New Market Wizards - PursuitOfEdge/books GitHub Wiki

Bill Lipschutz

"i don't think you can consistently be a winning trader if you're banking on being right more than 50 percent of the time. you have to figure out how to make money being right only 20 to 30 percent of the time."
thinks the trait of winning trades is pretty much just hard work, dedication, commitment. obsession with improving their craft. then intelligence helps a bit
says he would trade for free because he loves the game
his first experience was turning a $12k inheritance into $250k over 4 years but then blew the account in a few days due to overleverage

William Eckhardt

doesn't believe intelligence helps much
talks a lot about evolution and how the markets make us feel and how the comfortable thing is the wrong thing
"call of the countertend" - he really hates countertrend it seems and says the whole buy weakness/sell strength, higher win rates, smaller profits, is doomed to failure
Red Queen Hypothesis - because competition is so fierce have to evolve faster just to stay in the same place
good systems are developed over YEARS
thinks indicators like RSI are worthless - "what they make during market consolidations, they lose during trends"
if he were to start over, he would focus more on money management. never risk more than 2% per trade
"you can't go broke taking profits" - actually he says that's how they DO go broke, where amateurs go broke taking large losses, pros go broke taking small profits
when he was first trading soybeans, he lost -50% of his equity in 5 minutes, then of course reduced position size to recover
believes that the most fundamental principle of successful trading is cut your losses, let your profits run. and that people instinctively go against this and really struggle with because it's uncomfortable, but it's the right thing to do
Howard Seidler: "you need to have the persistence to stay with your ideas day after day, month after month, year after year, which is hard work" "if you're following your rules, even if you lost money, you haven't performed poorly as a trader, the probabilities will work out"

Stanley Druckenmiller

him and Soros hold a core group of stocks long, a core group of stocks short, and then use leverage to SP futures, bonds, and currencies
believes in preserving capital and hitting home runs, really pressing positions with big leverage when confident

Tom Basso

highly recommends keeping your day job as you figure out trading
claimed by Jack as the most zen trader and role model with how relaxed he is
he first trade was a losing corn trade and his stomach turned
lost money for like 5 years but never gave up and still had the confidence that he would make it one day
he missed a trade that would've turned $5k into $35k cause his fam came to visit and after that never missed a trade again
had an equity that started $130k and turned to $500k in one month and then gave up 80% of it, after that he decided it was better to just have manageable swings and keep a balance each day
says if he handed someone a black box system that worked, that person wouldn't be able to trade it because they aren't comfortable with the system
next 1000 trades, once lost -15% in his big portfolio overnight and it didn't bother him at all, he was just "curious" how that could happen
thinks of trading in scores of years, might have a bad year might have a good year you would have seen it all by the end
does a lot of mental rehearsals and plays in his head of what the worst could be, thinks of his life as a movie, as in watching a movie himself and not taking it too seriously like a horror movie
he started signals -> risk management -> psychology but in the end he thinks it should be the opposite, psychology -> risk management -> signals
if he retired he would basically just be doing the same thing as he does now, just with assistants when he wants to go on vacation

Linda Raschke

trades short-term
strongest skill is picking entries
waits for the rubber band to stretch as far as possible (mean reversion)
good trades last up to 10 days, but usually gets out after 2 or 3
doesn't set price targets, just goes by feel
believes in chaos theory, how you can predict short-term but not long-term, and how you can predict price direction but not magnitude
when she has a bad trade, she doesn't just dump it immediately, she waits for a bit and tends to get a better price because the whole reason she got in was because it was overdone
says her smallest positions end up her biggest losers cause she neglects them
trades too many markets which leads to sloppiness
70% win rate
450/200 win/loss size
believes she can see patterns better than most people due to her studying music/piano very young
feels like if she gave away all her secrets it wouldn't help because most people can't control their emotions or follow a system

