Three years after Market Wizards redefined what a trading book could be, Jack Schwager returned with a second collection of interviews that went deeper, darker, and in many ways further than the original. The New Market Wizards, published in 1992, features a different cast of traders — though several of the original Wizards reappear in a different capacity — and a more psychologically sophisticated set of questions. Where the first book established that exceptional trading performance existed and tried to understand its mechanics, the second book is more interested in what separates the traders who sustain exceptional performance from those who achieve it briefly and then collapse.
This article is part of the full summary series based on the 10 trading books every serious trader must read. If you haven’t read the summary of the first volume yet, the Market Wizards full summary and key lessons covers Michael Marcus, Ed Seykota, Bruce Kovner, Paul Tudor Jones, and the themes that run through all seventeen original interviews. This second volume builds directly on those foundations.
What Changed Between the Two Books
The trading world of 1992 was meaningfully different from 1988. The 1987 crash had happened. Portfolio insurance had failed spectacularly. The currency markets had been reorganised by the aftermath of Plaza Accord volatility. And the traders Schwager was interviewing had, in many cases, navigated those events — either profiting from them, surviving them, or in some cases being nearly destroyed by them.
The result is a book with more scar tissue. The traders in The New Market Wizards speak with the authority of people who have been through something. They are less interested in explaining their methodology and more interested in the conditions under which their methodology fails. That shift — from “here is how I make money” to “here is how I almost lost everything, and what I learned from it” — makes the second book more honest and, in many respects, more instructive than the first.
Schwager also refines his interviewing technique. He pushes harder on inconsistencies, probes more deeply into losing periods, and is more willing to let subjects contradict each other without resolving the contradiction. The result is a book that feels less like a collection of success stories and more like a serious investigation into the nature of sustained trading performance.
Bill Lipschutz: The Sultan of Currencies
The Lipschutz interview is one of the most technically detailed in either Wizards book — and one of the most psychologically revealing. Lipschutz spent eight years at Salomon Brothers running the forex desk, generating hundreds of millions of dollars in profits for the firm before departing in the late 1980s. His methodology was currency-focused, macro-driven, and deeply reliant on his ability to read market positioning — not just price but the distribution of other participants’ positions across the curve.
What distinguishes Lipschutz from many of the traders in the original Wizards is his frank discussion of asymmetry in position sizing. Most traders in the first book emphasise keeping positions small and cutting losses quickly. Lipschutz argues for something more nuanced: that the right trade deserves a large position, and that scaling into a position as it moves in your favour — adding to winners rather than taking profit — is the primary driver of extraordinary returns rather than modest ones. “If you believe the trade is right,” he tells Schwager, “then the problem is that you’re not in it big enough.”
This is a direct tension with the conventional risk management wisdom of the first book. Lipschutz is not advocating recklessness — he has strict rules about when and how he scales in, and he distinguishes carefully between adding to a winner and averaging into a loser. But his willingness to express genuine conviction through position size is a counterpoint to the pure loss-minimisation philosophy of traders like Seykota and Marcus. The lesson is not that one approach is universally correct but that the best approach is the one that matches the trader’s specific edge and psychological makeup.
The most instructive section of Lipschutz’s interview concerns his attitude toward losing trades. He describes a specific period when he held a losing currency position far longer than his rules dictated — not because he was unable to exit, but because his conviction about the fundamental thesis remained intact even as price moved against him. He eventually exited at a significant loss. What he learned was not that he should have exited earlier — his thesis, in his assessment, was ultimately correct. What he learned was that being right about the direction of a trade and being right about the timing are entirely separate problems, and that a methodology which conflates them will eventually produce catastrophic losses regardless of the underlying intellectual quality of the analysis.
Stanley Druckenmiller: The Art of Concentration
Druckenmiller’s chapter is among the most quoted in either Wizards book — and his central principle is the most counterintuitive in the collection. Where most of the traders in both volumes emphasise diversification and position limits, Druckenmiller argues that when you have genuine conviction, the appropriate response is to concentrate as heavily as possible. “The way to build long-term returns,” he tells Schwager, “is through preservation of capital and home runs.”
The philosophy Druckenmiller developed while working with George Soros at the Quantum Fund is built around this asymmetry: most of the time, you are managing risk conservatively and waiting. When a genuine opportunity presents itself — one where the risk-reward is dramatically in your favour and your conviction is high — you bet heavily. The 1992 pound sterling trade, in which Quantum made over a billion dollars betting against the British pound’s ability to maintain its peg in the European Exchange Rate Mechanism, is the canonical example. Druckenmiller had established a large short position before Soros encouraged him to increase it dramatically. The result was one of the most profitable single trades in hedge fund history.
Druckenmiller’s interview also covers the psychological dimension of managing other people’s money at scale. The pressures that come with running billions of dollars — the reputational stakes, the client relationships, the difficulty of maintaining conviction when peers are on the opposite side of your trade — are qualitatively different from trading your own capital. His candour about the psychological cost of that scale is rare in financial literature and provides context for understanding why many traders who perform exceptionally well with their own capital struggle when they manage institutional money.
Mark Minervini: The Stock Market Wizard
Minervini appears in both the original Wizards and in the dedicated Stock Market Wizards volume, but his New Market Wizards interview is the most personal of the three. He describes his early years as a trader in detail that is alternately inspiring and sobering: years of losses, near-bankruptcy, the inability to understand why a methodology that seemed intellectually sound was producing consistent losses in practice.
