May 1, 2019

Episode 18 | Interview with Jack Schwager

Matt Zimberg interviews the legendary Jack Schwager, famous author of Markets Wizards, Hedge Fund Market Wizards and Market Sense and Nonsense. In this interview, Jack addresses the traits of successful traders and the steps they take to manage their trades. Jack goes over real-life examples of traders he interviewed and shares their experiences to identify what it takes to master the art of trading and investing.

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Episode Transcript

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[00:00:01]

Welcome to the Optimus Futures Podcast. A place to learn from an industry insider with over 20 years of experience in commodity futures and options. Gain insight to the newest technology, platforms risk management, trading philosophy and advice about the current state of the futures and options markets. For futures trading platforms, deep discount trading commissions, overnight margins and instructional videos. Feel free to visit our website at Optimusfutures.com.

[00:00:32]

Please remember that this matter should be viewed as a solicitation to trade trading futures and options involve substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. Optimus Futures LLC is not affiliated with, nor does it endorse any trading system, methodologies, newsletter or similar service. We urge you to conduct your own due diligence.

[00:01:03]

Now here’s your host. Founder and CEO of Optimus Futures, Matt Zimberg.

Matt Zimberg: [00:01:12]

Hi guys this is Matt Z from Optimus Futures and very privileged to have Jack Schwager here with us. First of all, he is a legend in the industry you guys know that, but I don’t know anybody else in this industry who has actually given traders more practical advice. There’s a lot of educators out there and there’s a lot of academics out there and there’s a lot of technicians and fundamentalist and all kinds of stuff. And when I listen to Jack he says it like it is because whatever he says I see it with the real traders. So, I brought him here today and he asked me specifically not to give him the questions ahead of time which was a really really nice surprise and what I think about that is because all the answers will be authentic. They won’t be prepared. He will say just like it is. And Jack I want to show you something about 20 years ago over 20 years ago when I started in the industry my friends gave me your book my Friend Ok, and it’s Schwager on Futures: Technical Analysis. One of the best books I’ve read I still have today. They dedicated this book to me as you see here but it’s missing your signature. So hopefully when you’re over here in Boca you can come and sign it.

So, let’s start with the questions OK. And I’m going to ask Jack questions that I hope will help you become better traders. I’m not here to describe trading as an easy concept. I’ve listened to a lot of Jack’s webinars and seminars and I’ve gathered some questions here that I think would help you out. So, my first question is this from the time you’ve written your first book of Market Wizards, are today’s traders need a different set of tools or characteristics in order to succeed in the marketplace?

Jack Schwager: [00:03:20]

Well different approaches may be in some cases because the structure of markets has changed. I don’t know for example if cryptos can be a legitimate market long term or not but obviously there were no crypto markets back then or even a few years ago of consequence. Also, I just think in terms if I mentioned to you that I was working on a new market wizard book and I’ve interviewed a few people so far in one and one of my interviews the trader uses a technique that just couldn’t exist before. Because he uses literally he uses data from social media to gauge when there is an inordinate amount of talk about something and that’s actually the key component of what he’s doing. So, in terms of technique you know that’s a that’s a that’s an approach that didn’t exist before. In fact, I was thinking that I would title that chapter neither because people are so used to saying oh you’re a are a technical analyst. Well here’s somebody who is neither. You know is not using the fundamentals, just now is using social media indications which just like you know it’s a completely different way of doing things. So yeah. So, because of market structures have changed some things have changed. But underlying principles are still are still the same. So certain elements of trading are tied to human emotion and go counter to human nature to be successful and those elements are the same through time. So there are certainly big common denominators regardless of whether you’re talking now or when I wrote the first Market Wizards book which I guess is like 30 years ago or if you go back to a book like reminiscences of a Stock Operator which I was reading 65 years later before I wrote my first book that was still pertinent then to me just like I hope my market was a books will still be pertinent sixty five years later and they’re at least seemingly pertinent so 30 years later by virtue of still selling. So, the answer is both. It’s the markets have changed and that that changes some of the techniques some things that work before may not work now. But the basic elements of what makes trading a trader successful that remains the same through time.

