. I don't see my mission to be a trader.

Speaker B: Yeah, fantastic. Um, I mean, of course, I mean, so these books have had a huge impact. I mean, uh, the amount of, of people I know, I told them about this interview and they're like, oh my God, I got that book from three people I know and I pass it on to three people. Ah, so on. So like obviously that's having a fantastic impact. Um, I was going to ask, in terms of the pathways to success, how do people get control of their emotions? Is that something that is possible or if someone just can't handle their emotions just when the market is going against them and everything is going against the strategy and they just, and they can't handle it. Uh, because I feel like emotion is the biggest challenge for traders. Right. And that's the hardest part. So have you learned kind of anything about how to get past emotion or how to train yourself to just be less emotional at the times that it matters?

Speaker A: Yeah, I don't know to what degree you could train yourself to be less emotional because that type of, that sort of part of your inner being, uh, your Particular makeup, how you react to stress and stuff like that. I don't know if you could really change that much. But what you can do is make it so that you don't have to make decisions on distress. And again the best way you can do that is following confidence advice of deciding where to get out before you get in. Because at that point you're totally objective. Uh, you don't have any emotions because you don't have a position. You know, emotions go with a position, no position, you don't have an emotional problem. Right? Who cares? Uh, so uh, as soon as you get into that position your emotions will kick in, uh, if that's what your makeup is. And so if you kind of decide where to get out before you get in and put in the stop, you don't have to worry about emotions because as long as you don't pull your stop, you've now protected yourself and no matter what happens, you're either going to be right or you're going to be out. And so that's the way I circumvent it. The way I deal with uh, uh, emotions is to just always have a protection uh on a position. The only exception is that if you are putting on a position not as a trade but as uh, a long term investment like an alternative. So a few years ago I decided I wanted to have some of my assets in gold just because I thought it might go up and over the long term and instead of having some, you know, that, that money, cash that money. So I didn't so the gold up and down, it didn't make any difference. I just kept them rolling over the futures contract. So that's an example where and you know, got out some five, five, six months ago in that trade, you know, so now I know it's going up since then more but that's besides the point. I, for the time I wanted, I held that but that was not uh, that was not a trade. That was sort of an alternative way of holding assets. Without that as an exception, I always will have the stop on any position so I don't have to have the emotional concern. I, I basically know what I can lose on a trade before I, before I put it on.

Speaker B: And then from an upside perspective, um, are they very like specific on, on kind of the exit or do they kind of just let it kind of run a bit more and adjust very quickly on the upside? They're m successful kind of traders, right? Because obviously um, I mean it's good to protect the downside. But how far Are they letting the upside run?

Speaker A: Yeah, I try to bring the stop into close to break even or break even as soon as I can. And uh, and once I do that, then I don't have to worry much about it because, well, uh, the worst it's going to be is going to be a scratch trade, roughly. And so I try to do that as if it goes my way as quickly as, as I can, uh, you know, even the same day sometimes or within a day or two. If it doesn't, then I can't, you know. But, uh, when I can, I do that. And then I, I might have like an area. Like I say, okay, if this is right, this is the first day, let's say if it's a short position, this is the first area where I think there's major support. Then, uh, for one thing, I'll trail the stop down over time and, uh, just do, do it that way. So I, I don't necessarily have a, a position that I have, uh, I'm gonna hold until this point. I, I will just translate. Move yourself.

Speaker B: Yeah, yeah, yeah.

Speaker A: That's the basic thing. And so I'll never get the entire booth because, uh, I learned for myself that again, if you're trying to get the entire move, then you're gonna have to ride out some pretty violent swings against you. Because very few trends, especially nowadays, go smooth. They, they, the trends tend to be very choppy even when they're going. So I find it easier just to have a trailing stop and I get stopped out. Then I have the luxury of, okay, I can look to get in again, uh, you know, on a, if it's a short on more of a rebound. So I don't always get it. A lot of times I'll miss the rest of the trade. But sometimes I do if it's a lot easier to handle that because I don't have to worry about giving back most of the profits, um, if the move is going in my, in my direction for a bit. So I've kind of mentally adjusted to say, hey, look, ah, my goal. Um, I know I don't have the emotional, uh, makeup to ride a whole move. I just don't feel comfortable doing it that way. So I'm dealing with my own kind of personality here, uh, and saying, knowing that about myself, I may as well just try to get the swing and I'll get stopped out well before the entire move is completed. Uh, but if I do again, I might have a chance to get back in again. So it's not like it's over. And if I don't get in what. At least I made money on the trade.

