Lessons from Martin Schwartz

To succeed in trading one must learn from the best, so it is wise to consider the advice of Martin Schwartz.
I highly recommend you read his book Pit Bull – Lessons from Wall Street’s Champion Trader.
“I took $40,000 and ran it up to about $20 million with never more than a 3 percent drawdown.” (Month-end data)

“By living the philosophy that my winners are always in front of me, it is not so painful to take a loss. If I make a mistake, so what!”
My trading style was to take a lot of small profits rather than go for one big one.
“After a devastating loss, I always play very small and try to get black ink, black ink. It’s not how much money I make, but just getting my rhythm and confidence back.”
“The market does not know if you are long or short and could not care less. You are the only one emotionally involved with your position. The market is just reacting to supply and demand and if you are cheering it one way, there is always somebody else cheering it just as hard that it will go the other way.”
“Preparation pays. It’s essential to know more than the other players in the game.”
“The most important change in my trading career occurred when I learned to divorce my ego from the trade. Trading is a psychological game. Most people think that they’re playing against the market, but the market doesn’t care. You’re really playing against yourself. You have to stop trying to will things to happen in order to prove that you’re right. Listen only to what the market is telling you now. Forget what you thought it was telling you five minutes ago. The sole objective of trading is not to prove you’re right, but to hear the cash register ring.”
“Before taking a position, always know the amount you are willing to lose. Know your “uncle point” and honor it. I have a pain threshold, and if I reach that point, I must get out.”
“When you’re trading, it’s important to have your guns on. You can’t be wandering around the Street unarmed, and if you don’t know the terrain, you’re going to get killed.”
“When I became a winner I went from ‘I figured it out, therefore it can’t be wrong’ to ‘I figured it out, but if I’m wrong, I’m getting the hell out, because I want to save my money and go on to the next trade.’”
I became a winning trader when I was able to say, To hell with my ego, making money is more important.
“I’ve learned through the years that after a good run of profits in the markets, it’s very important to take a few days off as a reward. The natural tendency is to keep pushing until the streak ends. But experience has taught me that a rest in the middle of the streak can often extend it.”
“I have stated before that whenever your worst fears are not realized about a trade and the market is letting you out better than you expected, it is not just luck. Rather your position is most likely correct and should not only be held but perhaps added to.”
“My attitude is: Never risk your family’s security.”
“If a trade which you are very worried about does not turn out as badly as feared, dont get out. The rationale is that if there is no follow-through in a direction adverse to your position, then there must be some very strong underlying forces in favor of the direction of the original position (since the reasons-fundamental or technical-for your own fears are probably shared by many others in the marketplace.”
I used fundamentals for nine years and got rich as a technician.
“Whenever you get hit, you are very upset emotionally. Most traders try to make it back immediately; they try to play bigger. Whenever you try to get all your losses back at once, you are most often doomed to fail.”
“I turned from a loser to a winner when I was able to separate my ego needs from making money. When I was able to accept being wrong. Before that, admitting I was wrong was more upsetting than losing the money.”
“The most important thing is money management, money management, money management. Anybody who is successful will tell you the same thing.”
“You can never shift from reverse to first gear without first going through neutral. YOU MUST CHANGE THE DIRECTION OF BAD TRADING BY FIRST SHIFTING TO NEUTRAL. YOU MUST STOP. What happens is that as your fear of losing rises, your emotions start to short-circuit your intellect and you no longer have confidence in what you’re doing. Stopping lets your emotions calm down and lets you reestablish your momentum with your intellect. Remember,time is always your ally. Use it to relax, clear your head, and regain your energies.”
“when the market gets good news and goes down, it means the market is very weak; when it gets bad news and goes up, it means the market is healthy.”
“One of the most interesting points that Jack D. Schwager makes in his book Market Wizards is that almost every trader he interviewed talked about how they’d failed before they’d finally become a consistent winner.”
When you’re a market timer, you have to be equally good at going short and going long, and when the market changes sides, you can’t hold your position and hope it turns around.
“My strengths are dedication to hard work, dogged persistence, ability to concentrate for prolonged periods, and a hatred of losing.”
“One of the most suicidal things you can do in trading is to keep adding to a losing position.”
“The best advice I can give to the ordinary guy trying to become a better trader is Learn to take losses. The most important thing in making money is not letting your losses get out of hand.”
“By preserving your capital through the use of a stop, you make it possible to wait patiently for a high-probability trade with a low-risk entry point.”
I always take my losses quickly. That is probably the key to my success.
“The great thing about being a trader is that you can always do a much better job. No matter how successful you are, you know how many times you screw up. Most people, in most careers, are busy trying to cover up their mistakes. As a trader, you are forced to confront your mistakes because the numbers don’t lie.”
To be a winner, you have to be willing to toe the line and pull the trigger.
“My philosophy has always been to try to be profitable every single month.”

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