AlphaMind Podcast Episode 57: Jack Schwager: Unknown Market Wizards

Jack Schwager, author of the legendary Market Wizards series of books, talks about his latest book, Unknown Market Wizards, more than 3 decades after the publication of the original Market Wizard’s book.

This is the podcast interview we have been waiting to do all year. We have been huge fans of the Market Wizards series of books since the first one landed with a splash in 1989. That was a time when trading had first exploded beyond the confines of the old-fashioned stock and commodity exchanges. There were new futures floors, new instruments, and rapid expansion of trading activities buoyed by the growth of futures and derivatives contracts and juiced up by the early computerised trading systems.

Through a series of interviews for the book Jack Schwager introduced the world to trading legends, until then relatively unknown outside their small corner of the world. Traders such as Michael Marcus, who busted time after time after time, before finally growing $30,000 into $80,000,000 over a 10-year period. We learned of the wisdom of Ed Seykota, the feats of Paul Tudor-jones, and the skills of Richard Dennis. Jack introduced us to the Trading Turtles, and to many quotes which even now people repeat over and over again as inspirations. 

Schwager followed up the original book with 3 more outstanding versions, the New Market Wizards, Stock Market Wizards, and Hedge Fund Wizards, and now he has done it again, taking us in one sense back to the beginning and in another sense into the 2020s, with Unknown Market Wizards.

We were delighted to have a chance to talk with chat, and for once Jack the interviewer, become Jack the interviewee. You can hear the fantastic insights Jack shares with us in his own words from years of talking to and working with the best around.
It was a pleasure for us to this interview, and we are sure you will get something from it, whether you are new to the scene, or like us, have been around the markets for decades. 

To hear a Soundbite of the Podcast, listen here:

You can find out more about Jack Schwager at his website https://jackschwager.com/

Jack is also a partner of Fundseeder, a financial data and analytics company which provides a free trader platform that provides performance analytics, data tracking, and monetization opportunities for promising traders. You can find out more about Fundseeder at https://fundseeder.com

Podcast Episode links: 

🎧Main Link

🎧‬iTunes

🎧‬Spotify

The AlphaMind Podcast

The AlphaMind podcast is co-hosted by Steven Goldstein and Mark Randall, market veterans with over seven decades between them in the financial markets. The podcast delves into the lives and stories of extraordinary guests whose experiences provide a fresh and powerful lens through which to understand the mental, emotional, psychological and behavioural challenges people face when encountering risk and uncertainty in financial markets. To find out more visit the AlphaMind podcast website. 

The AlphaMind Podcast is produced in partnership with 'The Society of Technical Analysts'.

The AlphaMind Trader Performance Coaching Programme

Our powerful Trader Performance Coaching Programme focuses on helping people develop and improve the key risk skills, abilities and mindsets which contribute to trading performance mastery.

This programme makes use of our unique and powerful ‘Human Alpha Performance Model’ which helps illuminate the human aspects of the risk process as people navigate their way through the Financial Markets. The model helps people make sense of their behaviours when taking and managing risk in the financial markets, whilst the coaching helps people to make key changes and adjustments which drives growth in risk capability and personal performance.

This programme has been delivered over the past 10 years to people at many of the world’s leading trading and investment firms.

Click here to find our more about the programme, or email info@alpharcubed.com or steven.goldstein@alpharcubed.com.

AlphaMind is a collaborative project between Steven Goldstein of AlphaRCubed Ltd and Mark Randall of The Mark Randall Consultancy. 

AlphaMind Podcast Episode 48 - Flash Crash : Liam Vaughan talks about his book about Navinder Sarao and the 2010 Flash Crash.

The story of Navinder Singh Sarao is one of the most incredible stories ever to come out of Financial Markets. 

A young man who amasses a $70,000,000 fortune day trading stock markets, who is accused of causing the biggest Stock Market Flash Crash in history, is then the subject of a major US govt investigation and a multimillion-dollar manhunt. And all this done on his home computer, from his upstairs bedroom, in his parent’s modest house, in a very ordinary West London suburb, without his parents, family or friends having a clue.  

Sarao, never had the trappings of wealthy financial market participant. He ate from McDonalds, wore cheap track-suits, didn't take fancy holidays, of have a flash car, that is if you do not count his yellow bicycle he jokingly called his Lamborghini.