Matt Zimberg: [00:06:00]

Such as risk management you know watching your equity. Understood. My next question is this why does a successful trader worry about as opposed to a beginner trader? So, you’ll have somebody who’s successful in trading and you have somebody you starting out and not doing that well from your experience. I’ve noticed you in one of your lectures you said something about what they worry about are totally two different things. So, can you elaborate on that please?

Jack Schwager: [00:06:35]

Sure. Well successful traders worry about or focus on not losing money. Beginning traders are traders who really haven’t learned the art yet worry about how they could make a fortune. So, it’s a completely different emphasis.

Matt Zimberg: [00:06:56]

And you find it. It’s more emphasis on risk management as opposed to methodology?

Jack Schwager: [00:07:03]

Absolutely so if you interviewed 100 successful traders virtually all of it would tell you that making sure they preserve their capital or risk management is by far more important than how they get into the trade. Thinking of another interview I just did for the book I’m working on it so that that trader is basically using chart analysis as approach. Traded for decades many decades using chart analysis and very successfully. But one question about how effective are charts. How much of an edge is there? He’s the first one to admit very little ledge remains. I mean to some extent charts have come to popular. You have to adapt from it in many ways, but the edge comes not according to him not according to me. His edge comes not from the fact he’s using charts. That’s just the way to signal a trade. But the edge comes from his risk management and I would agree that having discussed this his approach in detail that’s probably true. So, the message is that beginning traders think it’s all about finding that a way how to get into a trade where actually that’s not right. It’s really all about how to get out of a trade. Getting out of a trade means two things that means first and foremost getting out of a trade without that trade damaging your ability to continue trading would end up where it’s damaging your your trading stake so to speak. And also, is a matter of having some idea OK well if the trade works where you get out. So, but there’s more emphasis on getting out than getting in. I would say among professional traders about the importance of getting out as opposed to as opposed to finding a great way to get into a trade thinking.

Matt Zimberg: [00:08:59]

OK my next question is about the return belief system that beginner traders have whether their day traders or swing traders. Can you talk a little bit about the consistency in trading in terms of returns for long term traders? I think a lot of the retail traders for example thinking they’ll put X amount of dollars they can get X amount of dollars consistently per month. Do you find that amongst good traders there is consistency, or they’re are just all over the place and in the end, you just average their returns for something which is positive? How even the best traders out there what are the real fluctuations you know in their equity?

Jack Schwager: [00:09:43]

Well there are some traders who had amazing consistency, but they are the exception. So, I think if somebody like Ed Thorpe who who’s actually famous to the world not as a trader but because he wrote this famous book on how to beat the house of blackjack. And he’s a math professor basically. So, but as a as a hedge fund manager he had unbelievably actually two different hedge funds. He had wanted then another one two years later. It’s like taking his first hedge fund which lasted 19 years. 19 years he had three losing months in 19 years and in all three months with less than a 1 percent loss. So I think about the probability of that of his track record you know that many wins versus just as such tiny losses and under conservative assumptions his probability of getting that record was less than the probability of selecting one atom one atom out of anywhere the mass of the Earth not the surface but the entire mass of the earth and then randomly selecting another atom and getting the same atom. So that probability so far. So, I have explained it by analogy because the number is so large people can’t comprehend. So, a track record like that is so super consistent it it’s just mind boggling. But he did it because he found ways to deal with inefficiencies in the market and he was able to exploit them. But that’s unusual to get that type. It’s just that we take a more ordinary got more ordinary but a more standard approach to trading. No traders like I mentioned one of the fellows I saw I interviewed for this new book. He’s been training like 40 years, but he still has a few. You know he still has two or three or four losing years in there now. Yeah, I mean so he made thirty-six years of profits and four years of losses. That adds up to be a pretty darn good record. But for the most part even really good traders will have periods where they lose money and you the idea in fact that one of the things I one of the lessons I try to get is Don’t think in terms of objective. Don’t say that. Mike I’m going to make 30 percent a year this year or whatever number it is because that’s not realistic. The market is not a machine that spits out a constant number of opportunities regardless of what your approaches you’ll be. No matter how you approach to market technical fundamentals or whatever way that methodology there’s gonna be times where it’s working well and it’s times where it’s not that many times where there’s opportunities there’s going to be times when there’s not. So it’s unrealistic to expect this kind of constant opportunity and if you do and you have some goal that you feel you have to reach then what’s going to end up happening is you’re going to you’ll get to put on trades where there’s really no opportunity you’re going to risk money where you shouldn’t be risking money and it only be detrimental. So, no. There’ll be times will be great years if you if you’re a good trader of course and there’ll be times where even if you’re a really good trader doing everything right you’ll still lose money. Even the best traders with rare exception will go through periods where they lose money just because it’s a probability game and know about it. Even if you have a very good approach you’re going to lose a certain set at a time. And if you do things like if you toss 10 coins in a year it’s not going to usually it’s going to be rare for not where it’s going to be uncommon for to turn up all 10 heads but one out of 1024 times, so we’ll be all heads. And if you’re if you’re trading thousands of trades that means you know if you had an if you were equal chance of winning or losing. And for many traders there are less than equal because they make more than they gain. But if you say equal chance of winning or losing then it’s you should expect you’ll have 10 losses in a row. So, you need to understand that even just random probability will result in good traders having streaks whether it was money.

