Market Wizard Marty Schwartz

“By mid-1978, I had been a security analyst for eight years and it had become intolerable. I knew I had to do something different. I always knew I wanted to work for myself, have no clients, and answer to no one. That, to me, was the ultimate goal.” – Marty Schwartz

This is where he got me. I was having an enjoyable read through this interview and then Schwartz hit me with this as if, to borrow a line from Meatloaf, he took the words right out of my mouth. This is the vision that drives me. I don’t strive to be a flashy billionaire with houses, cars, and planes. I want to work from home, be¬†challenged mentally, and earn a decent living.

This thought made me recall various traders who were interviewed by Michael Covel in his various works. Most of them worked from home or very dull offices and most of them were not really known on a national level.

While I will eventually get into some of the rules that Schwartz discusses, I have to say that his attitude toward trading was more compelling to me than any of his rules. I was fascinated with how he compared and contrasted his trading with his Marine training.

He applies his Marine training to his trading later by describing how the Marines teach you to never freeze when under attack. He explains how there is no point in just taking punishment and that retreating can also be a form of offense. He says “The most important thing is to keep enough powder to make your comeback.”¬†I have a friend who calls me every time the market goes into a correction and reminds me to “Keep your powder dry.”

Schwartz’s Trading Rules

“I try not to go against the moving averages; it is self-destructive.”

This is something that Gary Kaltbaum preaches regularly. Fortunately for me, most of the stocks I follow through reading Investor’s Business Daily generally break out above the 50 Day Moving Average.

“Before putting on a position always ask, ‘Do I really want to have this position?'”

I think this falls in line with my taking time to think about it overnight before I take a position. The idea is that there is no need to rush into anything, and every time it feels like there is a need to rush, I lose money.

“After a successful period, take a day off as a reward.”

This applies more to day traders than those of us with a more long-term outlook, however there is still something to be said for celebrating your victories. One of the best ways I have found to stay motivated and encouraged is to celebrate every small victory as if I had just won the Super Bowl.

“My biggest losses have always followed my largest profits.”

This is a caution against getting a big head. This happened to me after my PCLN trade earlier this year. I was so excited about the result of the trade that I thought everything I bought was going to do the same thing. I felt like I couldn’t lose, which made me more likely to lose.

“Bottom fishing is one of the most expensive forms of gambling.”

This is a key concept of the CANSLIM strategy. Because of that, I have been trained for years to not even consider lower quality stocks or “value plays.” O’Neil actually advises against any stock priced below $10.

“Before taking a position, always know the amount you are willing to lose.”

This cautions an investor to implement some form of risk management. We have seen almost every single trader profiled in Market Wizards insist that risk control is an absolute necessity.