Victor Sperandeo

throughout his entire career, placed a greater emphasis on loss avoidance than scoring large gains
never finished the credits for his college degree, but read 2500 books on markets
played poker as a kid, memorizing the odds for all the card combinations
the median swing in the Dow during a bull market is 20%, so if the market is up over 20%, start looking for correction
his definition of bear market: minimum of 6 months and -15% decline
if market has risen 20%, even if still bullish, he has a max 50% position size (sounds like a lot) because it is at its median peak over the years
losses are always predetermined so that he can measure his risk, always knows where to get out before getting in
taking a loss never affects him, because he never takes big losses
when trading very large, the position should make money instantaneously, else you get out asap. you gotta stay in business because if you don't you can't make money
over a 5-year period, he trained 38 people and taught them everything he knew, and only 5 were able to make money
the best trader he trained was a high school dropout who didn't know the alphabet, bomb exploded near him in Vietnam and shrapnel in his pancreas, due to his experiences he was always afraid of everything, so he cut losses quickly
also trained a guy with 188 IQ and knew everything on Jeopardy but never made any money
thinks smart people struggle because they rarely make mistakes and they rationalize, but in trading you have to admit your mistakes
thinks most of his trainees failed because they lacked emotional discipline, he could do it over again he would pick people just based on psychological traits, the ability to admit mistakes and take losses quickly, and not abandon their game plan
in 1929-1932 and 1973-1974, worst bear markets, buy-n-hold would have lost 75-95% and would have bankrupted people
when out of sync with the market/taking a string of losses, just cut back position size, like baseball Ty Cobb just make contact with the ball until you get your confidence back
the single reason people lose money is because they don't cut their losses short and don't treat it like a business
likes trendlines (says most people draw them incorrectly), failure tests of previous highs or breaks of them
trendline goes from lowest low to highest low immediately preceding highest high
1989 crash - the market had been up for 200 days without an immediately downtrend, versus the historical median of 107 days, the market was up over 24%, studies show 7/8 times it will correct that carried prices below that point, the changes of the market moving higher are very low

Blair Hull

you can still make money blackjack card counting today, it's what he'd do if he didn't already have money
it's not the mathematical ability, but the discipline to follow an edge that leads to winning
playing in a team helps with discipline that's hard to do alone
there are very few people with the skills to get an edge, then far fewer who can withstand losses emotionally and will still stick with the system, probably only 1/500 has the discipline to be successful
team approach bet size 1/50 of capital so $1000 => $20
talks about small edge over many times, play the edge as much as possible
trades mostly delta zero/neutral
infrequent directional bets, but when they do they are usually opposite a big news event and at maximum panic
covered calls are a really bad idea, just sell instead
option sellers have the advantage over options buyers
his strategy is basically just tracking theoretical/relative value and buying the underpriced ones, selling the overpriced ones
good chess/bridge players would make good options traders
reduce position size when losing e.g. when down -50%, your size should be cut in half
people who obsess about being good traders/showing off tend not to actually be the best traders cause they are too ego-driven

Jeff Yass

win rate is about 55%
says to focus on big gains over probability and to bet bigger when there is a higher probability of success
never trades directionally
if you don't diversify you're literally throwing away money, even if it reduces return, it reduces the risk EVEN MORE, so ALWAYS diversify

Monroe Trout

https://the7circles.uk/monroe-trout-best-return-low-risk-can-buy

risk management: never lose more than -1.5% on a trade, -4% in a day, -10% in a month
aims for +30% CAGR at -10% maxDD
has achieved +67% CAGR and -8% maxDD, profitable 87% months
has 95% of his net worth in his funds, rents his condo and drives a cheap car
really enjoys and is passionate about trading, says if he didn't do it he would quit the next day. gives himself 10 vacation days a year and never takes them. believes good things have a price to pay
uses systems, but says half of his performance return is due to his discretionary entries and exits, from his experience trading on the floor
if he gave 10 CTAs his exact system, most of them would not make money
says most people place their stops a tick or two above the low and the high, and he literally moves the market to hit them
holding periods are a day up to a week
trades about a dozen models
believes the best trader is the one with the highest daily sharpe ratio at the end of the year
trading volume forms a U-shaped curve, most at the open of the day and at the close
risk is always bigger than you think. e.g. in 1987/89 black monday crash the statistical chances of that are less than 0, but it was still enough to happen and wipe people out
he still gets angry when he loses money, although he considers it irrational and it doesn't affect his trading, he believes it's just something that you never completely get over