Review – Hedge Fund Market Wizards

April 29, 2018


– Disclaimer: the German version comes as a trilogy, and I only read the first book about macro strategists, so technically this review only applies to one third of Hedge Fund Market Wizards. –

Trading is easy now. Hundreds of online brokers and trading systems contend for your attention. Each one offers lower transaction fees, more professional analysis tools, better training videos and access to more exotic underlyings than the next. Trading consistently successful, however, is actually pretty hard.

Like its predecessors (Market Wizards,  New Market Wizards, and Stock Market Wizards), Hedge Fund Market Wizards, contains a series of interviews with successful traders. Author Jack Schwager, himself a recognized trading expert and fund manager, sat down with some of the top hedge fund managers to discuss their personal background and strategies.

There is a lot more to trading than you would initially think. Some people trade systematically (using an algorithm to decide about trades), some are discretionary (using their intuition). There are trend followers (expecting a momentary trend to continue for some time) and those who expect a trend to revert to the mean. Some analyze fundamental market data, some just look at price charts. And I’m still taking exclusively about traders using a macro strategy, based on global overarching market trends. One key learning of Hedgde Fund Market Wizards is, that trading strategies are something highly personal. A successful strategy will always fit a trader’s character. This cannot simply be taught, although many people try to (including Schwager).

One thing all hedge fund managers have in common is a painstakingly accurate risk control, and extensive analysis of correlations between markets and positions. Apparently, it is pretty easy to generate more profits by simply taking more risk. But the hedge funds that have the highest yields now will probably also be the ones carrying the highest losses when the markets turn, because they simply are the ones with the greatest exposure to risk. The ”gurus” on the other hand use complex mathematics and statistics to decide what size a position should be, how to mitigate risks, and when to close it. That way, the interviewed fund managers consistently had very low losses.

Another common trait is that none of the interviewees started as a hobbyist. Some were employed traders or analysts first. Many just went ”all in” and started trading with their own and borrowed money. But all had the passion and determination to follow through. So unlike “normal” investment (reviewed here or here or here), trading actually is a full-time job.

Every interview closes with a succinct summary by Schwager, rehearsing the key learnings, and highlighting the methodical specialties and quirks of the interviewee. That way, the book is very accessible for readers with some prior knowledge of markets and financial instruments. One caveat, however, is that the interviews do contain jargon and Hedge Fund Market Wizards may be hard to understand for novices. There is a small appendix covering some basics, though.

If your goal is to become a professional trader or funds manager, use Hedge Fund Market Wizards as inspiration and resource. Learn how others have succeeded and apply the knowledge to develop your personalized strategy. If you don’t want to trade professionally, Hedge Fund Market Wizards may still be an interesting read if the financial markets have some appeal to you.


Key points:

  • Other trader’s strategies won’t work for you, develop your own
  • Keep hedging strategies and risk control in mind
  • Study successful traders to get inspirations


Author affiliations:

Jack Schwager is a portfolio manager and advisor for several hedge funds. He is a recognized trading expert especially for the futures markets and technical analysis, who wrote several books on the topics and developed novel technical indicators. He is also a frequent lecturer and speaker on financial topics. Schwager can be found on his website.


Review copy:

copy received at promotional event
Börsenbuchverlag; Auflage: 1. (3. Juni 2013)
ISBN-10: 3864700957

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Hedge Fund Market Wizards Book Cover Hedge Fund Market Wizards
Jack D. Schwager
Business & Economics
John Wiley & Sons
May 29, 2012

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