Slaying Bullish Bias - A Market Wizards Playbook
· 8 min read
“The markets are never wrong; opinions often are.”
—Jesse Livermore (quoted by Bruce Kovner in Market Wizards)
2025 is a cognitive trap for equity bulls. The Ukraine front barely moves, President Trump’s blanket 10 % tariff rattles importers, and German GDP just printed –0.6 % QoQ—yet the S&P 500 hovers north of 5 500.
If that disconnect feels comfortable, your built-in bullish bias (the reflex that “prices should rise”) is probably steering the wheel.
Below you’ll find the fully annotated 30-question audit that the original Market Wizards might run if they sat at your terminal today. Each line now includes:
- Wizard Insight – the lesson Schwager’s interviewees hammered home.
- 2025 Angle – why the trap is live right now.
- Real-World Example – an actual 2025 tape or trade vignette.
Paste the checklist into your trading journal, sprint through one block per week, and watch your P/L detach from hope-fuelled drift.
1 Self-Diagnosis & Mind-Set
| # | Question | Wizard Insight | 2025 Angle | Real-World Example |
|---|---|---|---|---|
| 1 | Do you scan for longs first? | Mark Cook forced students to open a bearish filter before coffee. | All major U.S. broker dashboards open on “Top Gainers.” | 11 Mar 2025: NVDA +6 % headlined your grid; bottom losers list showed LUMN –13 % (a better 2-R short you never saw). |
| 2 | 5 % drop—curiosity or dip euphoria? | Paul Tudor Jones cut leverage 50 % within minutes on 19 Oct 1987. | 15 Mar 2025: SPX –5.1 %, VIX 34 → index kept sliding another –2 % before basing. | You felt “great entry” and bought QQQ, stopped out –1 R next day. |
| 3 | Does shorting feel “un-American”? | Tom Baldwin joked “The pits only cheer the upside.” | Media framed every 2024 sell-off as “unpatriotic betting.” | You posted a bearish tweet on Apple and got piled-on for “fighting innovation.” |
| 4 | Dips = noise, rallies = trends? | Ed Seykota logged only % risk and ATR multiples—no adjectives. | CNBC still calls –2 % a “slump” but +2 % a “rally.” | 23 Apr 2025 journal: “just a blip lower” (SPX –1.8 %), “solid up-trend” (+1.6 %). |
| 5 | Is self-worth tied to rising curves? | Seykota kept family money in T-Bills. | Real college costs +6 % YoY; equity drift no longer guarantees coverage. | You increased size after your kid’s tuition invoice hit inbox. |
2 Historical Perspective & Narrative Traps
| # | Question | Wizard Insight | 2025 Angle | Real-World Example |
|---|---|---|---|---|
| 6 | How did you fare in each mini-crash? | Jones was green in ’87; Raschke flat in ’98. | 2022 bear (–27 %) still on broker statement. | Your 2022 curve: –18 % vs CTA index +13 %. |
| 7 | Tested your edge with drift = 0? | Seykota’s systems worked on pork bellies—no drift. | Forward SPX drift est. < 4 %. | Your momentum back-test Sharpe fell from 1.2 ➜ 0.48. |
| 8 | Rely on “Don’t bet against America”? | Kovner warns empires rotate. | Proposed 2 % buy-back tax in House bill HR-1735. | Removing buy-backs in DCF knocked 7 turns off Apple PE. |
| 9 | Ignoring survivorship in Wizard lore? | Schwager himself says thousands blew up. | TikTok “profit porn” hides losers. | Your Telegram group shares only green screenshots. |
| 10 | Studied markets that never bounced? | Japanese believers held Nikkei bags for 34 yrs. | Greek ASE –85 % from ’07 peak even now. | Your Europe ETF overweight assumes 7 % CAGR. |
3 Quantitative Evidence
| # | Question | Wizard Insight | 2025 Angle | Real-World Example |
|---|---|---|---|---|
| 11 | Shorts share of tickets & P/L? | Cook: “Trade both sides or half your vision is gone.” | Q1-25 had strongest 3-day down-impulse since Covid lows. | 9 shorts out of 112 trades; net P/L –2 R. |
| 12 | Invert your long signal—result? | Seykota’s “whipsaw song” works both ways. | High-short-interest anomaly revived with expensive rates. | Inverted signal on same universe scored Sharpe 0.32. |
