I've worked in physics and am heading for a career in finance. In these fields you occasionally run into that guy. The guy who is either so smart nobody can understand him, or he's a manic-depressive frothing in a mania stage. Either way, "that guy's" nervous system is obviously wired to a higher pitch than mine ever will be; at least without chemical additives or surgury. Reading the book is like talking to that scary smart manic guy. It's always humbling running into "that guy." Niederhoffer is that guy. He ranges wildly from stories of his colorful youth in a working class neighborhood in NYC (which actually did remind me of Feynman's stories) to horse racing, to squash, to trading FOREX. He goes so fast, you can barely keep up with him, even in a leisurely read. Why is he talking about handball? I thought he was just talking about liquidity? Checkers? And how does Jesse Livermore fit in? Read it and see.

Niederhoffer is the type of man I admire the most; he has physical courage, he's brilliant, he loves his family and friends, he beats the system with wit and street smarts and he comes from humble means. He managed to get a system for gaming the GPA named after him. He was a world champion at Squash. He was an early pioneer of direct marketing private equity funds. He was an early skeptic of the efficient market hypothesis (what would traders get paid for if the markets were efficient?). He was a professor at U.C. Berkeley. He built (and lost, in a story I hope the next edition of his book documents, and, stunningly, built again) a great fortune. His story is completely mind boggling; the world is a better place for his having lived his story in it, and you'll be a better person for absorbing his insights about the world.

Beyond my gushing over his yarn spinning, if you're a careful reader, and you know something about markets, you can pick up some pretty serious insight from his descriptions of his day to day work. The only other book I got a feel for the markets like this was Larry Harris' book on Trading and Exchanges, and that was nowhere near as much fun to read.

As many already know, Niederhoffer has had quite a volatile, and highly publicized career as a speculator. But it is pure naivety and ignorance for people to brush his work off merely because of the two blow ups he had in his fund. In fact, if anything, these two events have, in my opinion, made Niederhoffer's perspective exponentially more valuable than most modern financial literature on the subject.

With that said, I must disagree with his view on statistical inference and its role in market speculation. Although statistical inference is valid as a data point, when one uses it as their primary and sole validation of any trade premise, the risk they expose themselves to is far too high. The foundation of his theories are based on using prior statistical probabilities to validate a trade. In other words, if the odds of a trade blowing up in your face are 1 in 1000, then it's a good trade. But if you don't consider what is going on in the macro environment, the overall sentiment of market participants, and other "subjective" data sets, then you risk exposing yourself to a situation where you make a massive long bet on the S&P futures at a time when the market is in a freefall because of some geo-political and/or financial event such as a Russian debt default, or Asian financial meltdown. This is the scenario that blew Niederhoffer up, but the interesting thing to note is that the "trade" itself had already caused significant loss in a prior event. So what does that tell you about statistical inference?

The value in this book is what you gain from his anectdotes and insights. Although he has a tendancy to go off on a tangent and lose you, if you can keep your focus, this book will provide you with invaluable insight into the mind of one of this generations most experienced market operators.

And his comparison of a classical symphony with the Japanese Yen is priceless, and can be worth the price of this book in itself.

I have personally read this book over 5 times by now, and I'm sure I'll read it again.

There are some weak chapters (checkers and music for me) but overall Niederhoffer gives an honest voice to what being a "trader" is really like, and especially from the buy-side perspective. The most refreshing aspect is that he disabuses folks of how glamorous the life is. I resisted reading this book for years, and now regret it. While wordy and at times brutally personal, it is quite real in a way that no other book on hedge fund and trading life has ever really captured. Strongly reccomended.

It's not surprising that this guy blew out his hedge fund when you read the "slice of life" recounts of what his trading was like. You get the feel that he was always on the edge, leveraged to the max, one sudden market surge away from bankruptcy every time he was in a trade. I don't know how true to reality those descriptions are, but they make for some great reading. I wonder if he really had a bum sleeping in his closet that helped him enter and liquidate large currency positions?

Those trading excerpts are artfully sprinkled into the text and do not make up the meat of the book, but for some reason they are what I remember most. This is an autobiography that sort of reads like a novel and sort of like textbook on physics theory. It really is well-conceived and brilliantly written.

Let's see what else I can remember - he grew up in New York in a middle-century era and had an uncle who was a bookie, was heavily involved in raquet sports and eventually became a national-champion squash player. Lessons from his father included avoiding "hoo-doos" (unlucky people - Shleprocks I suppose - whose bad luck was contagious and who could be found around the local stock-betting bucket shops) and how to maintain self-control and exercize grace under pressure in raquet sports. The local neighborhood scene included some very serious championship-calibur checker playing in the park.

Lessons from all of this (and many more wonderful antecdotes) are all tied into shaping his thinking and developing his mindset into an intellectual and a professional risk-taker. He worked closely with the famous George Soros trading currencies and eventually started his own hedge fund.

I'll be rereading it someday soon, as it really is a classic that contains more wisdom than meets the eye.

[...]

I avoided this book for months. It sat on the shelf at my library, but I ignored it. "I don't want to be a speculator. I don't even want to be a trader! I want to be an investor."

Well, after finally reading it, I stand by my statements above. However, this ranks up there as one of the greatest books I've ever read, on investing or otherwise.

This guy is crazy!

A family friend was an excellent chef (accountant for his day job). He was a smart guy too, and he planned on writing a cookbook. He gave up, unfortunately, when he read some Pierre Franey cookbook- I forget which one. He felt it was such an incredibly excellent book that there was no reason to pursue writing another one.

That's sort of how I feel about this book. It isn't perfect-- for one thing, he focuses way too much on sports and thinks they're far too important. Also, he's a speculator, which I don't think is so great. All investors prey off the market for their living, but I think speculators particularly are rewarded out of tune with what they provide the world, which is nothing. They certainly do absorb risk, however, which is the ultimate necessity of a true free market soceity. Risk is the glue that holds it all together.

I could tell you how brilliant this guy is, but there's no point. If you buy an investing book this year, buy this one. Seriously. It gets my absolute highest tier of recommendation.

This guy is crazy!