Matt Zimberg: [00:13:51]

Thank you. I also noticed that you mentioned that when you examine good traders focusing on returns alone it’s probably very misleading. I want you to elaborate on that. I understand the concept because I understand of somebody who achieves 10 percent being a day trader versus achieving 10 percent in selling premiums but elaborate more with professional traders that you met and the risk that they take. What is beyond returns?

Jack Schwager: [00:14:23]

Okay well first of all I’ve been in the position many different roles in my life where I have to evaluate traders and I tell traders that I’m the least important statistic is return because we have traders like oh I’ve made 50 percent last year and here’s why. And I say that I’m not being facetious when I say returns are the least important statistic because it by itself returns are a meaningless number. So, I can prove that very easily. So, everybody listening to this broadcast I listen carefully because I’m going to tell you how if you’re a profitable trader I’m going to tell you how to double the money you’re making. Proof you. Absolutely. Definitely this will work if you do everything the same. You want to double your profits. All you have to do is double the size of your trades now does that make you twice as good of a trader. No. Well it means you’re taking twice as much risk a lot more chance of being knocked out of the game. So, the amount of return by itself doesn’t mean anything. It depends on what risk you’re taking to get that return. And I only look at return risk statistics so return is only a numerator in some statistics by itself. It just really has no meaning because you can have people. In fact, I think I’ve used this analogy in one of my books. Imagine you have two traders. They form. They together their technical in nature and they’re computerized and they come up with this trading system. But one and one of the guys is very risk tolerant. He wants to trade 30 percent Margin equity and now the guy’s very risk averse. He wants to trade 5 percent margin equity and they can’t agree. So, they finally separate they form two separate companies. They trade the exact same system, but one guy is trading 30 percent margin equity one guy’s trading 5 percent margin equity. So, it’s just a difference of how much leverage they using one is using versus the other. Now one is going to make a lot more money for a lot more risk and the other one’s vice versa. But it doesn’t mean that one’s a better trade and the other fact that I’m just giving you an example where they’re trading the exact same system. So, it’s a question of individual risk tolerance and the fact that you’re making money by taking more risk doesn’t make you a better trader. It just means that you’re willing to take a lot more risk and that has its own downsides.

Matt Zimberg: [00:16:52]

Thank you. My next question is how do successful traders adjust to different markets? Meaning that you know I’m dealing with retails. In the retail it’s like fashion. You know the jump from one method to another one month it’s price action. The next one is Fibonacci the third one is you know market profile they say this one this one and that one and I know this is not the right approach. The professional traders how do they adjust to different market conditions in the marketplace when there is higher volatility, lower volatility? I know traders that you yourself consulted like Tudor Jones. You traded in the 70s as a pit trader and he trades today as well. How did they go through all those decades? With success in maintaining a reasonable drawdown that doesn’t kill their trading account?