Speaker B: The number one kind of rule is to preserve the capital. And the second one is just to increase the capital. Right. So is to not lose is number one. And also I think the um, the trading strategy, um, or the trading system needs to align just with how you work internally. Right. Like, and I think that seems to be aligned to. Yeah.

Speaker A: And I would not use the words not lose because you're going to lose. And I personally will lose three out of four times at least. Uh, so it's not a question of not losing, but not losing much.

Speaker B: Much. Oh yeah, uh, of course, much is the key word.

Speaker A: In fact, losing or learning to lose is probably one of the most. One of the main lessons that come out of the books is that you have to. If you try to avoid losing, you're going to lose. Uh, I mean lose in a more major way. Learning to accept losses that is just part of the game is an important,

Speaker B: very important thing and to minimize it and to have the exits in there and the stops in there just before you enter the trade, which most people fundamentally know and yet few people actually follow through with. And then they fomo in and out of trades and, and, and that's when like, like, um, internally. Yeah, they're all over the place, you know, And I've have a lot of friends like that that have lost a lot of money and then have integrated some systems like this where they're like. And now they have like hundreds of indicators just to say all right, because the seller buy now, you know, and so they've gone so far, uh, to have as much insight and then just follow the system. I actually had um, some dinner the other night, um, and my friend was like, he had. He'd made a lot of money and he lost a lot of money and now he's making a lot of money again and he's like, I just can't even select anything anymore. I just have. He said I just have to follow my system because I don't like, I can't. Um, um, what's the words he said? Um, the trust of his own like, emotions is just not like strong enough. So it's a lot of money and he just has to follow his system now and it's working. But I can see the conviction and I just follow along with him. Right. Because I know that he's better than me. So. And ah, because um, he has the passion. Um, and so, and he's just basically in a Countries constantly. But the best kind of people I know right now, ah, or the most successful kind of people have such kind of solid strategies and systems and they have no emotion about the thing that they're in. And they will cut out like, like super quick, um, because that's what the system says, you know. And so, and he's been kind of speaking to me saying, stop being so emotional, stop caring about that thing or that thing or that thing and just have the system and just follow the system. And that's the number one rule. And like, I'm not that good of a trader, just to be clear, but like, I'm trying to learn these things. Um, and so, uh, but it's certainly something that you need that system to avoid. The psychology, uh, the psychological hindrance. It's going to be kind of the brain, which you have, you know, because I don't think kind of like the instincts are that kind of good under pressure, you know. I think for some there are. And, and so on that point, how many people, across all the people kind of who you've interviewed have gone by instinct, you know, versus systems?

Speaker A: Uh, how many have. Have what have gone.

Speaker B: Have gone by instinct? Yeah. And so they in and out just by kind of instinct instead of like advanced systems, it's an individual. And if there are none, that's great as well, by the way. But if there are some, that's really interesting. Interesting.

