Trader tales: Jack Schwager’s Unknown Market Wizards

Highly acclaimed author Jack Schwager has been writing about the investing world’s greatest traders since 1989, when he first published what would become the first of many Market Wizards books.

Schwager is a recognised industry expert in futures and hedge funds. He is also the co-founder of FundSeeder – an analytics platform that connects undiscovered trading talent with sources of investment capital.

In his latest book, Unknown Market Wizards: The Best Traders You’ve Never Heard Of, which was published by Harriman House in November last year, he focuses on solo traders who were not only operating in complete obscurity but, amazingly, had some of the “best performance records I have ever encountered”. Several of these traders were discovered via FundSeeder.

One of the profiled futures traders, Amrit Sall, has averaged annual returns of 337% over 13 years, using a strategy Schwager had never seen before. On a basic level, Sall traded market-moving events.

“Essentially, what he was doing was using the influx of new information and being very, very prepared on how the market should react to that information. He had a precise game plan,” Schwager tells Opto. It’s the stories from exceptional traders such as Sall that makes Market Wizards one of the most popular finance books today.

The following is an excerpt from Unknown Market Wizards, published with permission.

Preface

The premise I had when I set out to write Unknown Market Wizards was that there were solo traders, operating in complete obscurity, who were achieving performance results that far surpassed the vast majority of professional asset managers. I found these traders and proved my premise. But I also found something else that amazed me.

I never thought I would again find traders whose records matched those of some of the traders in the first Market Wizards book. I assumed the extraordinary performance achieved by some of those traders, while a testament to their exceptional trading skill, was partially made possible by the unique markets of the inflationary 1970s. Moreover, the ensuing decades witnessed enormous growth in the application of quantitative power to trading and investing, with professional managers accounting for an ever-increasing percentage of all trading — trends that suggested it would be far more difficult for traders to excel by wide margins in today’s markets.

To my great surprise, some of the traders I found in writing Unknown Market Wizards may well have the best performance records I have ever encountered.

The opening sentence of the preface to the first Market Wizards book, written over 30 years ago — “There are some amazing stories here” — seems entirely appropriate to this volume as well. Here are the remarkable traders you will meet in Unknown Market Wizards:

• A college graduate who started with a $2,500 account and in the course of the next 17 years pulled $50 million of profits out of the market.
• An ex-advertising executive who in a 27-year career as a futures trader achieved an average annual return of 58%.
• A stock trader who developed a unique trading approach that utilizes neither fundamental nor technical analysis and turned his original $83,000 stake into $21 million.
• A futures trader who over a 13-year career has averaged 337% per year without any drawdowns exceeding 10% after his first trading year.
• A bellhop in the Czech Republic whose day trading strategy for buying stocks has provided return/risk performance that far surpassed over 99% of both long-only funds and hedge funds.
• A futures trader who made and lost over one-half million dollars twice before developing a contrarian methodology that led to a 20-year career of consistent trading success.
• A former US marine who designed proprietary software to automatically trade market events and has a 10-year record of outstanding return/ risk performance.
• A futures trader who has averaged a return of 280% per year with an end-of-month maximum drawdown of only 11%.
• A music major who used his self-taught programming skills to design stock trading systems that delivered an average return of 20% during the past 20 years, well over triple the S&P 500 return during the same period.
• A one-time professional tennis aspirant who achieved a remarkable average annual return of 298% over a near-decade as a futures trader.
• An equity trader who by combining long investment positions with short-term event trading has tripled the S&P 500 performance in both return and return/risk terms.

If you are expecting to find step-by-step instructions on how to make 100% a year in the markets with only two hours of work a week, quick, put this book down — you’ve got the wrong book!

If, however, you are looking to learn from some of the world’s best traders — how they think about markets; what they have learned about trading; how they have improved; what mistakes they have learned to avoid; what advice they have for other traders — you will find much here that is instructive.