Jack Schwager: [00:17:49]

Well they yeah, they do adapt to markets doesn’t mean they change the methodology necessarily. Only if the methodology stops working for whatever reason. But by adapting you talked about volatility. So, for example, one of traders I interviewed a hedge fund manager in a book called hedge fund market wizards sort of talked about the 2008 period where volatility a tremendous increase in this point was when the markets become much more volatile you just have to trade much smaller. So, he counted like he would run into hedge fund managers they would say oh yeah, these markets are really crazy. I’ve cut I’ve cut my trading size in half. He would think his trading size in half the market volatility is increased fivefold. So even though they thought they were adapting they really weren’t sufficiently because they didn’t fully adjust for the change or volatility. So that’s an example of what you mentioned that the trader has to adapt. If a market’s much more volatile, it’s not the same as trading the market when it’s much less volatile. There are times when markets become much more correlated no risk on risk off. So there normally say something like commodities and stocks go and different. They don’t have any correlation in fact if anything commodities are more likely even sometimes to go up when the market’s down. So, if anything over time and maybe an inverse correlation. But we had we had periods in the last decade where you had risk on risk go off in markets that was as unrelated or even inversely related as stocks in commodities will be going up together. Well if you’re in that type of market then you have to be cognizant of that because a lot of your positions may be going up and down the same. And that means there’s a lot more risk in your portfolio than they would otherwise be. So, you always have to be cognizant of the environment that you’re trading at and specifically the risk that is associated with that environment. There’s an element of it is markets don’t always continue in a way that the same techniques will work over time. So, for example trend following was extremely effective in the early days you know when my first Market Wizards book and I was talking to traders who had started trading in that case where traders would start as early as the late 1960s and late 1960s and 70s during those periods a true trend following was working tremendously well because it was new. I mean you know we were still dealing with three pieces people to warrant trade of computerized systems, but you go from that world to where everybody and his brother can have you know a trend following system and b approach begins to lose. Now it doesn’t mean markets don’t have trends anymore. Markets still trend but they do so now typically such a choppy volatile fashion that there’ll be so many whipsaw losses that it will make sure that the markets will make sure that people add up that losing even if there is a trend. So that doesn’t mean that market trends don’t exist that just means the simple methods of exploiting them don’t work anymore. But by and large I mean I guess if they stop working if they work badly enough for long enough they’ll start working again simply because because people will abandon it and you know if too many people are doing something it’s just not going to work. I guess an it’s terribly possible the technique will work better again in the future because so many people will be discouraged. Actually, analogously has nothing to do with trend founder or tech technical analysis but it comes with a world of pure somebody who is a pure fundamentalist. Joel Greenblatt of Gotham Capital. He he’s a value investor so and he completely would look at a chart. But he had a saying which kind of makes the same point. He said this is his three rules of value investing industry rules were one value investing works. Two value investing doesn’t work all the time. And three rule 2 is rule why rule one works. So, if it worked all the time everybody would do it. But the fact that you go through a period like 99, late 1988-1999 where the smartest people like Buffett and the smartest investors were losing money and every bad the dumbest investors were making money by buying these stocks that a year later would be worthless, but they were just getting on the train of Internet stocks. So, in a situation like that value investing now doesn’t work but it’s it was horrible. But because you get periods like that is why works over time so that’s the way markets are. It goes back to that point you talked about earlier consistency. Well the markets are like that they no approach will be consistent through time.

Matt Zimberg: [00:23:15]

Thank you. I want to talk about the traders that started in the beginning and they had a lot of challenges, so they didn’t succeed. And later on, they succeeded. First, I wanted to know what in your opinion or from your observation made them continue? When they lost money because a lot of traders come in they lose money and then they move on to their other asset classes or they just move on from trading. But those who succeeded what do you think they why they continued. I’m really looking specifically I’m asking more about their nature and what they improved in their trading in order to get to where they are to be consistent from I shouldn’t say failure because nobody was born a trader but let’s say from being challenged by the markets to being more successful what have they done.

Jack Schwager: [00:24:08]

