Michael Platt Hedge Fund Market Wizard – How To Pick A Trader

by Olivier on March 10, 2014

Am currently reading Jack D. Schwager: ‘Hedge Fund Market Wizards – How Winning Traders Win’. A great book I do recommend. So far, the interview that most resonated with me was the one with Michael Platt. Here’s the passage that I liked best (page 276):

Jack Schwager: You have picked a lot of traders in your career. What do you look for when you hire a trader?

Michael Platt: I want market makers, people who know that anything can happen. The type of guy  I don’t want is an analyst who has never traded – the type of person who does a calculation on a computer, figures out where a market should be, puts on a big trade, gets caught up in it, and doesn’t stop out. And the market is always wrong; he’s not. Market makers know that the market is always right. You are wrong if you are losing money for any reason at all. Market makers have that drilled into their head. They know value is irrelevant in times of market stress; it’s all about positions. They understand the markets will trade against positions. They get it. It is built into their books. It colors the way they think. I look for the type of guy in London who gets up at seven o’clock on Sunday morning when his kids are still in bed, and logs onto a poker site so that he can pick off the U.S. drunks coming home on Saturday night. I hired a guy like that. He usually clears 5 or 10 grand every Sunday morning before breakfast taking out the drunks playing poker because they’re not very good at it, but their confidence has gone up a lot. That’s the type of guy you want – someone who understands an edge. Analysts, on the other hand, don’t think about anything else other than how smart they are.

My friend David over at Finance Trends has reviewed Schwager’s book and done a great series of posts highlighting quite a few Hedge Fund Market Wizards. Make sure to check them out:

Here’s my post taking a closer look at Ray Dalio’s Principles.

Let the market make the decisions, not your ego. – Edward Allen Toppel

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