The New Market Wizards: Conversations with America's Top Traders by Jack D. Schwager
Authors: Jack D. Schwager
Ads: Link
All futures transactions are guaranteed by the clearinghouse of the exchange.
Since, by their very structure, futures are closely tied to their underlying markets (the activity of arbitrageurs assures that deviations are relatively minor and short-lived), price moves in futures will very closely parallel those in the corresponding cash markets. Keeping in mind that the majority of futures trading activity is concentrated in financial instruments, many futures traders are, in reality, traders in stocks, bonds, and currencies. In this context, the comments of futures traders interviewed in the following chapters have direct relevance even to investors who have never ventured beyond stocks and bonds.
Randy McKay
VETERAN TRADER
T here are few futures traders who have gone from a starting account of several thousand dollars to double-digit million-dollar gains. Those who have kept their winnings are even fewer. If we now add the stipulation of holding a twenty-year record of highly consistent profitability, we are down to about the same number as there are Republican supporters of Teddy Kennedy. Randy McKay is one of those individuals (a consistent trader, that is—I don’t know what his political leanings are).
The start of McKay’s trading career coincided with the birth of currency futures trading. Although currencies have become among the most actively traded futures markets, at their inception they were moribund. In those days, the currency trading ring was so quiet that in the list of daily activities conducted in the pit, trading was probably a distant third to newspaper reading and board games. Yet, although the currency futures market’s survival was initially in question, McKay’s success as a trader was never in doubt. Despite the lack of activity, McKay was able to parlay an initial $2,000 stake into $70,000 in his first calendar year in the business (actually, a seven-month time span).
McKay continued his success, making more money each year than in the previous year. This pattern of steadily increasing annual gains was broken when McKay decided to switch from trading on the floor to trading at home. He quickly made the necessary adjustments, however, and by his second year of trading from home, he registered his first million-dollar gain. McKay continued to increase his winnings each successive year until 1986, when he suffered his first trading loss. Prior to that point, he had strung together seven consecutive million-dollar-plus years in his own account.
Over his entire trading career, McKay has been profitable for his own account in eighteen out of twenty years. A conservative estimate would place his cumulative earnings in the tens of millions. McKay has also managed a handful of accounts for family and friends. The two oldest accounts, which were initiated in 1982 with a starting equity of $10,000, have each generated cumulative earnings in excess of $1 million.
Despite his great success in the markets, McKay has maintained a very low profile. Until recently, even within the industry, few people had heard of him, myself included. McKay, however, has decided to enter the world of money management, a transition that requires at least a modestly higher public profile.
The interview was conducted in McKay’s office during trading hours. Although McKay traded intermittently throughout the interview, he seemed totally focused on our conversation, with the exception of when he made actual trading decisions. I found McKay refreshingly open about his personal experiences and his thinking process in regards to the markets.
----
How did you first get involved in this business?
In 1970, I returned from a tour of duty in Vietnam…
Before you continue, I’m curious, were you drafted or did you volunteer?
I was drafted. In my second year of college, I learned to play bridge and became addicted to the game. I played day and night and skipped all my classes. My lack of attendance led to
Since, by their very structure, futures are closely tied to their underlying markets (the activity of arbitrageurs assures that deviations are relatively minor and short-lived), price moves in futures will very closely parallel those in the corresponding cash markets. Keeping in mind that the majority of futures trading activity is concentrated in financial instruments, many futures traders are, in reality, traders in stocks, bonds, and currencies. In this context, the comments of futures traders interviewed in the following chapters have direct relevance even to investors who have never ventured beyond stocks and bonds.
Randy McKay
VETERAN TRADER
T here are few futures traders who have gone from a starting account of several thousand dollars to double-digit million-dollar gains. Those who have kept their winnings are even fewer. If we now add the stipulation of holding a twenty-year record of highly consistent profitability, we are down to about the same number as there are Republican supporters of Teddy Kennedy. Randy McKay is one of those individuals (a consistent trader, that is—I don’t know what his political leanings are).
The start of McKay’s trading career coincided with the birth of currency futures trading. Although currencies have become among the most actively traded futures markets, at their inception they were moribund. In those days, the currency trading ring was so quiet that in the list of daily activities conducted in the pit, trading was probably a distant third to newspaper reading and board games. Yet, although the currency futures market’s survival was initially in question, McKay’s success as a trader was never in doubt. Despite the lack of activity, McKay was able to parlay an initial $2,000 stake into $70,000 in his first calendar year in the business (actually, a seven-month time span).
McKay continued his success, making more money each year than in the previous year. This pattern of steadily increasing annual gains was broken when McKay decided to switch from trading on the floor to trading at home. He quickly made the necessary adjustments, however, and by his second year of trading from home, he registered his first million-dollar gain. McKay continued to increase his winnings each successive year until 1986, when he suffered his first trading loss. Prior to that point, he had strung together seven consecutive million-dollar-plus years in his own account.
Over his entire trading career, McKay has been profitable for his own account in eighteen out of twenty years. A conservative estimate would place his cumulative earnings in the tens of millions. McKay has also managed a handful of accounts for family and friends. The two oldest accounts, which were initiated in 1982 with a starting equity of $10,000, have each generated cumulative earnings in excess of $1 million.
Despite his great success in the markets, McKay has maintained a very low profile. Until recently, even within the industry, few people had heard of him, myself included. McKay, however, has decided to enter the world of money management, a transition that requires at least a modestly higher public profile.
The interview was conducted in McKay’s office during trading hours. Although McKay traded intermittently throughout the interview, he seemed totally focused on our conversation, with the exception of when he made actual trading decisions. I found McKay refreshingly open about his personal experiences and his thinking process in regards to the markets.
----
How did you first get involved in this business?
In 1970, I returned from a tour of duty in Vietnam…
Before you continue, I’m curious, were you drafted or did you volunteer?
I was drafted. In my second year of college, I learned to play bridge and became addicted to the game. I played day and night and skipped all my classes. My lack of attendance led to
Similar Books
