Yeshaayahu Schwager wrote many works about great transactions in the futures industry and financial markets. After interviewing the greatest traders in recent 20 years, his best-selling books are: Financial Wizards published by 1989, revised edition by 20 12, New Financial Wizards published by 1992, and 20065438+. His works on fundamentals and technical analysis of futures trading can also be called textbook level. In fact, Yeshaayahu Schwager himself is managing an investment management account of a futures and foreign exchange portfolio.
654381October 27th in Beijing, Yeshaayahu Schwager shared his interview experience and views on trading with China market participants. Under the trend of China's financial market opening to the outside world, the internationalization of traders is an important dimension of China's financial market internationalization. "Hand-to-hand combat" between local and overseas institutions in domestic and overseas financial markets is bound to be more frequent, and many people with rich experience in overseas transactions will return to the local market to practice. On the other hand, China's financial market has continuously improved its innovative trading mechanism and enriched its trading products. The maturity of the market will eventually provide tradable targets for domestic and foreign hedge funds. Perhaps, in the near future, there will also be traders in the China market who are awe-inspiring in the global market and can study abroad.
For ordinary financial readers, the cases of a few traders sweeping the market or confronting the monetary authorities are always the most fascinating, but on the contrary, the analysis of the failures of great traders occupies a large space in Yeshaayahu Schwager's interview record, and it is more valuable for these practitioners to remain calm in the face of heavy market damage. In his works, Yeshaayahu Schwager did not deliberately exaggerate the legends of those successful cases. He showed the readers the high professionalism of the trading profession from beginning to end. It can even be said that this is a dangerous job for people who are engaged in trading their own funds. In the market, for a long time, the state that practitioners need to keep is not embattled, but to do their homework and avoid making mistakes.
Readers who want to learn the magic weapon to win the market or the secret to make money through these works may also be disappointed. In Yeshaayahu Schwager's view, whether based on fundamentals or technical analysis, it has its own rationality in different scenarios and is suitable for different types of traders; It is neither better nor worse to engage in short-term arbitrage trading or large leveraged trading betting on macro trends from the perspective of profitability; In financial markets, the transition between price resistance and support is usually instantaneous. If readers try to predict the future according to historical laws, they will eventually be confused. Yeshaayahu Schwager's message to readers in the interview is just like what he said to China market participants in Beijing that day: fully understand yourself, stick to the trading method that suits you, and to some extent, it can also be said that it is discipline and flexible to the ever-changing market.
Finally, it is worth mentioning that although almost all Yeshaayahu Schwager's books are buyer traders, readers may be more willing to hear these stories from the media, but the seller traders in the real market are also an indispensable group. The highly specialized division of labor of these hidden market liquidity providers shows the professionalism and refinement of modern financial markets. In my interview experience as a reporter of Securities Market Weekly, such practitioners are quite respectable, especially in the immature market environment of China, traders often bear the responsibility of developing financial markets and strengthening market self-discipline.
Winner of the transaction: managing risk
Yeshaayahu Schwager believes that the most important reason for failure is the lack of proper risk management. Many people want to enter the market at the right time, buy low and sell high, but the most important secret is that there must be very strict fund management measures and discipline. Trading methods and techniques are important, but not as important as risk management. Even though the greatest traders may have many special skills and talents, if they don't have proper risk management strategies, they are likely to be out. Therefore, if a trader wants to succeed, he must understand that it is one of the laws to ensure that he follows the laws of the market, and that he should properly protect risky positions and not be too radical.
In some markets, for ordinary traders, the threshold of some risk management tools may be too high and the hedging function is not matched enough. Then, the best risk management method is to control the scale of transactions and reduce unnecessary transactions when market volatility increases.
"They are not careful enough when choosing the timing of the transaction. At the slightest sign of trouble in the market, they can't sit still and are eager to enter the market to trade. This is tantamount to forcing yourself to trade passively, not actively. " Tom Baldwin, a floor trader visited by Yeshaayahu Schwager, described his views on trading frequency in this way. Investors often have the impulse to "cut their meat" when facing losses, but Baldwin reminded that when trading losses, don't rush to appear, be patient, wait a little longer and choose the most favorable opportunity to appear. In reality, leaving the venue easily just because of floating losses may not only miss the later opportunities, but also return to the venue on the way down and bear greater losses. In the final analysis, such investors do not make trading decisions based on information and logic.