| 13 | Price vs log-return testing? | Wizards think in % risk. | Nasdaq 100 raw-point rise masks compounding. | Strategy CAGR fell from 18 % ➜ 11 % in log mode. |
| 14 | Stop symmetry? | Raschke: 2 ATR both sides. | Meme squeezes tempt 1 ATR shorts, 3 ATR longs. | Last month: 6 short stop-outs at –1 ATR, 2 long at –3 ATR. |
| 15 | Monte-Carlo μ = 0 survival? | Jones funds vol desks to weather drift drought. | Commodity volatility doubles path risk now. | 10 000 paths: median curve flatlines by month 22. |
4 Risk & Capital Allocation
| # | Question | Wizard Insight | 2025 Angle | Real-World Example |
|---|---|---|---|---|
| 16 | Exposure cap symmetric? | Seykota could flip net ±200 %. | Short borrow fees sub-1 % for 80 % of S&P names. | You allow +150 % long, –25 % short. |
| 17 | Averaging down losers? | Kovner: “Losers average losers.” | AI chip names drop 18 % intraday regularly. | Added twice to AMD at –3 % and –6 %; closed –2 R. |
| 18 | Cover shorts first in vol spikes? | Tudor held shorts through crash until vol bled. | Post-VIX-34 drift negative for 12 sessions. | Closed TSLA short on spike, kept long tech—lost 1.4 R. |
| 19 | Put hedge value? | Jones buys vol only when skew cheap. | 1-month ATM put cost 1.8 % in Mar 2025. | Last year: spent 3.4 R in premium, saved 1.1 R in crashes. |
| 20 | Squeezes breach worst-case loss? | Baldwin sized by dollar vol. | Feb 2025 GME +40 % gap. | Short lost 2.3 R overnight. |
5 Process & Decision Architecture
| # | Question | Wizard Insight | 2025 Angle | Real-World Example |
|---|---|---|---|---|
| 21 | UI bias toward gainers? | Seykota coded neutral dash. | Broker UIs show green first. | Missed FSLY –12 % fail because list buried. |
| 22 | Short checklist depth? | Raschke rehearses shorts like longs. | Easier borrows post-reg changes. | Long checklist 12 items; short only 5. |
| 23 | Narrative only for shorts? | Wizards trust price. | News calls every dip an “overreaction.” | Skipped META short for lack of “fundamental story”; missed –8 %. |
| 24 | Post-mortem balance? | Cook logs every miss. | Feb 2025: three perfect failed-break short signals unreviewed. | Reviewed 7 missed longs, 0 shorts. |
| 25 | Auto-flip after failed breakout? | “Failed move = fast move” —Soros. | AI names fake breakouts weekly. | Long NVDA fake-out –1 R, no flip; price dropped another 4 %. |
6 Psychology & Continuous Improvement
| # | Question | Wizard Insight | 2025 Angle | Real-World Example |
|---|---|---|---|---|
| 26 | Bias tags clustering on longs? | Jones hired risk coach. | AI tools auto-tag sentiment now. | 65 % optimism tags on long entries, 15 % on shorts. |
| 27 | Real-time beta alerts? | Tudor’s board lit red at β > 0.7. | Slack webhooks trivial. | Hit 0.78 beta on 9 Apr, noticed next day. |
| 28 | Gap-down rehearsal? | Basso ran crash sims monthly. | Turkey ETF gap –12 % overnight, Feb 2025. | Panicked exit + slippage –1 R; never rehearsed scenario. |
| 29 | Forced-flat longs feeling? | Seykota welcomes dry powder. | Broker outage flushed longs 14 Jan. | Felt panic → identity fusion with bull thesis. |
| 30 | Preparing for lower drift? | Wizards add new edges. | Demographics & reshoring compress margins. | Equity CAGR model still at 8 %. |
7 Wrap-Up
Bullish bias survives because it pays most of the time—until it erases years of gains in a single macro grenade.
The Market Wizards neutralised the bias through symmetry: equal screens, stops, reviews, and above all, equal respect for up and down tape.
Run this playbook once per quarter:
- Audit each question honestly.
- Patch the weakest habit or policy.
- Re-test your edge in a zero-drift simulation.
Do that, and the next tariff volley, energy spike, or AI bubble unwind becomes just another tradeable regime—not a career-ending ambush.
Happy (bias-free) trading!