In Millionaire Traders, Kathy Lien and Boris Schlossberg have replicated the well worn template used by Jack Schwager, of Market Wizards fame. The book consists of interviews with twelve successful traders. The subtle twist this time is that all twelve traders are self-made. They are almost all self-taught and grew their initial small trading stakes into enough capital to allow them to become full-time traders.
The traders interviewed ply their trading skills on a wide variety of markets, including all the usual suspects: equities, options, futures and currencies. There is a definite slant towards currencies traders featured but this isn’t too surprising once you take into account that both Kathy Lien and Boris Schlossberg work for FXCM, one of the largest forex retail brokers.
Once you have read a certain number of trading books the contents seem to get awfully repetitive. There is only so many times that you can bear another definition of support and resistance lines, or have moving average lines explained to you once again. It is for this reason that you’ll often find traders remark that they’re glad if they can get one useful piece of information out of reading another trading book.
Using this measuring stick Millionaire Traders passes muster. All twelve interviews are generally interesting and engaging. The traders who specialise in the market that you yourself trade obviously bear the greatest scrutiny.
For me the most interesting interview was with an anonymous trader who just went by the moniker of Indi Jones (after the movie character played by Harrison Ford). This trader highlighted the importance of not taking the age old trading advice that is sprouted everywhere at face value; sayings such as ‘Cut your losses and let your profits run.’ While each of these sayings has been learnt the hard way by generations of traders they are not as cut and dried as they seem. How do you cut your losses and how do you let your profits run? Answers to these questions are directly related to the system being traded and the trader themselves.
When it comes to cutting your losses it certainly surprised me the number of traders in this book who average down. They don’t average down relentlessly, hoping and praying for the market to reverse against their losing positions. Instead they average down only to a point. They know when to recognise that they are wrong and get out of their losing trades. The reason they average down is that they also know that it is just about impossible to pick perfect entry points all the time. They have a view as to which way the market is going to go. If, after entering a trade, the market goes against them slightly they don’t bail out at the first opportunity, instead they take advantage of the cheaper price on offer.
Indi Jones illustrates the difficulty in perfectly timing trades with a quote from Warren Buffett: “I buy a stock I like for 100, it goes to 90, I still like it, I buy more. How is that more risky?”
I think the key take away point for me was that it is not wise to take conventional wisdom at face value. Any one person’s successful trading style cannot be summed up in a glib phrase or two.
The large number of traders in this book that defy conventional trading wisdom by doing something such as averaging down illustrates the need to be open to interpretations of different ways of trading.
When I first started using averaging down in my trading eighteen months ago, it took me a while to become comfortable using it, as I had been using nothing but fixed stop losses prior to that. I am now completely comfortable in using them and don’t think I could trade any other way. It takes extra discipline to use averaging down but it gives my trades more room to breathe. I am looking to increase the probability of my trades being successful. I’d rather have more of my trades in the long run go in the direction that I have identified as the long term trend rather than try to be exactly right with each and every entry that I make.
Some of the other staid trading advice regurgitated by the book includes: preserve your capital, personalise your trading system to you, be disciplined. All good advice of course but what do these really mean to you? How can you make them work for you?
There are no systems or strategies to be learnt from this book. It is more of a motivational book; to show you that it is possible to make it as a trader. That people have taken a meager amount of trading capital and turned it into a substantial fortune.
Of course, what is never touched upon is how much was this all down to luck versus skill for each individual trader. Out of thousands of aspiring traders probability dictates that at least a few of them will be profitable over the long run. It would have been fascinating if each trader had been asked their view on this. Would they even care as long as their luck/skill held?
It seems as if each interview in the book was carried out in one session. I think it would have been beneficial if there could have been follow up interviews done, as there are some lose ends and other points of interest that could have been further expanded upon.
By far the biggest problem with the book is the atrocious editing. Almost every chapter in the book is littered with grammatical errors and punctuation mistakes. There are multiple instances where answers are marked as questions. Such mistakes break up the flow of reading the text. I have a hard time believing how such problems could have gotten past even the more cursory proof reading.
At the end of the day, this book, entirely due to the style of its content, is going to be compared to Jack Schwager’s Market Wizard series. While the interviews found in Millionaire Traders are interesting enough, with plenty of robust trading advice to be found, I don’t see it knocking Market Wizards off its pedestal any time soon.