Speaker A: It's some. It's some. So obviously. Well, most of the traders I interview, most of the people with these great records are discretionary to some m. Extent. They may have methodologies. Ah, but, or even systems to some extent, but there's still always discretion involved. Uh, not in all cases, but in most cases. Uh, and, but so, so some of them, I've come across traders who have just good natural, very good natural instincts. Uh, and that's again, it's an innate trait and it depends on the trader. So not, and I should say here, that this, this intuition thing. Right. It's nothing mysterious about it. What intuition? Uh, or we call it instincts or intuition, all that is is kind of like subconscious experience. So they've like focused on the markets all day for years and I've seen so many situations and, and when they get their intuition, like saying, you know, something's wrong here or whatever, it's, it's kicking in something in their, in their memories. And whether they can explicitly say what it is or not, it doesn't make a difference. It's, it is that, um, that experience that stares on a Subconscious level. So, so there's nothing magical or mysterious about it. It really is part of experience. But it, it comes out as an intuition. And some traders have that and it's important. And for some traders, not. It's really, it's really a matter of, of the individual trader. Um, it's like. I'll give you a good example of that type of instinct. So this is in the first chapter of the first market wizards book, uh, Michael Marcus. Uh, so he talks about one time he, he was bullish on soybeans. And he had this, uh, he had a very large position, but he didn't have the maximum position allowed by the CFTC for a single trader. So uh, I don't know. What if he had a thousand contracts? I don't know what he had, but he had a really large position but not the maximum. And a, uh, report came out that was really bullish on soybeans. And this is still when he's dealing, you know, they're dealing with brokers. We're talking back now, I interviewed him in the 80s, but we're talking now about experience from the 70s. Right. So, um, so as broker calls, you know, calls, you know, really good news, you know, I mean, it's like, I mean the market's gonna be limit up. And uh, But Michael's kicking himself because he doesn't have a maximum position. So he puts in an order at the market just in case it should trade up, limit up for the remaining number of contracts he has that he could buy. Whatever it is, 300, 500, I don't remember. So, uh, the market opens up limit up. And within 15 minutes he gets a call from the broker that he's filled on his. But his order. And all of a sudden dawns on him. This market was supposed to go limit up three days or four days. And I'm getting filled on the first day. And instinctively he calls, he does calls a broker and he starts selling wildly. He starts dumping his whole position. And in fact he sells so much that he actually ends up net short. He kind of over. He oversells. He doesn't even. He said the first time he made, the first time that he could remember that an error made of money because he was so. He was so wild to get to get out of that position. He was just selling hundreds of contracts at night and just oversold by. By error. Uh, and of course the market crashed after that. But it was that instinct that, hey, this doesn't smell right. I shouldn't have gotten filled. He realized even though he had that order. He shouldn't have gotten filmed. And uh, and so that's a perfect example of, of intuition.

Speaker B: And so, but he went against his, his system or his strategy, which is against the rules. So they're kind of against the rules of everyone else. But they, then it worked in his way as well. Right. So that's where experience, um, he was

Speaker A: very bullish on beans. He had this very large position he wanted, but he realized the market was telling him that something is, you know, your, your, the position is, is wrong. There's something, something wrong. This action says that's the wrong position. And he acted, uh, you know, instinctively and immediately, uh, to get out of that position.

Speaker B: Yeah. Fantastic. And um, speak to me about Fun Seeder. Yes, yes. What is Fun Seeder? Because I thought that was a really interesting.

Speaker A: Okay, so, yeah, so idea and front cedar, you know, so for the website is funceder.com and fund f u n d seed s e-e - e r fundseeder.com so the idea was, hey, just uh, like in my books, I find these people all over the world who are like, may not be known or maybe in some cases they don't have access if they wanted to match money, they have no means of that because they don't have the pedigree or whatever. They just happen to be very good traders. But the idea was there's probably people all over the world, lots of people who are, uh. Not that there's a lot, not that there's a large percentage, only a tiny percentage of traders would fall into that category. But there's so many tens of millions of traders globally that you only need a small fraction that are really good to make a difference. And uh, the idea, there's probably a lot of traders out there that are really good, have found their methodology, but don't have access to capital. So uh, um, funds here is like two, two companies. One is technology, one is, one is investment side. The technology side provides three, uh, metrics, performance metrics for four traders to uh, to get like analytics charts on their performance, stats on their performance. And that's free. And the idea there is you're trying to get them to get on the platform so you can find them. And then the investment side of the company or part of the company is looking to identify, uh, traders that can then be used for a management product. And so this year, actually just very recently, the first fund got started, uh, using traders off the platform essentially. And so what it is, is it's a way for people to get free analytics. But uh, more importantly for those traders who would like the chance to manage assets, if they are really good, it's a way they could get access to managed capital without having you know, going to Princeton necessarily or have worked for a hedge fund or know anybody or be in the right country. I mean it could be anywhere. So a couple of these traders are you know, in Portugal or whatever. I don't know, just places you wouldn't, you wouldn't associate with, with uh, having you know, really good traders.

Speaker B: M. And, and so does that mean that a person like me, I can sign up and can invest in somebody's fund who I like their kind of track record. So this person's say for example, who you're interviewing, athlete letters, book, um, the name who you cannot say, um, that is that turned 50k into 500mil. Can we follow that person? Or is that person kind of. Yeah, you know what I mean? Or, or those, the kind of people that are potentially a part of the platform that we can have a look at kind of their uh, track records

Speaker A: that's like say that type, you know, has no so much money. He's nowhere not interested in managing anybody else's assets. And the fact at this point he's made so much money he's looking to be doing other things and sort of investing in other things and doing philanthropic work and stuff like that. So it's.