The Book

Sarao’s story is brilliantly captured by this week’s guest on the Podcast Liam Vaughan. Vaughan is a Bloomberg journalist and author of the book about Sarao, ‘Flash Crash: A Trading Savant, a Global Manhunt and the Most Mysterious Market Crash in History.’

Vaughan’s brilliant book tells how Sarao first came to become involved in the markets as a day trader. He also describes Sarao’s extraordinary gifts which made him so successful well before he started the trading activities which were to subsequently bring him down. 

The book goes beyond Sarao’s story, telling the story of the Flash Crash which revealed some major flaws at the centre of how futures markets functioned, and presented a detailed argument of the role played by high frequency trading and the advent of electronic order books. 

‘Flash Crash’ also tells the story of the rise of modern trading. It traces the roots of the current markets back to the frantic and sometimes dubious trading activities which took place in the alleyways and coffee houses of the City of London dating back to the 1700s.   

Vaughan goes on to describe the original physical locations where open outcry futures trading was practiced and how this attracted a certain type of individual and style of trading. He explores the transition to the modern electronic markets, and how different skills, abilities and characteristics were required for success in these new market environments. 

There is a subtext to Vaughan’s book, which is how those with power and money were able to influence the path the investigation into the Flashcrash. It describes how finding a scapegoat in the little man 'Sarao' enabled those with the power and influence to continue largely unaffected by some of their own dubious activities.

I cannot help thinking that there is a red-thread which can take this theme back through many cases of wrong-doing in financial markets, even back to Nick Leeson, (Our guest on an earlier episode). Often the fault really lies with the system and those higher up in the food chain, but the buck is passed to a scapegoat, and outsider, someone who was in the wrong place at the wrong time who must carry the can.   

There is something in Vaughan’s style which reminds me of Michael Lewis. He possesses that ability to take complex and often very dry subject matters and explain them in ways which those unfamiliar with the subject could follow and remain engaged with. This is the art of the financial market storyteller, relating complex ideas to a broad audience and yet not diluting them so much that they lose their meaning.

The Podcast Episode

In this interview, we discuss with Vaughan a wide range of themes connected to this remarkable story, including:

- How Sarao, who it was found suffered from Asperger's Syndrome, had grown up obsessively playing computer games, which may have come to be a major advantage to screen-based trading.

- The paradoxes in Sarao’s character traits and how these supported his success as a trader but at the same time left him vulnerable in other areas of his life.      

- How Navinder’s gifts and mental attributes, seen by some as learning difficulties, probably worked in his favour in his trading activities. 

- How Navinder’s mindset, again possibly prompted by his mental state, including his very different relationship with money, which may have contributed to his fearlessness and his trading style. 

- How his obsession with trading and the desire to win may have led him down unhealthy paths, and how on reflection the money and rewards never produced the satisfaction he needed.  

- Having a grudging admiration for what Sarao achieved, and how even though his activities were considered illegal ultimately it exposed flaws in the markets system which existed and which Sarao was able to brilliantly exploit. 

- How the laws changed after Sarao commenced his spoofing activities and after the Flashcrash. 

- The degree to which his activities were illegal or improper, particularly considering how the electronic futures system itself had made it possible with the advent of electronic trading. 

- How Navinder’s activity exposed the frailties within the Electronic Futures Trading system and how new platforms increasingly developed the ability to manipulate markets. 

- How Navinder had felt the market was rigged against him by other people who had unfair advantages, including other spoofers and HFT traders. 

- We debated whether his activities followed the failure of the authorities to act on his complaints about the activities of others, and whether by ignoring them they effectively green-lighted his activities. 

- The huge gulf which exists between the resources and level of expertise in those regulating and policing trading activities and those of the firms and people engaging in activities in markets.

- The importance of balance between your trading activities, and the other parts of your life.  

- Whether Navinder was ultimately a victim in this story. 

Episode Links:

🎧‬Buzzsprout
🎧Main Link
🎧‬iTunes
🎧‬Spotify

The AlphaMind Podcast

The AlphaMind podcast is co-hosted by Steven Goldstein and Mark Randall, market veterans with over seven decades between them in the financial markets.

The podcast delves into the lives and stories of extraordinary guests whose experiences provide a fresh and powerful lens through which to understand the mental, emotional, psychological and behavioural challenges people face when encountering risk and uncertainty in financial markets.

To find out more visit the AlphaMind podcast website.

The AlphaMind Podcast is produced in partnership with 'The Society of Technical Analysts'.

