After some of the books I’ve read recently this came as a bit of light relief. Most of the book consists of edited transcripts of conversations with traders. Much of the chat consists of war stories – how they got started, best trade, worst trade etc. But nestled in there is much advice too. What’re remarkable, given the diverse backgrounds and strategies that each trader brings, is how consistent that advice is. Schwager summarises these in 42 points in the last chapter, but there is still value in reading the whole book to understand them in a better context, and reinforce them.
Rather than repeat that summary I’d like to pull out two, related ideas that are in the book. Perhaps the most interesting is that most technical methods by themselves are ineffective. Its suggested that what they really do is give a trader a framework through which to understand the markets. Although not testable in any meaningful way, it does suggest a reason why traders who use technical analysis can be successful, despite the academic record against it and its own internal inconsistencies.
The second idea that I found interesting is that for a trader to be successful he should use a system that they developed themself. There’s two reasons given for this. It seems to be important that the trader works in a way that they are comfortable with, and an off the shelf system (even if it works) is unlikely to match up well. And a trader must have confidence in any system they use, so they keep trading when things aren’t going well, and they are more likely to have faith in something they have tested themselves. There are numerous people selling courses or systems that offer an easy route to riches. Many are little more than scams and, unfortunately, the strongest message from the book is that, like everything else, it takes hard work to get good at trading.