6 Timeless Trading Lessons from Jack Schwager

I’d like to share with you six timeless trading lessons I learned from speaking directly with Jack Schwager.

Lesson 1: “Early failure is not necessarily predictive of future outcome.”

Jack spoke about how an early or terrible failure didn’t necessarily mean that you are bound to fail in the future as well. This is an important lesson because there are a lot of talented traders with an amazing skill set that often get bogged down by failures early in their career. Jack Schwager goes on to say that he’s seen a number of traders turn their humble beginnings into hugely successful careers due to their self-confidence and extraordinary analytical skills. He gives the example of Michael Marcus, who originally lost his mother’s money early in his trading career, but later went on to turn $30,000 into $80 million in the space of 12 years. So the point here is to be undeterred by early failure, maintain confidence and understand that you only truly fail if you give up. Most traders will experience some form of failure before becoming successful in their own right. (Also see “What is Value Investing?“)

Lesson 2: “A trait that is essential for great traders is the ability to be flexible.”

Jack emphasizes how successful traders who have been around a long time are continually adapting to market changes, and are prepared to adjust their approach or bias to be on the right side of the market. A trading strategy that has worked in the past might not necessarily withstand the test of time moving forward, which is something we need to be aware of. The most important aspect of being a flexible trader is knowing when you’re wrong, being ready to accept that you’re wrong and also being humble enough to switch positions if required.


Lesson 3: “Don’t look for the trading secret, there isn’t any trading secret. Look for a trading method that’s right for YOU, it isn’t going to be the same for everybody.”

This one is mostly aimed at entry-level traders who are taking their initial few steps into the market. There’s a common misconception that a “secret formula” to achieving success in trading exists, which simply isn’t the case, as Jack Schwager points out. He goes on to state that it’s very important to create a trading method that aligns with your risk tolerance, patience and personality traits. Something that works for somebody else isn’t necessarily going to work for you. This can be backed-up by some of the traders whom Jack interviewed for his Market Wizards’ series, who share personal experiences of blindly following a tip which lead them to losing substantial amounts of money.

Lesson 4: “Don’t just trade anything because an example works, don’t jump to any conclusions.”

Jack shared one of his pet peeves, “the well-chosen example”. A term he coined that that refers to a chart pattern or trading strategy that has been taken from an isolated scenario in the past and presented as though it has an edge to continue to produce profitable trades in the future–which is misleading. This highlights the pitfall of looking at charts with tunnel vision and analyzing strategies with a small data sample/number of trades.

Lesson 5: “Know when you’re getting out before you get in.”

When asked to share one of the best chunk-size bites of trading advice he’s received in ten words or less, Jack responded with the above quote from Bruce Kovner. A trader should clearly know where (or when) they’re going to exit a trade even before they get into the market. The reason being, before you get into a trade you have complete objectivity, whereas once you’re in a position you can lose objectivity and make irrational decisions based on fear and greed.


Lesson 6: “There are a million ways to make money in the market, unfortunately they’re all difficult to find.”

Before signing off, Jack Schwager leaves us thinking about the reality and difficulty of finding edge as a trader. While there may be a million or more ways to make money trading (not a select few as some may lead you to believe), it requires a lot of hard work and dedication to be a sustainable trader who makes strong returns over the long term.

While reasonably simple, these six fundamental lessons are partially responsible for the success of many great traders. To hear Jack discuss each one of these topics in greater detail and more, you can listen to the full-length interview here
Full credit to: Aaron Fifield


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