Speaker B: But uh, the thing, there's those types of people in there that are uh, just like starting out mostly. Yes. Like in the beginning.

Speaker A: Well they usually. They may have a number of years, they may have longer records as well. But essentially it's not a platform for somebody to go on and invest in specific traders. Basically it's a platform where fundseeder can take certain of those traders and put them in, in a multi trader fund and people could invest in the multi trader fund essentially.

Speaker B: Okay, and are there any kind of limitations on who can invest in those funds or is it just open to the general market?

Speaker A: It's like any type of hedge fund. There's, there are you know, sort of minimum capital requirements and uh, there, there are in line with normal regulations, whatever, whatever is required for people to invest in an alternative investment.

Speaker B: So that will be uh, we'll put uh, the link in the show notes. Um, um. So everyone, I can access that. Um, what's the next book? Because um. Yes, what's the next book called? And then when's it going to be launching? And you already spoke about the one example of that book. Uh, just from that guy who turned 50k into 500 million. Uh, but who else are you interviewing and what's kind of this book about?

Speaker A: So this book is, the focus is we started doing, this is the first book I'm doing with a co author, uh, as I said, fellow named George Coyle. Um, and uh, we started, we ended up with having too many, too many um, traders that it looked like we were just gonna end up with too much text given the chapters we were writing, given how much text that was and then how many traders we'd interviewed that still were not, you know, unwritten. It was still, still doing some entries and so forth. But it became clear we couldn't fit this all into one book. So the idea then was to split them into do the solo traders in the first book and do the hedge funds in uh, managers in the next book. And so right now, so, and this, this book is still being written and the way the publishing world works, not because it takes that long to get printed, but because they have to do these marketing programs and these things are like fashion, you know, for the major booksellers. They've got to provide the list of uh, you know, the spring list and the spring or summer list is like provided in the fall of the previous year type of thing, you know, so, so there's a long lag time before the book actually appears. And as I said, we're not, we're just in the midst of writing it. So this book really won't come out until next summer. Uh, and it's, it's like every other book in the series. It has market wizards name. This one will be called Market Wizards the Next Generation basically. And uh, and it's almost all the traders in the book are, are on the young side. So this is certainly by far the youngest cohort of traders I've ever interviewed. And so it's basically uh, the focus is individual traders, almost all of them who are also young. Considering that we're looking for traders with at least 10 years track record, obviously they can't, there's a limit to how young they could be. But for a book like this, well, some of them in their 20s and even 30s of course is very young. And um, so I, right now, the oldest one so far right now is 41, but there's one we're still interviewing who will break that mold. But he's got a really great record. So there may be one in there that's like 50. But you know, basically the, the focus is more on individual young traders in this book.

Speaker B: And so what are some highlights from this book already? Um, um, like awesome key insights or something that you've learned from these interviews that you maybe haven't seen before or something that was a fresh insight or something super interesting.

Speaker A: Yeah, there's probably a number of things, but from a personal standpoint, I guess doing these interviews it's made me personally focus more on shorter term charts because I see so many of these traders, even if they have a longer term idea, are executing with the aid of shorter term charts. And so it's, it's made me pay more attention to shorter term charts as a way to add to positions with very close stops and stuff like that.

Speaker B: So how short?

Speaker A: Oh, uh, well, not as extreme as some, some of these traders are down to, to literally two minutes and five minutes.

Speaker B: That's what I thought it was going to be like that quick.

