Lessons from a Market Wizard: 10 Enduring Principles from Marty Schwartz

The Ten Commandments of a Trading Titan

Marty Schwartz’s trading career is a collection of wisdom for any aspiring trader. His principles are not complex or esoteric; they are simple, timeless, and brutally effective. They are the product of years of experience, of countless hours spent in the trenches of the market. In this article, we will distill his wisdom into ten enduring principles, a set of commandments for any trader seeking to achieve consistent profitability.

1. Trade with the Trend

This is the first and most important principle of Schwartz’s trading philosophy. He was a trend follower, and he believed that the path of least resistance is the path to profitability. He used the 10-day EMA to identify the trend, and he would not take a trade that was not in harmony with it.

2. Cut Your Losses

Schwartz was ruthless in cutting his losses. He understood that the first loss is often the best loss, and he would not hesitate to exit a trade that was not working out. He knew that capital preservation is the key to long-term success.

3. Let Your Winners Run

While Schwartz was quick to cut his losses, he was slow to take his profits. He understood that the big money in trading is made by riding the big trends. He would use the 10-day EMA as a trailing stop, and he would not exit a winning trade until the trend had clearly reversed.

4. Know Your Risk

Schwartz would determine his stop-loss level before he even entered a trade. He would risk only a small percentage of his capital on any single trade, and he would never, ever move his stop further away from his entry point.

5. Don’t Be a Hero

Schwartz was not in the business of predicting the market. He was a reactor, not a prognosticator. He would wait for the market to confirm his analysis before he entered a trade, and he was not afraid to admit when he was wrong.

6. The Market is Your Mirror

Schwartz believed that the market is a mirror of your own soul. He understood that fear, greed, and ego are the three great enemies of the trader, and he worked tirelessly to conquer them.

7. The Laminated Checklist

Schwartz used a physical, handwritten checklist to ensure that he was following his trading plan. This simple tool was a effective bulwark against impulsive decision-making.

8. The Post-Mortem

Schwartz would review his trades at the end of each day, to analyze his performance and to identify areas for improvement. This commitment to continuous improvement was a key element of his success.

9. The Biggest Losses Follow the Biggest Wins

Schwartz was always on guard against the dangers of overconfidence. He knew that his biggest losses often followed his biggest wins, and he would often take a break after a big win to clear his head.

10. It’s You vs. You

Schwartz understood that the greatest enemy a trader faces is not the market, but themselves. He was a master of the psychological game, and he knew that the key to success is to conquer your own emotions.