Michael Masters – A Stock Trading Strategy Market Wizard Prodigy

Michael Masters is an Atlanta-based fund manager. This article looks briefly at Micheal Masters’ early life and his trading career. We end the article by some quotes from his interview in Jack Schwager’s Stock Market Wizard.

Micheal Masters’ trading career:

He first got interested in the financial markets in the ‘70s. His dad was a trader, specifically a short seller, and he taught him the importance of taking profits, the idea that a profit is not confirmed until it’s realized. Additionally, Michael had two uncles who were traders. He learned the importance of discipline from them.

He went to college on a swimming scholarship and participated in the Olympic trials but couldn’t make it because he had mumps, which affected his performance.

Michael wanted to be a doctor. When has was ten years old, he had a terrible accident and ended up in the hospital for weeks. He was impressed by watching the doctors in the hospital and thought it would be a good occupation. He loved the idea that the job combined both science and helping people. On the other hand, swimming was primarily part of his childhood physiotherapy.

He later lost interest in medicine and enrolled in some finance courses which he liked together with an enormous investment course. After he graduated, he needed work experience to get into business school, so he applied to work as a broker.

Although he started as a broker, he hated the job. After a while, he decided he wanted to be on the managing side and not the selling side of the business. However, the company wanted him to sell financial products. He was fired after five years as a broker.

Michael started his fund, the Marlin Fund, in 1995. He sold ten 1-percent shares in his new company at $7k per share as a means of raising capital for his company.

According to him, he reached a point where trading in his account was reliably profitable. So, he felt he was ready to go out on his own and that he wasn’t comfortable working as a broker anymore:

During the first five years of the fund, he made a significant return with low risk — an annual of 86% in compounded return, with only three losing months and the worst month just a little below 3% loss.

As of April 2000, the fund had more than $500 million in assets under management. The total investment would have been more significant than that, but Michael had decided to close the fund to new investors because he was concerned that excessive growth of the fund could reduce performance.

Michael’s net position usually averaged around 40% net long and had ranged between 90% and 10% net short. A typical breakdown would be 50% long and 10% short, with the remainder in cash

The Marlin Fund had a very high turnaround of positions, and Michael always locked himself in his trading room during work hours. The average trade was held for two to four weeks, with 70% of those trades being profitable.

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Micheal Masters’ trading strategy quotes:

Here are some quotes from the interview with Jack Schwager in Stock Market Wizards:


We look at our business like a grocery store. You can get leverage in two ways: by taking on larger positions or by turnover.


The most important advice I can offer investors is: Have a plan. Know why you are buying a stock, and know what you are looking for in the trade.


I wanted to manage money on a performance basis. The fact that I had competed successfully at the highest levels of swimming gave me confidence that I could excel in this business as well.


Believing in a higher power gives me the strength to deal with the losses that are an inevitable part of this business.


We use technical analysis not because we think it means something, but because other people think it means something.


Our net position averages about 40% net long and has ranged between 90% net long and 10% net short. A typical breakdown would be 50 percent long and 10 percent short, with the remainder in cash.

What were the key characteristics of Michael Masters’ trading strategy?

The FAQ provides insights into Michael’s trading strategy, including the fund’s average net position, turnover rate, and the duration of typical trades. It also mentions his preference for technical analysis and the importance of having a plan in trading.

How did Michael Masters manage risk in his trading career?

Michael Masters’ risk management approach is covered in the FAQ, detailing the fund’s net position, ranging from 90% net long to 10% net short. It explores the breakdown of long and short positions and the emphasis on cash management.

What advice does Michael Masters offer to investors and aspiring traders?

The FAQ summarizes Michael Masters’ advice to investors, emphasizing the importance of having a plan, understanding the reasons behind stock purchases, and the role of belief in a higher power to navigate losses in the trading business.

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