Well there are actually surprisingly if you read all the Market Wizard interviews, a surprisingly large number failed in the beginning it’s like it’s the it’s the exceptions that were successful right from the beginning. There are some, but they really are the exception. And so, I think the I can go back to the very first chapter of the first market was a book a fellow by the name of Michael Marcus somebody who would be completely unknown to the world if it weren’t for the book. I mean I just I knew personally I even had work for him. But in any case, Michael. He just was he started out and just one blew out one account after another he even at one point we thought he was starting to make it make some money. Then by then bet it all on one trade, he borrowed from his mother. He came from a lower middle-class background, so it wasn’t like he had wealth in his family on the contrary. And then he ended up losing all his own money again and a portion of his mother’s meager savings. But I asked them. As with recounting all these failures one after the other didn’t you ever. Didn’t you ever think of just giving up and he kind of uses it not literally but like you know the scene in Fiddler on the roof where Teddy is talking to God and he doesn’t like it. He doesn’t get it literally, but he says like at the point is like looking up and saying God am I really that you know you know hopeless. And he just heard just that that. No, you just you can you can do it. You know you have. You just have to continue. So, you just had this you had this inner belief that he could do it now. I’m sure some people may have that belief and they’re wrong. But his case of course was right, and he became enormously successful. So, with the lesson in that I guess I draw two lessons from this whole thing. One is early failure doesn’t necessarily mean that you can be a failure long term. I mean there’s lots of stark examples that I’ve come across where people failed and failed. And that was tremendously successful. And the second element is that the people who do succeed have this kind of inner drive just that they’re just something inside of them just drives them to the point where they’re ultimately successful and they kind of. And it doesn’t have to be of course training I mean I think this is true in so many careers I mean people you know have they could start a business where they feel like it to start a business or an Internet or whatever company and they may fail a couple of times and then eventually is extremely successful. So, I think everybody has certain skills and certain drives and certain passions of what they want to do. And so, for the right people that that they just don’t give up. They just don’t give up on their on their objective and goal. And that’s kind of a unifying theme of all these traders who initially failed and the course to become successful they eventually learned what they were doing wrong and they had to change what they were doing. But they had this this just refusal to give up.

Matt Zimberg: [00:27:25]

And those who are successful or successful trainers outside of trading and outside the markets do you find that they have a certain way that they think of things or certain behavior traits that they have outside of training and outside their office that is common to all of them? That the way they think the view the world or just I was just curious, I was always curious you know a friend of mine asked me once. Can somebody paint fences and bicker who paints fences become you know a good trader? And I truly didn’t know what to answer because I don’t know the process that it takes you know to become a good trainer. I know people are good trainers and they see that all of them had good careers and they were successful even prior to training. But you know I just wanted to know what kind of habits a person can adopt in his day to day life that would help him in his trading? The early risers, do they exercise a lot, do they read? I mean what do you notice about them that is common to them which is more common success you know come to success?

Jack Schwager: [00:28:31]

These part these traits which are what is personal it’s remarkable how there are no common denominator you know in the Wizard books I’m always trying to get the message out. What are the common denominators. But they’re never anything to do with personality trait so some are conservative some are liberals some are really nice quiet spoken people some are somewhere you wouldn’t want them as a neighbor you know some are you know I don’t know we’re very active physically extremely active almost athletic and some don’t want to get off the couch to get you don’t get a bag of potato chips. I mean just that. So, it’s it really ranges all over the map. So, I’ve never found any personality types or that that are common to trade. Some could be brilliant some could be brilliant, brilliant academically and some you know dropped out of college should they, but they have obviously had some sort of smarts for trading or whatever but not necessarily book smarts. So, it really does vary tremendously. And I don’t have any common denominators of that.

Matt Zimberg: [00:29:45]

I’m glad you answered that because I’d like to think that if somebody puts enough effort to study about risk management and you know listen to people like yourself. You know have experience with good trainers would be able to adopt it. I want to give you a chance to talk a little bit about your projects and give you the stage a little bit about things that you do. I want to talk about Fund Seeder I want to. Well obviously, I want to find traders in Optimus that would be able to fit the Fund Seeder model. Can you tell us a little bit about what you’re looking for? How you put it together? What are the parameters that people need to fit that you would even consider them? You know for to raise capital, but let’s talk about Fund Seeder in general and its purpose.

Jack Schwager: [00:30:31]

Ok so the definition of fund seeder. Basically, I should say right up front it was my concept it was my colleague Emmanuel Blurry who I think you know?

Matt Zimberg: [00:30:41] He’s a great guy.