The AlphaMind Trader Performance Coaching Programme

Our powerful Trader Performance Coaching Programme focuses on helping people develop and improve the key risk skills, abilities and mindsets which contribute to trading performance mastery. 

This programme makes use of our unique and powerful ‘Human Alpha Performance Model’ which helps illuminate the human aspects of the risk process as people navigate their way through the Financial Markets. The model helps people make sense of their behaviours when taking and managing risk in the financial markets, whilst the coaching helps people to make key changes and adjustments which drives growth in risk capability and personal performance.

This programme has been delivered over the past 10 years to people at many of the world’s leading trading and investment firms.

Click here to find our more about the programme, or email info@alpharcubed.com.

AlphaMind partner with AlphaRCubed to deliver the Coaching Programme. - AlphaRCubed provide a suite of Training, Development and Coaching programmes aimed at Trading and Investment businesses. View their flip brochure here to find out more about their work.  

The AlphaMind Project and Newsletter
The AlphaMind project is a collaboration between AlphaRCubed Ltd and the Mark Randall Consultancy. Its aim is to explore, understand, educate and inform about the key factors which lead to successful trading and investment performance at the human level.

We will shortly be publishing a regular Newsletter. If you would like to add your name to the Newsletter subscription list, then just sign up at this Newsletter link.

Book List - Behavioural Finance and Related Topics.

Thank you to Richard Lehman of UC Berkeley who has provided me with the following link which takes you to a list of books on Behavioral Finance or related subjects. It is not an exhaustive list, but they try to keep it reasonably current. The books are grouped as either Popular, Academic, Public Policy, Randomness, Psychology, or History as a general categorization and listed them alphabetically by author within each group. The links will take you to their respective pages on Amazon.com for further details, reviews, or to purchase.

http://www.behavioralfinance.org/Default.aspx?pageId=1649976

Is the Euro getting ready to turn lower?

The past few weeks have been a little aimless for the EURUSD. - Since the sharp drop in the EURUSD on the 11th August (from 1.3160-1.2830) the EURUSD has ranged pretty much between 1.2600 to 1.2900. In that time I had thought we were going to rebound back into the low 1.3000s, however the set-up I was looking at never followed through, and the EURUSD has since sunk back into this extended range. - Now with pressures re-emerging on the periphery of the Eurozone (see the lower part of yesterday's post here) I believe the risk may be once again switching to the downside for the Euro.

On the technical front, the moves on the EURUSD over the past couple of months and weeks have manifested as 'Expanding wedges',which may be indicative of further lows ahead for the EURUSD. - I have some doubts as to the validity of the larger Expanding Wedge due to the way it has formed mostly along the upper line of the pattern. However, the way the smaller pattern has consolidated the breakout, does suggest that this pattern may be valid. The chart below highlights these patterns.

Should the EURUSD start to breakout and hold below the base of the mini-pattern and the recent 1.2600 low, then there is a chance that a deeper and more prolonged breakdown in the EURUSD. - The next chart shows the monthly EURUSD, I have highlighted 2 significant features of this chart. The first feature is the large Multi-Month broadening pattern, (as I have mentioned before these broadening patterns are very difficult to trade signals off, however they can point to where strength and weakness lies), this pattern suggests that in the much bigger picture the direction for the EURUSD is going to be much lower. The second feature of this chart is the Andrews Pitchfork, this also points to weakness ahead, the pitchfork as a potential signal is bolstered by the fact that the upper line of the pitchfork held the recent high near 1.3300.

I am not altogether sure that this is ready to break down quite yet, however I do think that the bearish signals, technical and fundamental, are starting to stack up. This is something however I will keep an eye on for a possible break in the not too distant future.

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On a different note, a few weeks ago I posted my 10 favourite trading books (can be seen by clicking here).  I was however amused by a posting on the BNET blog by Geoffrey James where he presents his view of  'The 10 Worst Business Books of All Time'. It is worth checking it out for some amusement, btw the winner was 'Leadership Secrets of Attila the Hun'.  Yep you read that correctly.....