Institutional investors should not be impulsive. Paul. Paul Tudor Jones also said in an interview, "If you can't judge the market situation or the transaction results are out of control, wait patiently and don't rush into the market."
Yeshaayahu Schwager mentioned another example that day. There was a very successful trader who often met Yeshaayahu Schwager in his early years, but he also had a very unsuccessful experience. Before opening a position, traders think that they have got a very good opportunity and a great trading opportunity, and that they can hold it for a long time without protection. But in the middle period, he found S. When the market situation was not as good as expected, in fact, he couldn't get out because his position was really big. In the end, after he reduced his holdings, 60% of the funds were lost. After that, he left the transaction and almost his whole career was ruined by this transaction.
If risk management measures are investors' bottom line principle, what is the main difference between successful traders and failed traders?
Yeshaayahu Schwager believes that successful traders must also have a certain spirit of adventure, which is related to the management risk mentioned above. Risk management does not mean avoiding all risks, because benefits and risks are accompanied. Even if the so-called "risk-free interest rate" is obtained, it actually only evades the credit risk, and may suffer heavy losses when there is liquidity risk in the market, such as the China bond market at the end of 20 16.
Closer to home, Yeshaayahu Schwager's so-called adventure is not a blind adventure, but that he can prioritize the contradictions and risks in the market and get the main benefits while avoiding the main risks. "You may have some different and better trading methods than others, or you can believe that even if this method makes you lose a lot of money now, you can still control the risk well. Of course, this is also because different investors will have different willingness to accept the most extreme situation. "
Yeshaayahu Schwager used MichaelMarcus as an example, which he often mentioned in his books and on many occasions. Marcus once got $30,000 from his clients, and finally he increased the funds to $80 million. Of course, this shows that he is very talented, but his winning factor is that he looks at the market and knows which factor can affect the market the most among a hundred different factors.
Interestingly, according to Yeshaayahu Schwager, even a trading geek like Marcus who is good at grasping the "pain point" of the market, the most regrettable trading failure actually comes from closing the position in advance and missing the huge profits behind. He didn't take any risks at that moment. This is somewhat similar to someone who concluded that the pain of waiting is greater than the pain of losing.
Abandon methodological bias
The financial market has a "comparative advantage" similar to international trade. Different traders have different types of skills, some quantitative and some non-quantitative. Traders should know their own advantages and find out what they are good at or the most effective method for themselves.
Many market participants will be happy to label themselves as factions. Sometimes this is the need of marketing, and sometimes it is even upgraded to a kind of "political correctness". Yeshaayahu Schwager believes that there is no good or bad method in trading, only suitable. "From the quantification of 100% to the qualitative description of 100%, from the fundamental analysis of 100% to the mathematical analysis of 100%, it may be long-term or short-term, with different models or formulas, but traders must find their own methods anyway.
In the follow-up communication, Yeshaayahu Schwager also mentioned flexibility, requiring traders to be unbiased about the long and short state of the market. Similar to being neutral in methods, there are no permanent short positions or long positions in the market, only traders are good at using which tools.
This is a process of discovery. In other words, a good and bad trader is not just a matter of money. Yeshaayahu Schwager believes that for individuals, he himself agrees that sometimes technical analysis is more important than fundamental analysis, and there will be a transition process between different methods, so it is more difficult to distinguish the advantages and disadvantages from the perspective of profitability. "Traders should think about finding the right way of analysis, change their own analysis strategies and methods, and finally, form the confidence to support you. Under good risk management conditions, it can show a good return on investment. "
However, it is almost impossible to find a suitable method overnight, and the cost of trial and error is high. When new traders start doing this, they are like children, not knowing which method is suitable and which method is not suitable. In the process of finding a suitable method, traders may face the risk of being out.
"I estimate that 80% of the market people will lose money at the beginning, and some people will lose a lot. I talked to Mark Weinstein and accepted his interview. Mark has done many excellent cases, but we may be talking about 60%-70% cases, not successful experiences. " Jack Yeshaayahu Schwager said.
Trial and error does not mean complete failure. But how to avoid losing all the money before finding the right way?