Jack Schwager: [00:30:42]

Yeah. And so, Emmanuel I first met each other I was working for a London based hedge fund advisory firm called Fortune Asset Management. Fortune got acquired by Close Brothers which is a merchant bank in the U.K. I was the only U.S. employee I was a partner and I just at that point there was no point in my staying with a big company which had very little to do with alternative investments going to negotiate out everybody on terms or we were both happy with. And I actually took a sabbatical then to write to write the British have this nice thing called Garden. It was a garden leave or something like that where we’re in this type of deal you kind of get paid for a period of time you’re doing absolutely nothing. So, you just get a salary as part of our agreement. But I took that time to write Hedge Fund Market Wizards and another book.

Matt Zimberg: [00:31:37]

I thought that’s only in France for two months and in this summer.

Jack Schwager: [00:31:44]

Market Nonsense was the other book. But also, after that well one of our clients was an ADM and Emmanuel had at a subsidiary of the gab. And the idea was to form you want to form a commodity CTA type portfolio since that was my focus work through Fortune. I tried to get them to do managed account structures so in any case we picked up from there. So that’s where we know each other. So one time we were at a conference and we’re having dinner and Emmanuel throws his idea out about Fund Seeder and the basic concept is you know to create  a Global you know a net you know on a Web based location where you could connect traders who really have no access to capital and undiscovered traders who might have skill but no way no collecting connecting with for that matter with investors and on the other hand invest investors or companies that that that you know want investments that are looking for new emerging manager sort of be a connection between the two kind of a global hub. And that was a basic concept. I said you know that’s a pretty good idea. And part of the concept was to have the trading records come from directly from brokers as opposed to because if you have a trader submitting you don’t know what’s right what’s wrong you know what’s true it’s not. And so that was the whole that was a general concept and the concept was then too well-connected investors and traders. Although now as we’ve evolved really the focus now is no different. It’s not much different. It’s still to find global trading talent and by global. We have like literally traders from 100 countries signed up so literally defined globally traders who have skill but not necessarily access to any. The way of earning money besides early trading but no way to multiply that in some way by also having asset management and on the other hand people who want to tap into that skill. So, what we’re doing now is to construct an index of those traders and we actually just want to begin with the others. And so that’s the basic concept and we have a we do in fact we will be running for multiple years now to look through almost four years of Fund Seeder a trader index where we take the top traders top 5 percent of traders are measured by our proprietary risk return risk measure, not return. So, we take the top traders top 5 percent at the end of any month and they become the traders that are assumed to be equally allocated to the following month for that forms that the index track record. So, the index has no hindsight because the traders that are in the index and on any you get they were selected as a performance at the end of the prior month and it changes every month their portfolio changes. So that index has done quite well on a return risk basis. And so, where we are currently in the process of turning that into an investment product. And so, bottom line traders who are part of the index would get compensated for being in the index and we would be tapping into trading talent that is not accessible anywhere else. So that’s the long and short of it.

Matt Zimberg: [00:35:31]

Great. I hope to integrate one day into that platform. I think it’s one of the better platforms out there. I’ve seen its parameters that you use and I think even for individuals who followed their own trading I think you did a great job you know just to let you know from my experience, some of my customers turned into CTAs and I think the biggest challenge I’ve seen for some of them is actually the psychology of trading other people’s money. It’s really burdens them. I’ve seen it. I’ve seen amazing track records that have been there from three to five to six years and the minute to give the money just I always tell them it’s not just the trading it’s going to be the pressure of working with customers and our customer picks up the phone and he says you know we’re down 5 percent. Do you think you’re going to recover? All the brokers in the world the call CTAs why have you gone long obviously you should have gone short and tell them it plays a big role in their psychology you’re going to be a very strong character of really never to listen to anybody you’ve said it a thousand times but I’ve seen it from real practical experience that as a trader you can’t listen to anyone, not the brokers, not your customers, just continue what you’re doing. My last question was actually it’s something that you said you said in one of your seminars I think you did it in Denver. I think I’m not sure that you said good trading is effortless. I really need you to expand on that because you also mentioned that you’ve seen a lot of traders that you believe. I think you said that you don’t believe in a way to recover is work harder right. When you’re going through bad periods can you explain this the concept of effortless work versus you know the market?

