Most traders just lose money fighting a trend as they try to pick the bottom. “Bottom fishing is one of the most expensive forms of gambling.” – Marty SchwartzĬatching falling knives just tends to cause a trader to lose money not catch a bottom. Eliminating big losses from your trading is the best way to increase your odds of profitability. The biggest thing that causes traders to be unprofitable is big losses. The most important thing about making money is not to let your losses get out of hand.” – Marty Schwartz “I’m more concerned about controlling the downside. Many times big wins are created by big position sizes that can lead to big losses eventually. New traders tend to trade too big and go off their trading plan when they feel like they can’t lose. This is a caution against getting a big ego after a big winning trade. “My biggest losses have always followed my largest profits.” – Marty Schwartz Enjoy your weekends after a great trading week. I do think it is crucial that traders relax and take time to enjoy their great trades and winning streaks. While this applies more to discretionary day traders that trade with a lot of financial and emotional heat. “After a successful period, take a day off as a reward.” – Marty Schwartz Follow your trading plan not your emotions and impulses. Rushing into a position and chasing a stock is one of the main reasons that traders lose money. There is no need to rush into any position, wait for your signal. “Before putting on a position always ask, “Do I really want to have this position?” – Marty Schwartz A trader will become their own biggest obstacle if they let their opinions and predictions interfere with trading the price action for profits. Flexibility and open-mindedness is an edge over others. The sole objective of trading is not to prove you’re right, but to hear the cash register ring.” – Marty Schwartzįocus on what is happening in the market now, not what you want to happen, or what you think will happen next. Forget what you thought it was telling you five minutes ago. Listen only to what the market is telling you now. You have to stop trying to will things to happen in order to prove that you’re right. Most people think that they’re playing against the market, but the market doesn’t care. “I’ve said it before, and I’m going to say it again, because it cannot be overemphasized: the most important change in my trading career occurred when I learned to divorce my ego from the trade. He is proof that you you can get rich as a technical trader, fundamentals are not the only path to wealth in the markets. I used fundamentals for 9 years and got rich as a technician.” – Marty Schwartz “I always laugh at people who say “I’ve never met a rich technician” I love that! Its such an arrogant, nonsensical response. Sometimes the most simple technical indicators can be the most powerful. The 10-day EMA was his favorite tool for trend identification and trading with the flow of a chart. The market is in a negative mode and you should be thinking sell.” – Marty Schwartz Conversely, trading below the average is a red light. When you are trading above the 10-day, you have the green light, the market is in positive mode and you should be thinking buy. I call this “red light, green light” because it is imperative in trading to remain on the correct side of a moving average to give yourself the best probability of success. “The 10 day exponential moving average (EMA) is my favorite indicator to determine the major trend. Staying on the wrong side of a moving average can create large losses. Regardless of other technical indicators the moving averages show the path of least resistance in a time frame. This is something that can cause a lot of losses for traders that fight a trend. “I try not to go against the moving averages it is self-destructive.” – Marty Schwartz Here are ten of the trading principles that made Marty Schwartz a legend. Schwartz is also the author of Pit Bull: Lessons from Wall Street’s Champion Day Trader. Investing Championship in 1984 and was also featured in Jack Schwager’s Market Wizards book. He has been both a futures day trader and also an options trader and was successful with both and also other markets. (Buzzy) Schwartz trader who made a fortune successfully trading the financial markets.
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