Marty Schwartz’s 6 Key Trading Rules

Marty Schwartz’s 6 Key Trading Rules
Image via @MrTopStep YouTube

“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 what it’s all about freedom. Freedom to eventually do whatever you want to do with the market being your only boss as you try to take money from it. This vision of freedom is what drives me to take the risk and do the work to get to the finish line. I don’t strive to be a billionaire with multiple houses, I am only looking for freedom. I have enough money to do whatever I want I now want enough money to do nothing.

Most of the traders interviewed by Jack Schwager and Michael Covel were not flashy they simply traded for a living whether managing money for others or their own money.

Marty Schwartz is a Market Wizard. In his prime he had streaks of 20% return months. (Yes, 20% return months). He did what is impossible for most. He traded a lot of futures in his time and in recent years he has shifted to selling option premium which was surprising to me. He always found ways to come back from losses and make money consistently.

Schwartz explains how his Marine training helped his trading. There is no point in just taking punishment and that retreating can also be a form of offense. He explains “The most important thing is to keep enough powder to make your comeback.” Never bet all your chips and never lose all your chips.

Marty Schwartz’s 6 Key Trading Rules:

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

Stay in the same direction of the moving average trend in your own timeframe.

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

Are you taking a signal or just acting on an opinion?

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

You have to stop and enjoy the fruits of your labor to prevent burn out and stay motivated.

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

Winning streaks can be dangerous because they lure a trader into feeling like they know something and then trade too big.

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

There is a big difference between buying a dip and catching a falling knife.

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

Know what your maximum loss potential is before you ever take a trade.