Jack Schwager: [00:37:22]

Yeah. In my talks on trading I kind of action the same talk I will make the point that hard work is essential you know many people want to get Marcus going to one easy way to make a lot of money. And I point out the people really being successful very hard workers put right after that. Shortly after that I make the point that you just said good trading is effortless. And that sounds kind of paradoxical I mean like I can’t make up my mind is its hard workers at effortless. And the answer is it’s both. So, the hard work is involved in kind of developing a methodology and doing all the research and keeping it up and being disciplined and does a lot of things that go into the hard work part of it. Mostly of course it is coming up with a methodology that works that really takes a lot of effort. But when you’re actually trading and here this this I need to apply to people who are trading discretion and if you have a trading system then then it’s not an issue because the trading system is running and it’s running. I mean OK. And if the trading system is a ballot system it’s a good system. Then if it’s going through a draw down then you should let it alone because you know it’s that’s part of it. If it’s within its normal boundaries that’s part of the process. But for probably the majority traders who trade not by an automated system they are making decisions then virtually every tradable right into this situation where even if they’re doing everything is supposed to be doing they just go through a stoppage everything that was wrong I mean by wrong I mean not methodologically wrong but wrong in terms of wrong with what the market is giving them. They maybe do the right thing, but the market is giving them a loss and it’s whatever they do sort of ends up the loss and just it’s frustrating periods at virtually all traders go through it. So, my point is when you get to a period where every decision you make seems set up by virtually happy they just end up being wrong in terms of losing money now not in terms of contradicting your methodology then you can’t just try hard and can’t do more trades to make it good. You have to you have to you know you have to just move away. When I asked traders when things go bad better bad periods what do you do. And the answer is typically well I stopped trading. What could be for a few days could be a few weeks but they just stop what they might just cut their one part one trader said well he just he might trade two thousand contracts you know at some point you know normally but if his are going back cut back cut back it might cut back to 10 contracts you know so you just drastically cut your position so the losses relative to your equity size is not consequential and it doesn’t work for a tiny trader but a few people have any type of size of account that could work. You just cut down to size but more often than not the answer is you don’t do you just stop trading so you can kind of come back with a clean slate and start again, but trading trying harder doesn’t work and there’s a quote of one trade one I mean I use from one to traders where he asked me, Did you ever read did you ever read a book called Zen and the art of Archery? And I kind of say half-jokingly I’m afraid I missed that they said no I’m absolutely serious and he quotes, and I use this quote I quote him exactly here he said, “Whenever there’s any effort force, struggling, straining, or trying it’s wrong” and everybody who’s been a trader knows the truth of those words. So, when it’s not going well you can’t fight against that you have to just you know cut little end of that round go away they’ll come back another time.

Matt Zimberg: [00:41:17]

I know that trader. That’s the trader actually you couldn’t publish, right? Well first of all I want to that’s all the questions I have. To our viewers out there I just wanted to let you know we’re going to list the Fund Seeder website in the links below. We’re going to link all of Jack’s books to Market Wizards and all the books he wrote below so you can purchase them on Amazon. Jack is going to come up with a new Web site when he does we’re going to publish it as well when it comes up when your books. We’re going to keep updating this link because what I think you do is just incredible. It’s amazing the amount of time that you have dedicated over your life to help traders and say it like it is because I’ve got to tell you something in our industry this is not the case. So, I’m happy those people are down to earth who say it like it is and hopefully they will inspire the next generation of traders out there. Jack again thank you for your time. And hopefully we’ll see you again here at Optimus studios. All the best. Thank you, Jack.

[00:42:23]

Thank you for listening to the Optimus Futures podcast. Subscribe to our podcast on iTunes Sound Cloud and Google Play. You can also find us on YouTube Facebook Twitter and Google Plus all under the username Optimus Futures if you have any questions feel free to send us an email to support@optimusfutures.com or give us a call directly at 561-367-86864. Toll free at 1-800-771-6748. Once again thank you for listening to the Optimus Futures Podcast.

Please remember that this matter should be viewed as a solicitation to trade trading futures and options involve substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. Optimus Futures LLC is not affiliated with nor does it endorse any trading system methodologies newsletter or similar service. We urge you to conduct your own due diligence.

Notable Replies

  1. @Mod-MattZ,

    I am a big fan of Jack Schwager’. A true pioneer in the futures industry.
    I think I read both of his original wizard’s books like 20 times in my career.
    Great interview Matt.
    Thanks for all of your effort as always.

    Best Regards,

    • P11

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