Stock Market Wizards: Interviews with America's Top Stock Traders
by Jack D. Schwager

Aug 2001

Not a masterpiece, but better than expected

I bought this book partially out of homage to Schwager, as the first two installments of Market Wizards had such a powerful effect on my methodology and mindset. (Ironically, though, not until the third or fourth reading of each, after two or three years of having them on my shelf). But mostly I bought SMW because I wanted to read the interview with Mark Cook, an exceptional trader I had heard a fair bit about through the grapevine.

Cook aside, my intuition told me this book would be a letdown overall… and that's exactly what it was in comparison to the first two. Being prepared for this tempered my disappointment, though, and allowed me to get more enjoyment out of the bright spots.

Furthermore, after reading a few of the interviews a second (and third) time, I have to revise my earlier poor impression and give Schwager more credit. I am upgrading my initial assessment from mild disappointment to worthy and interesting read.

A good measure of interview books is whether those being interviewed have unique and interesting things to say, or a fresh angle on a subject to give it a new or insightful perspective. I thought that Mark Minervini had some interesting commentary on why paper trading is a poor substitute for the real thing, and how skilled traders can use gut feel efficiently while novices have to fight it. John Bender's perspective on options pricing was fascinating, rooted in a common sense that most quants overlook. Stuart Walton was interesting because his psychological background was so refreshingly atypical, and Mark Cook just comes off as a candid, open and great guy all around. So, when all is said and done, Stock Market Wizards is still a step down but worth the time to read.

Last but not least, at least two interesting thought paths developed after further reading of Stock Market Wizards.

First, what are the psychological implications of the fact that so many successful traders blew out, or otherwise experienced severe financial pain, early in their careers? Is this some kind of necessary catharsis that leads to greater chances of success? If so, what are the deeper implications?

Second, why is it a common theme of successful short term traders—who tend to be more consistent in their gains—that they have to "work on taking profits too quickly." In other books too (Marty Schwartz from the first Market Wizards), taking profits too quickly is something short-term traders chide themselves for and say that they have to work on.

But could this tendency to move "too quickly" somehow be a component of success? I think it is at least a possibility, because the thought of taking profits off the table ("making the cash register ring," as Schwartz so aptly puts it) has been so vilified and rejected by the common wisdom that there may well be some value in it.