My Top Trading Books

I have just ordered a new copy of  'Market Wizards', I lent my old copy out to someone, only to forget who I lent it to, and then not had it returned. - However this has prompted me to decide to compile a list of my Favourite 'Trading/Financial Market' related books. The list includes books which I consider related to trading in any number of ways, some obvious, some less so. As well as my favourite (Top 10) books, I also have written a list of books I consider influential in some way, though for one reason or another they did not make my Top 10. -  By the way you may notice a bias towards market psychology and individual trader psychology. - Here goes:


My Top 10 List - In no particular order :

- Market Wizards (And the New Market Wizards) - Interviews with Top Traders. By Jack D. Schwager. This is the Daddy of all trader related books.  - If you have never read this, read it. If you have read it, well read it again. 

- Reminiscences of a Stock Operator. By Edwin Lefèvre. This 1923 book is a biographical account of legendary trader Jesse Livermore. I consider it a must read for anyone interested in trading. Not an easy read, partly due to its age, but with patience the reader will see why it is a classic of Trading Literature.

- The Wisdom of Crowds. - Why the many are smarter than the few. By James Surowiecki. Though not directly related to the markets, this book touches superbly on mass crowd psychology, which is so essential to understanding the way Markets and Technical Analysis works.

- Liar's Poker. By Michael Lewis. This excellent book is a tell-all of Lewis's experience as a Bond salesman at Salomon Brothers in the late 80s. It helps to understand the culture of the big banks and brokering houses in the late 1980s. This culture never died out, and was in my opinion a major factor in the great financial crash of recent years. 

- The Inner Game of Tennis. By W.Timothy Gallwey. Though pertaining to tennis and written almost forty years ago, the psychological lessons learnt from this book are so relevant and applicable to the art of trading. - Forget all those other self-improvement 'How to be a billionaire in a week' type books, take my word from it, this is a brilliant book. - It may improve your tennis too.

- Any book by Malcolm Gladwell: This is cheating really, as it covers four different books, plus none of the books are actually Market or Trading related. However, every time I read a Malcolm Gladwell book I seem to be able to take away something which I can then apply to further my understanding of market psychology,  trader psychology, or some other facet which I can then apply to better understanding myself or my own trading. For the record Gladwell's four books are; 'The Tipping Point', 'Blink', 'Outliers', 'What the Dog Saw: And Other Adventures'. - These are an enjoyable, easy to read, but nonetheless thought provoking, insightful, and extremely well written series of books.

- Who Moved My Cheese By Dr Spencer Johnson : This is one of those small self-improvement business books, which makes use of metaphor. Not everyone's cup of tea, and not related to trading but far more general. I found it incredibly useful at a time when I needed it.

- Forecasting Financial Markets, The Psychological Dynamics of Successful Investing. By Tony Plummer. A book from the late 1980s which delves into trying to understand Markets and Market analysis in relation to crowd psychology. Some chapters are a touch meandering and waffling, but overall a book which I thought was a brilliant piece of work.

- Way of the Turtle: The Secret Methods that Turned Ordinary People into Legendary Traders. By Curtis Faith. Really enjoyed this book, written by the most successful of Richard Dennis's Turtles. What I really took away from this book, was less what he revealed about the systems, or the Turtles techniques, but far more what he wrote regarding the mindset of the successful trader.

- Bringing Down the House: The Inside Story of Six MIT Students Who Took Vegas for Millions. By Ben Mezrich. Once again a book with no direct links to trading, however as all traders know, gambling and trading are two different sides of the same coin. This book is an enjoyable read, and I found much there one can take away from and apply to trading.  

List of Market/Trading Related Book's I have read, which I consider influential or which I enjoyed one way or another, but did not not make my favourites list:

-  Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Application. by John J Murphy.
-  Japanese Candlestick Charting Techniques. by Steve Nison
-  The Black Swan. By Nassim Nicholas Taleb.
-  The (Mis)behaviour of Markets. By Benoit B. Mandelbrot.
-  Risk - The Science and Politics of Fear. By Dan Gardner.
-  Against the Gods - The remarkable story of Risk. By Peter L.Bernstein.
-  Breakthroughs in Technical Analysis. Edited by David Keller.
-  Just One Thing. By John Mauldin.
-  The Mind of a Trader. Alpesh B.Patel
-  Bubbles and how to Survive them. By John P.Calverley.
-  Bailout Nation. By Barry Ritholtz.

Other Books of note which I have not yet read, but plan to:

- The Crowd, a study of the popular mind. Gustave Le Bon.
- Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude. By Mark Douglas.
- Japanese Candlestick Charting Techniques, Second Edition by Steve Nison.
- The Way to Trade, by John Piper.

If anyone has any further suggestions, these would be greatly received.





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