Lessons from Hedge Fund Market Wizards

1. Steve Clark was “brutally honest” in his interview with Schwager. In the opening, Clark describes his background; raised in a council house on the outskirts of London, no father in sight, no university degree, and no initial trading experience. Clark was installing stereo systems when a friend told him about trading jobs in the City.  Sometimes interest and motivation are more important than “pedigree”.
2. He worked a series of back-office jobs and assistant roles before getting a shot at running a market-making book. He got his first chance to trade the book while filling in for a trader on holiday…during the week of the October 1987 crash. Trial by fire situation.
3. Steve learned a valuable lesson making prices on October 19, 1987: the price is where anyone is prepared to deal, and it can be anything. Steve found he had to quote prices so low until sell orders dried up. He still lost several million pounds on his book that day.
4. Eventually he became the most profitable trader in his group. Steve credits this shift to his ability to cut positions that were down or “wrong”. He also traded around news to orientate himself on “the right side of the market”. Plus, he was inexperienced and didn’t have the fear that cripples people who’ve been in the business for a long time. 
5. Traded on order flow info and screened for stocks making moves on big volume. He also used charts to see what happened when stocks reached certain levels in prior periods. Clark cautions that he is not a big believer in predictive chart analysis.  (more…)

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