Jack D. Schwager - Unknown Market Wizards

Unknown Market Wizards

The best traders youve never heard of

Jack D. Schwager

Contents

Other books by Jack D. Schwager

Market Wizards: Interviews with Top Traders

The New Market Wizards: Conversations with Americas Top Traders

Hedge Fund Market Wizards: How Winning Traders Win

Stock Market Wizards: Interviews with Americas Top Stock Traders

The Little Book of Market Wizards: Lessons from the Greatest Traders

A Complete Guide to the Futures Markets: Technical Analysis, Trading Systems, Fundamental Analysis, Options, Spreads and Trading Principles

Market Sense and Nonsense: How the Markets Really Work (and How They Dont)

Schwager on Futures: Technical Analysis

Schwager on Futures: Fundamental Analysis

Schwager on Futures: Managed Trading Myths and Truths

To Aspen The Next Generation May you have the charm, beauty, and sense of humor of both your parents and the spending sense of neither. There is no such thing as being right or beating the market. If you make money, it is because you understood the same thing as the market did. If you lose money, it is simply because you got it wrong. There is no other way of looking at it. Musawer Mansoor Ijaz Every decade has its characteristic folly, but the basic cause is the same: people persist in believing that what has happened in the recent past will go on happening into the indefinite future, even while the ground is shifting under their feet. George J. Church We have two classes of forecasters: those who dont knowand those who dont know that they dont know. John Kenneth Galbraith

Preface

T HE premise I had when I set out to write Unknown Market Wizards was that there were solo traders, operating in complete obscurity, who were achieving performance results that far surpassed the vast majority of professional asset managers. I found these traders and proved my premise. But I also found something else that amazed me.

I never thought I would again find traders whose records matched those of some of the traders in the first Market Wizards book. I assumed the extraordinary performance achieved by some of those traders, while a testament to their exceptional trading skill, was partially made possible by the unique markets of the inflationary 1970s. Moreover, the ensuing decades witnessed enormous growth in the application of quantitative power to trading and investing, with professional managers accounting for an ever-increasing percentage of all tradingtrends that suggested it would be far more difficult for traders to excel by wide margins in todays markets.

To my great surprise, some of the traders I found in writing Unknown Market Wizards may well have the best performance records I have ever encountered.

The opening sentence of the preface to the first Market Wizards book, written over 30 years agoThere are some amazing stories hereseems entirely appropriate to this volume as well. Here are the remarkable traders you will meet in Unknown Market Wizards :

• A college graduate who started with a $2,500 account and in the course of the next 17 years pulled $50 million of profits out of the market.
• An ex-advertising executive who in a 27-year career as a futures trader achieved an average annual return of 58%.
• A stock trader who developed a unique trading approach that utilizes neither fundamental nor technical analysis and turned his original $83,000 stake into $21 million.
• A futures trader who over a 13-year career has averaged 337% per year without any drawdowns exceeding 10% after his first trading year.
• A bellhop in the Czech Republic whose day trading strategy for buying stocks has provided return/risk performance that far surpassed over 99% of both long-only funds and hedge funds.
• A futures trader who made and lost over one-half million dollars twice before developing a contrarian methodology that led to a 20-year career of consistent trading success.
• A former US marine who designed proprietary software to automatically trade market events and has a 10-year record of outstanding return/risk performance.
• A futures trader who has averaged a return of 280% per year with an end-of-month maximum drawdown of only 11%.
• A music major who used his self-taught programming skills to design stock trading systems that delivered an average return of 20% during the past 20 years, well over triple the S&P 500 return during the same period.
• A one-time professional tennis aspirant who achieved a remarkable average annual return of 298% over a near-decade as a futures trader.
• An equity trader who by combining long investment positions with short-term event trading has tripled the S&P 500 performance in both return and return/risk terms.

If you are expecting to find step-by-step instructions on how to make 100% a year in the markets with only two hours of work a week, quick, put this book downyouve got the wrong book!

If, however, you are looking to learn from some of the worlds best tradershow they think about markets; what they have learned about trading; how they have improved; what mistakes they have learned to avoid; what advice they have for other tradersyou will find much here that is instructive.

Acknowledgments

The first step in writing a Market Wizards book is identifying exceptional traders. In this regard, two individuals were extremely helpful. Steve Goldstein, Managing Director of Alpha R Cubed, a London-based coaching firm, was the source for two of the traders included in this book and several others who might appear in a follow-up volume (if there is one). Mark Ritchie, an excellent trader in his own right, recommended two other of the included traders. Ironically, I had intended to interview Mark himself, but the text I completed reached book-length before I scheduled the trip. Perhaps he will appear in a future volume. Posthumous thanks go to Bill Dodge, who brought Jason Shapiro to my attention.

FundSeeder.com (a website created by FundSeeder Technologies, a company I am affiliated with) was the source of three of the traders in this volume. I also used FundSeeder.com analytics to calculate all the performance statistics referenced in this book.

I am grateful to my wife, Jo Ann, who, as in all previous Market Wizards books, provided an invaluable sounding board and offered constructive criticism where appropriateadvice that I always followed.

Of course, there would be no book without the willingness of the traders interviewed to participate and openly share their experience, wisdom, and insights. They provided me with great material to work with.

Thanks to Marc Niaufre, who proofed all the chapters and managed to find typos that had eluded me despite multiple readings.

Finally, I would like to thank my editor at Harriman House, Craig Pearce, who made the final step of bringing my manuscript into polished form a pleasure rather than a chore. He struck the perfect balance between offering revisions that improved the text and avoiding unnecessary changes.

Part I: Futures Traders

Note: Readers unfamiliar with the futures market may find it helpful to first read the short primer provided in Appendix 1.

Peter Brandt: Strong Opinions, Weakly Held

I T is remarkable how many of the Market Wizards that I have interviewed failed in their initial trading endeavorsome multiple times. In this respect, Peter Brandt fits the bill. What is unusual about Brandt, though, is that after well over a decade of spectacular success following his initial failed attempts, he lost his edge, went cold turkey on trading for 11 years, and then resumed trading for a second lengthy span of outstanding performance.

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