Speaker A: I just can't get to that level and I, and I don't want to watch the market like that. So for me short is uh, 1 hour and 15 minutes. You know, those, those two, you know, uh, it's really a way to just add to a position with a very close stop. And so the, the percentage, the percentage hit rate is very low. But I'm risking so little on these trades and I'm, I'm doing it, it's sort of saying okay, here's a formation. It looks like it really, if it's going to go here, it should just break down right now. And so I could go short there and have a stop really close. And most times I get stopped out. But it's such a small, it's a small, but it's a way of fine tuning. You can't do that with daily charts. To get it that close it just, you can't do it. And I've used it mainly for myself as a way of adding on to positions where uh, you know, where you know, maybe I would hold three times as much as I would normally hold because the second two thirds is put on with such a, if it works, you know, like most times it won't work but the occasional times it does, I get to add the, this second, the second two thirds with really close stops. So uh, so basically the potential would be 10, 20 times of what I risk on those positions. So most 8 out of 10 times, 9 out of 10 times I'll get stopped out. But the times it works it kind

Speaker B: of makes up for that for these younger traders. Um, are there any specific asset classes that seem to be kind of popping up kind of more these days than others?

Speaker A: Uh, no, I mean the trade. Well, traders base. Again, it's the same liquid markets as others. And uh, so it's typically equities. It's always equities and futures that is the focus of these books. Uh, so no, no difference there. I guess what I've surprised that is a few of these traders, uh, made their initial, their initial success and the original building of wealth was on small. On small caps, which is an area that I personally never looked a little look at. But, and may. But for them, they find the inefficiencies there.

Speaker B: Yeah. Fantastic. Jack, this has been a great conversation. I'm just conscious that we're almost at time. Um, how do people connect with you? And well, before that, um, um, if you could give just one piece of advice, just uh, to all the people who have read your books, who love your books, who buy your books for others. Right. Like the biggest thing which you've learned that can help the most amount of people who haven't achieved that success just yet. Yes. What is the biggest piece of advice just before, um, the conversation is wrapped up.

Speaker A: Okay. Without repeating, of course, a number of things we've talked about would fall into that category, right?

Speaker B: Yeah.

Speaker A: But, uh, something that we haven't talked about, I would say is don't think that you could copy somebody else's strategy and be successful. You could learn from somebody. You can learn from lots of people. You can pull certain things from different people. But ultimately, virtually every trader I interview has developed their own methodology. Now, their own in quotation marks, their own methodology may be 100% somebody other people's methodologies. And there's one trader in this book that says, I haven't invented a single thing as a definitive statement. Nothing I do is new. I haven't invented a single thing. But what he's done is he's taken different things from different people and put it and found out what works for him. So ultimately it's a matter you can learn from other people, you can take from other people. But ultimately you have to find things that you believe in that fit your personality, that uh, you got to make it your own. So don't think that you could just go and buy a system or copy somebody else's approach and you're going to be successful because you won't have their conviction, you won't have, you won't have their particular talents to make that strategy work. You've got to find your own, your own strategy, even if it's learned from other people. But whatever you put together as your methodology has to be your own.

Speaker B: That's a great piece of advice and I think that's an excellent, especially on the point around conviction, right? Because you can follow someone else until it matters and until their size. And then all of a sudden you're just like, what do I do now? So I think that's a great, a great, great, great piece of advice. Um, how do people connect with you? Um, and yeah, let's go there.

Speaker A: So my own. I have a website I did years ago and I honestly don't update. I just don't want to take the time to update it. But there's stuff, some stuff on there and uh, uh, and that's just, uh, jackswaker.com my name.com and on Twitter there are times I post a fair amount. There are times I don't post at all. But, uh, my Twitter handle is at my name, Jack Schwager.

Speaker B: Fantastic. So, um, highly recommend that this is something, um, that you follow, but also just buy the books if you haven't already. They're fantastic books and they give you the psychology and examples and all the thinking and it's going to be just a fantastic way like, like if you want to get kind of better at the psychology of trading and understanding how successful kind of traders actually think and how they operate. Um, highly recommended, um, that these books are purchased. And like, I just can confirm that this is the number one book that the most m successful people I know have sent to me and have given to me and have given to others. Right. So that does say something. Jack, thank, uh, you so much for coming on the podcast. Uh, this has been such a great conversation and I really look forward to seeing that next book and hearing just more about, um, that genius who made 50k to 500 million. But thank you so much for coming on the podcast today. Um, yeah, and we'll talk soon.

Speaker A: Nice chatting with you. Hey, take care. Bye.

Speaker B: Bye. Thanks for listening to the Growth Manifesto podcast. If you enjoyed the episode, please give us a five star rating on iTunes. For more episodes, please visit growthmanifesto.com podcast and if you need help driving growth for your company, please get in touch with us at Webprofits IO.