Market Overview

Jack Schwager Explains Why Trading is More Difficult Now


Market Wizards author Jack Schwager recently spoke to Benzinga about his latest book, Hedge Fund Market Wizards: How Winning Traders Win. That whole interview can be heard here.

Early in the book, Schwager states that, "Trading is more difficult now because hedge fund accounting accounts for a larger percentage of trading activity". We asked his to elaborate on that.

"Basically, if you go back to the first book 25 years ago, you didn't have a lot of alternative strategy type players in the marketplace. You had a lot of unsophisticated speculators and traditional long only players. Hedgers who weren't seeking to maximize profit but really just take care of their own hedger needs. Now, there are a lot of large, sophisticated players. It's like a professional chess player playing a bunch of amateurs and then, 25 years later, playing against master chess players. It becomes more difficult. You don't see the gargantuan gains we saw in the first couple of books. Then there were strategies like trend following, which was a very strong strategy in terms of large returns, and while it had volatility, the returns were quite large in relation to the volatility. Now, it's become a matter of - there's still an edge game because markets do trend but it's more difficult to extract the trends. There are many more false breakouts."

We also asked Schwager how the average investor can employ a strategy from his book, but he said that there is no simple answer.

"What they should get out of my book is not a specific strategy, but 50 different things they can do about their own trading to make it better. It's not like I'm telling people 'this is the way you trade'. In fact, I tell people what they're not supposed to be looking for. You have to find a method that's going to fit what's right for you. For some people it'll be fundamental, for some it'll be technical. Some will be short and some will be long term. Everybody's different. Assuming that you find your approach, there are a lot of things these traders do that have nothing to do specifically with their approach, they would be true for any approach. Sizing your positions correctly, how you manage your risk, lots and lots of things that are sound from a trading standpoint."

Follow me @BCallwood.

Posted-In: Hedge Funds Trading Ideas General


Related Articles

View Comments and Join the Discussion!