Yeshaayahu Schwager shared a suggestion that he followed, which is one of the main principles that he calls himself a trader. "Traders must be able to bear losses without changing their living conditions, instead of getting mortgages for trading. The funds you can trade are relatively small compared with the whole assets. If you succeed, it will be a good foundation. If it fails, it doesn't matter if the money is gone in the end. You should quit to improve your knowledge and skills, and don't put more money at risk, or you may spend all your money in the first place. "
In fact, unless it is an asset with high stability and low cost, as well as a high degree of certainty and positive interest margin, it is extremely dangerous to try to obtain the fluctuation income of market price difference through leverage. In China, 20 15 real estate market, 20 16 bond market and 20 17 real estate market all have similar lessons.
People may ask, how do traders determine their personal style? "The first thing you have to do is to read a lot of books to understand what traders are going to do, and you have to do self-training. When you start trading, you should do fundamental analysis and technical research. If you still don't know what works for you in the market, you can try to answer some questions, such as should I make a fundamental investment? What skills do I master? Do I want to operate in the short term or in the long term? This is a process of self-discovery. "
Distinguish ability from luck in winning games.
Sometimes, an ordinary investor may get a good return when he first enters the market, even if he has no experience, but Yeshaayahu Schwager thinks this is dangerous. Some people succeed because of luck, or the investment style is just in line with the market style, which may last for a long time.
"For example, if you go to the bookstore and buy a book on brain surgery, you can read it at the weekend. Can you do brain surgery the next day? I don't think any rational person wants to do this. But if you go to the bookstore and pick up a financial book, even if you don't know the professionalism inside, you may have the possibility of a successful transaction. Why not do brain surgery easily, but are willing to do stock trading? Back to this core, as far as I know, trading is a professional event, but even beginners may have a successful proportion. Because there are only two choices in this market, either buy or sell. Maybe this bull market buys this and that, and every bull market is rising. " Yeshaayahu Schwager said.
In fact, further, in the market, professional institutional investors often flaunt that they can outperform the market and get α returns. However, if this investor happens to be at the disadvantage of the market for a period of time, when the market reverses, his apparent α returns will be completely swallowed up by the market β, and there is a huge risk of failure. For professional investors, it is even more fatal not to recognize market trends and fluctuations. In the long run, the luck of traders is zero.
"(Short-and medium-term financial markets) traders' bets are based on probability. For example, in the China stock market, I have a friend who bought at a low price, so he (even if he faces a temporary loss) is likely to make a comeback in the future. So you should bet on the right place. In the long-term capital market, fast-forward and fast-out, is likely to be eliminated. The long-term capital market is still different, and there are many factors to consider, including market factors and economic cycle. If you don't manage risks well and diversify trading risks, if you lose money in repeated transactions, especially in a good market situation, it means that you have some problems at this time. " Yeshaayahu Schwager said.
Yeshaayahu Schwager once interviewed Kevin Dali and called him a "long-term short-term trader" in the hedge fund guide. Yeshaayahu Schwager has seen Daley's position and won over many people. But a considerable proportion of his transactions may be only 3% or 5%, which is only limited to these proportions.
Daley became a hedge fund manager from 1999 to 10. This person used to make long-term investments, and later changed to short-term investments, and kept this short-term trading style for a long time. 1999 to 2003, the market was good, and everyone knew there would be a bubble in the market. However, in March, the US market fluctuated, when the market fell by more than 50%. During this period, his income was almost zero, sometimes he earned more money, and sometimes he earned less. But in 2008, he stepped up his action.
Yeshaayahu Schwager visited Daley on 20 13. "I asked him what his accumulated income was during this period?" "900%!"
So, how can we achieve a 900% return transaction, during which the entire index is flat? After the interview, Yeshaayahu Schwager thought the most important thing was that when the market was in such a bad situation in 2002 and 2008, Daley stopped trading. In 2000, he didn't lose 50% like many people, but made a few percent. In 2008, Daley only lost about 8%, which shows that he can make a good balance when the market is bad, which is why he does well. When Daley thinks the market is bad, he will wait patiently. "We often say that we lost a lot of money because of the depressed market. But when you lose a lot of money, it doesn't mean that others also lose a lot of money. From this perspective, your risk control is not good. "
Yeshaayahu Schwager further believes that investors should observe and think about the actions of long-term capital. This kind of long-term capital will not withdraw soon when the market situation is bad. One of the important reasons is that long-term funds are often accompanied by high leverage. More importantly, they will change their own practices, start risk-controlled transactions when the market is not good, such as bond investment, and carry out decentralized fund allocation. Maybe at that time, these long capitals in some positions will lose their bargaining space, and the income will only be a few percent, but this is a good hedging transaction. For another example, in the turbulent market environment, some long-term capital began to do some arbitrage transactions between the euro and the dollar.
