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“Unknown Market Wizards” Jack Shwager review about ***Peter Brandt***

Hello traders 👋

Today I want to share with you a review of the first trader from the last book of Jack Schwager “Unknown Market Wizards”

His name is ***Peter Brandt***

27 years of trading experience till 2020 (when the book was published for the first time)

14 and 13 years in a row with 11 years of pause between 😱

Settled in this business as a trainee for a commodity broker in the year 1972. Started his own trading around 1976, and from 1981 had a track record.

His average annual return is 58% 🏋️

Sharp ratio = 1.11, Sortino ratio = 3.00 Gain to pain ratio = 2.81

Succeeds nonetheless because his average gain is much larger than his average loss.

He is a breakout trader.

Bad years 1988 🆘 (After nine good years I got sloppy. I would enter chart patterns too early. I would chase markets. I didn’t have orders where I should have.)

And in 2013 🆘 when he decided to accept other people's money (That messed up his trading. I was out of sync with my approach. I am not being disciplined. I am not being patient. I’m jumping the gun on trades. I am taking positions before the market confirms them. I am taking trades on inferior patterns.)

  • I have learned that you can believe you know where the market is going, but you really don’t have a clue.☝️
  • I know now that I am my own worst enemy and that my natural instincts often lead me astray.😬

Also in 1995, after 14 years of trading, lost his edge and made a pause for 11 years.😱 The last two years were not successful and he closed his personal account:

  • I wasn’t feeling good about myself as a trader 🤷‍♂️
  • The fun of trading had left me at that point 🤷‍♂️
  • Trading had become drudgery 🤷‍♂️
  • The gap between previous and current results was emotionally difficult for me to live with… 🤷‍♂️
  • I had become gun-shy, I had lost my edge, and I didn’t know how to get it back. 🤷‍♂️

🔝Peter Brandt Quotes🔝:

  1. I trade only patterns where the breakout is through the horizontal boundary, no longer patterns like symmetrical triangles and trendlines. Only rectangles, ascending and descending triangles - with horizontal boundaries. You can find out much more quickly whether you are right or wrong.
  2. After stop trigger, I will take a second chance, but never more and neither on the same day.❗️
  3. Whenever I take a trade, I limit my risk to about 0,5% of my equity and I want to have my stops at breakeven or better within 2 or 3 days of entry. ❗️
  4. Once the profits of the trade equal 1% of my equity, I take half of the position off. Once a trade gets within 30% of my profit target, I make much closer stop protection. Once I get to more than 70% of my target objective, I will rise my stop.
  5. When the target is 2% of my equity (1:4 RATIO) I close my position. There can be occasional exceptions, where I will use a very close stop instead, especially for short positions. Because markets can collapse ⏬ much more quickly than they rise 🔼.
  6. I wouldn’t use an automatic overnight stop for the Mexican peso (6M), or Copper (HG) but I would use one for the Euro (6E), or Gold (GC) because it is so liquid.
  7. I put myself in the position, where what I do with charts can work for me. My edge comes from the process. I am a glorified order enterer; I am not a trader ☝️ Some of the orders I place, go against my natural inclination in a market. They are hard orders to enter.
  8. I think that most of my big profits have come from trades that were counterintuitive. How I feel about the trade is not a good indicator of how the trade will end up. My best trades can be precisely opposite to what I expected. 😬
  9. I take pride, in the fact that I can be wrong 10 times in a row. I understand that my edge comes from the fact that I have become so good at taking losses. 😎 It is a reflection of personal strength which is so crucial in a long run. A trader’s job is to take losses. I only have control over the orders I place, I don’t have control over the outcome of trades.
  10. Whenever I place a trade, I think, “A year from now when I look back at the chart, will I be able to see in the chart the day and the price at which I took a position?” If the answer is yes, then it is a good trade, regardless of whether it wins or loses.
  11. I trade stocks exactly in the same manner as futures. Stocks are subject to much more erratic price behavior than futures, but when stocks get on a gun 🔫, they act the same.
  12. After some research, I found that if I gave the market a little more breathing room in the early days of a trade, I would make more profits. However, my goal is not to maximize my return but rather to maximize my profit factor, that's why I use close stop-loss.
  13. Automatic trailing-stop and adding more contracts using open profits never made any sense to me.
  14. The rule of Richard Donchian works “If the market closes in the new high or low on Friday, then it is likely to extend that move on Monday and Early Tuesday.” Also, I have learned that it is best to liquidate any trade that shows an open loss as of Friday's close.
  15. I learned a long time ago that if you speculate with a loss to get less of a loss, you end up with more of a loss. The same trading discipline applies to an error ⚠️
  16. If my trade is not prepared on the weekend, if it comes not from my list of markets to monitor, that would be a loss with a high probability.
  17. If I sit and watch the computer screen all day, I will sabotage myself. Inevitably, I will make the wrong decisions. I will get out of winning trades. For me, what works is a disciplined approach: Make a decision, write the order, place the order, and live with it.
  18. I have found on markets that when you have a big move down, the first rally never holds. It often lasts for only 2 days after the reversal day.
  19. Charts will give you an idea of the path of least resistance, but charts do not forecast. There is a danger when people start thinking of charts in terms of forecasting. Charts are wonderful for finding asymmetric risk/reward trades.
  20. I am focused on the probability of being able to get out of the trade at breakeven or better, rather than on the probability of getting an anticipated price move. I ask myself “How confident are you that you will be able to get out of the trade not much worse than breakeven?
  21. It isn’t the charts that give me my edge; it’s risk management. I get an edge from discipline, patience, and order execution. I get my edge because I am willing to watch a market for weeks before entering, and then be out by the end of the day because the market didn’t act right.
  22. All the charts do, is give me a point at which I’m willing to take a bet. They give me the point at which I can say “The market should trend from this exact price.” Or can I find a bar on the price chart where is a pretty good chance that the low of that bar will not be taken out?
  23. I am not figured out where to enter trades so much, I figure out where I can place asymmetrical trades that have a near-50-50 chance of working.
  24. All my profits come from 10-15% of my trades; all the other trades are throwaways. The same pattern seems to hold year in and year out. The problem, of course, is that I never know which trades are going to be in that 10-15%.
  25. The trend is always driven by the main dominant fundamental factor. If people even know it, they are trying to fade it. That was about quantitative easing, people said: “The central banks can’t keep doing this. It’s causing too much debt. You have to short this market.” 😂
  26. You have to find your own way. If you think you can copy somebody else’s trading style, it will never work for you. The most important is that you wouldn’t have that conviction after 10 losing trades in a row to follow.☝️ Traders need to know exactly why they are taking a trade, this is the only way to survive through challenging periods.
  27. After such losing periods I just cut the size. I try to keep trading the same way. Optimizing your trade approach will only lead you astray. That’s the only way I’ll come out of a drawdown and get back on track.
  28. You have to learn to wait for the right pitch. The hardest thing is to answer “What is the pitch that I’m willing to swing on?” Only after this, are you ready to deal with other critical issues such as sizing, leverage, scaling, and trade management. ✍️
  29. Making money is bad motivation. 💸 Enjoy the process of problem-solving, markets are such a neat challenge!
  30. Missed trades are more painful than losses. I reduce could’ve-would’ve-should’ve trades by planning and having orders in place, rather than waiting for a breakout and then figuring out what I was going to do. ⏏️ And one of the things that I find amazing, is that if I wait long enough, there’s always another great trade that will set up.
  31. Discretionary traders, however, cannot test different alternatives, by definition. The only way to determine what types of trades work best and worst is to classify and record their trade results in real-time. Categorize trades and monitor trade outcomes for each category to have hard data on what does and doesn’t work.

The methodology of entering trades is actually one of the least important elements for Brandt. In fact, Brandt acknowledges that classical chart analysis has lost virtually its entire edge. What is critical is risk management. He essentially uses charts to identify points at which it is possible to define a close protective stop that is also meaningful points at which a relatively small price move would be sufficient to trigger a meaningful signal that the trade is wrong.

I hope you enjoyed so much wisdom from a real practicing trader! 😉

Sincerely, Taras Sviatun

Team Trading Volume Terminal

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