The turning point, Minervini explains, was the recognition that he had been treating the market as a place to express opinions rather than as a mechanism for generating profits. The distinction sounds subtle but is profound in practice. An opinion-based trader buys a stock because he believes it is undervalued, holds it through adverse price action because the thesis hasn’t changed, and adds to the position as it falls because the value gap has widened. A profit-focused trader buys a stock because price action confirms a thesis, exits immediately if price behaviour contradicts the thesis, and never adds to a losing position regardless of how compelling the fundamental argument for the stock might be.
Minervini’s SEPA methodology — Specific Entry Point Analysis — is built entirely around this distinction. He is not interested in whether a stock is cheap. He is interested in whether the market is confirming the thesis by moving in the direction his analysis predicted. When the market stops confirming, the trade is over. This approach produces a hit rate well below 50% on individual trades — the majority of his entries are stopped out for small losses. The extraordinary returns come from the minority of trades that work: those he holds for large gains while everything else is cut quickly.
Charles Faulkner and the Psychology of Trading
The most unusual interview in The New Market Wizards is with Charles Faulkner — not a trader but an NLP (Neuro-Linguistic Programming) practitioner who had worked extensively with traders to improve their performance. Schwager includes this interview because it provides an outside perspective on the patterns he had observed across dozens of trader interviews: why do intelligent, experienced people systematically make the same psychological errors in markets?
Faulkner’s analysis is that most trading problems are not technical but representational — the way a trader mentally represents their positions, their losses, and their identity determines how they behave under pressure. A trader who mentally represents a loss as a reflection of their intelligence will behave differently from one who represents it as information about the market. A trader who represents their open positions as “their money” will make different exit decisions from one who represents them as “risk capital deployed in a specific thesis.”
The practical implications are significant. Faulkner describes specific techniques for identifying and changing the mental representations that lead to self-defeating behaviour — cutting winners too early, holding losers too long, increasing position size after a winning streak, decreasing it after a losing one. These patterns are not random. They are driven by specific psychological structures that can be identified and modified. The chapter is the closest thing in either Wizards book to a practical psychology manual for traders.
William Eckhardt: The Anti-Turtle
Eckhardt’s interview is a deliberate counterpoint to the trend-following consensus that dominates both Wizards volumes. As Richard Dennis’s partner in the original Turtle experiment — and the man who argued, against Dennis, that trading could not be taught — Eckhardt brings a rigorous mathematical perspective to questions that most traders address intuitively.
His central argument is that the human tendency to take profits too early and hold losses too long is not simply a psychological failure — it is the product of a specific cognitive bias that he calls the risk-aversion/loss-aversion asymmetry. Human beings, Eckhardt argues, are naturally risk-averse when ahead (they take profits to lock in a win) and loss-averse when behind (they hold losses to avoid realising a defeat). Both tendencies lead to the same outcome: small gains and large losses. The correction for this bias is not willpower but system — a mechanical methodology that takes the sizing and exit decisions out of the trader’s discretionary control.
Eckhardt also offers one of the most precise formulations of the role of discipline in trading: “If you have a successful methodology, discipline means following it when you don’t want to. If your methodology is not successful, discipline means stopping.” The simplicity of this statement conceals its depth. Most traders who fail do so because they are disciplined enough to follow a poor methodology or undisciplined in following a good one. Identifying which of these is the actual problem — and responding correctly — is the work of a trading career.
The Deeper Theme: Why Sustained Performance Is Harder Than Initial Performance
The central question that emerges from The New Market Wizards — more explicitly than in the first volume — is why sustained exceptional performance is so much rarer than initial exceptional performance. Many of the traders Schwager interviewed for the first book had produced extraordinary results for a five or ten year period. Some had sustained that performance. Others had not. What separated them?
The book’s answer, assembled across a dozen interviews, is psychological adaptation. The traders who sustained performance were those who continuously adapted their methodology and their psychology to changing market conditions — not changing their core principles, but refining the application of those principles as markets evolved. The traders who failed to sustain performance were those who became rigid — either in their methodology (holding onto an approach that had stopped working because it had once worked brilliantly) or in their psychology (protecting an identity as a successful trader rather than remaining open to being wrong).
Druckenmiller’s comment that the biggest risk in trading is not being wrong but being wrong and not knowing it is the most succinct expression of this theme. A trader who knows they are wrong can act. A trader who is wrong but certain they are right will compound the error until the market forces a reckoning. The history of the markets is full of traders — including some very famous ones — who fell into the second category after years of exceptional performance in the first.
What The New Market Wizards Adds to the Original
Reading the two Wizards books in sequence produces an understanding that neither achieves alone. The original book establishes the existence of extraordinary trading performance and identifies the mechanical and psychological principles that underlie it. The second book tests those principles against a wider range of markets, methodologies, and market conditions — and reveals where they hold and where they require refinement.
The most important addition is the explicit treatment of failure. Where the original Wizards book describes failure mostly in the past tense — traders who overcame early losses to achieve sustained success — The New Market Wizards is more willing to examine failure as an ongoing risk even for the most successful practitioners. Lipschutz’s currency loss, Minervini’s early years, the psychological traps Faulkner identifies — these are not historical curiosities. They are descriptions of failure modes that remain active throughout a trading career regardless of how much experience or capital a trader accumulates.
Together, the two books form the most comprehensive public record of what it actually takes to trade financial markets at the highest level. They belong on the same shelf — and they should be read in order. The principles in the first book are the foundation. The complications, refinements, and honest assessments of failure in the second are what make those principles durable.
For the complete list of essential trading books in this series, visit the 10 trading books every serious trader must read. The next summary in the series covers Stock Market Wizards — Schwager’s deep dive into equity markets and the traders who have made their fortunes in individual stocks.
This article is part of an ongoing series of full summaries of the most important books in trading. Each title on the list receives its own dedicated review covering the key ideas, the trader profiles, and the practical lessons applicable to active market participants.