TRADING

The New Market Wizards

Table of Contents

Introduction1

Summary1

The trading perspectives1

The world's biggest markets2

Futures-the variety-pack market3

Fund managers and timers5

Multiple-market players6

The money machines7

The psychology of trading9

Conclusion9

Reference11

The New Market Wizards

Introduction

The book talks of the secrets of success in markets. The author Jack D. Schwager interviewed prominent market traders to find out what it takes to lead in the trading business. The book's audience includes academicians and market professionals as well as lay men. It discusses the misadventures in trading. Trading is based on one fundamental rule: anyone who cannot afford to lose should not trade for trading is a very risky business. For people whose capital is really important to them, they should not indulge in the business of trading as they will not be able to capitalize on the most lucrative investment opportunities. Risk is correlated with return. The higher the risk in an investment, the higher the return. However, only those who are able to control their greed and work hard are successful in the long run.

Summary

The trading perspectives

The fear of losing blindfolds a man to the real lucrative aspects of an investment and that leads to faulty decision making. A trading gap refers to the position in the market when it opens at a very large difference from the position it had close the previous day.

The author shares his rule of trading with the audience. A position that shows a wide gap should never be held. It is wise to make your own opinion about the long or short position in trade based on your own detailed analysis. By giving in the trade entirely to another person, you lose your ability to decide things for yourself and are unable to control the risk. If there is one thing to success in trading it is the ability of a trader to rule out greed. This is not as easy as it seems and the author proves the point by relating the story of his loss.

Decision making in trade is similar to decision making as it is in everyday life. Saddam Hussein's trade was to invade Kuwait. Kuwait is one country that was doing phenomenally well in that it was exceeding its OPEC quota. The invasion meant access to the Persian Gulf, hold over some of Kuwait's oil fields and achievement for Saddam Hussein's megalomaniacal ambitions. However, in making this trade, he evidently ignored the risks associated. The change of US government led to a change in the market. The US government sent troops at first to defend Saudi Arabia and later doubled the armed force there to take over Kuwait by force. Hence, Saddam Hussein lost any bargain power. The instance is a metaphorical example of a trader who refuses to get out of a long position even when the market signals are screaming for an exit. This kind of trader maintains his position hoping that he will be able to minimize his loss but is actually increasing ...