In Yeshaayahu Schwager's book, we can see that many stories come from concentrated investors, but those people eventually went bankrupt. But there are also some winners. What's special about them? Yeshaayahu Schwager believes that this is first related to position management. He added: "It may sound risky, but for some people, it is the key to their success. When you choose a position, you will find certain opportunities and feel very confident. "
1992 or so, the Bank of England feels that the development of the monetary system is not the direction they want. Soros is a man with a long-term vision, and he saw the mystery. The Bank of England later announced the news of the decoupling of the pound, and the market reaction was very strong. That year, Quantum Fund made a lot of money in trading.
In the interview, Stanley Druckenmiller, Soros's successor in Quantum Fund and also a master trader, also said something similar. During the period of 1989, druckenmiller, who just came to Quantum Fund, established a short position in Domagk based on the confidence of German unification. One day at work, Soros asked him, how many positions do you have now? Druckenmiller said 1 100 million dollars. "1 billion dollars? Do you call this a position? If you have this confidence, why only invest $654.38+0 billion? Many times you have a very good reason to support information. At that time, you will know from the market that you should hold such a position. " Soros encouraged druckenmiller to double his positions, and the result was quite rewarding.
"druckenmiller may say that he learned something from Soros, and he has to implant information in his position to get a good return." Yeshaayahu Schwager concluded. In other words, traders sometimes have to bet again based on reliable information and reasonable logic to support a high enough winning rate.
Stay flexible.
Yeshaayahu Schwager once again mentioned Marcus' example, and Marcus' innovative spirit also helped him. At first, he came into contact with options and gradually figured out what it was, which was used for arbitrage.
Yeshaayahu Schwager also has a positive view on the application of artificial intelligence in investment decision-making, but he also said that some conditions may be needed.
In terms of computing power and algorithms, computers can do a lot of computing work. The top human chess player in the world was defeated by the machine, but the investment market is obviously much more complicated than playing Go, and there are many dimensions and factors to consider. There are many routines and steps in playing Go, but when it comes to international trade and transactions, things are not going in any direction. Different countries have different political systems, different economic policies, different currencies and different interest rates, so its complexity is far higher than the rules of playing Go. Any number of factors are changing, many factors are not counted, and every factor is changing. A factor has just been analyzed and changed, that is, the opponent's information has changed. Therefore, investment is an environment full of uncertainty, which is why Yeshaayahu Schwager thinks that human beings still have a chance. "In the end, even now, we will have some risks. We haven't discovered what this risk is, but the world we live in should be the existence of people and machines. "
Excellent academic qualifications and rich experience are often possessed by traders, and the financial market is also a place that is good at shaping idols. However, Yeshaayahu Schwager believes that the most important and simplest criterion for evaluating whether a trader is qualified is, "You should look at the relationship between your return on investment and this market."
But if you want to choose a good trader, what is the most important trait you generally have? In Yeshaayahu Schwager's view, this trait should be flexibility. "You must be able to change your mind at any time and change some of your ideas quickly. I think a good trader can quit quickly when he finds a mistake. " Yeshaayahu Schwager said.
It can be said that admitting failure is the way to avoid greater failure.
On 1987, druckenmiller experienced the crisis of "Black Friday" when US stocks plunged. Before this crisis, the S&P stock market had fallen sharply during the period of 1987+00. At that time, druckenmiller had seven funds. In this position, he not only holds positions, but also arranges long-term bulls. When he came into the office on Friday, everyone might think that the market fell suddenly, but according to the previous decline, it was actually foreseeable. However, druckenmiller only lost a little money at that time. How did he do it? The answer is that he went long before that, and then he wondered why this happened, so he withdrew all his long-term long positions at the beginning of the decline and shorted them backhand.
So, how does Yeshaayahu Schwager view the balance between traders' discipline and flexibility?
Discipline is not some rules that prevent traders from innovating. Yeshaayahu Schwager's discipline refers to some good methods, such as following some very clear risk management policies. On the contrary, even if the holder thinks that the current risk protection may be correct, if you think that the current risk is tolerable, then you can quit (risk protection), which is very flexible. "But in principle, I won't come out, I will stay." Yeshaayahu Schwager said.