8 years back, I spoke to Jack Schwager, the man behind the Market Wizards series. Sandeep Rao spoke to him again recently on In The Money, and it was an interesting conversation. Market Wizards is probably the only book I’ve read multiple times when I was trading actively.

The one thing that stood out to me from the video was the debate between systematic vs. discretionary trading. There’s a common assumption that the best traders are rules-based, meaning they follow a fixed set of rules. The logic is that this helps them keep their emotions in check so they can follow the signals dispassionately.

But what Jack found among the traders he interviewed was that almost all of them were discretionary traders. They had rules, but they knew when not to follow them. Meaning, they knew when their approach wasn’t working and when they had to change the “rules” they were following.

The one purely systematic trader he ever profiled kept changing his systems. He once showed Jack the equity curve of the original system he made his first money on. It went straight up while he traded it, and straight down after he abandoned it. If he had stuck to it with blind discipline, he would have been wiped out.

At the very least, what this shows is that there isn’t just one way to make money. There are numerous approaches that work, and you ultimately have to figure out what works for you and stick with that approach until it stops working, because nothing works all the time. People change, the markets change, and so do the strategies.

Full episode here.

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