I was recommended by my partner Hakan to read Pit Bull by Marty Schwartz when we were on a two-month proprietary trading course in Phoenix, Arizona, back in 2003.
Pit Bull is entertaining, a relatively quick read, and perfect for a holiday or evening read. It is foremost a personal autobiography about what makes Schwartz tick as a trader, but he also includes a great deal from his private life.
Unfortunately, if you are looking for specific trading strategies you’ll be disappointed. The book doesn’t go into details about how to trade, but the book is more about life and general trading lessons.
Who is Marty Schwartz?
Marty Schwartz is a self-made trader millionaire. When the CME introduced the S&P 500 futures contract in 1982, Marty Schwartz went on to become one of the biggest private traders in the contract. He was around 35 years of age when he quit his securities analyst job and started his full-time trading career (so it’s never too late to try).
The importance of a trading plan
Our main takeaway from Pit Bull is that you need a trading plan. How are you going to make money? Do you have any trading strategies? Schwartz stresses the importance of having a trading journal.
Like almost any other trader, Schwartz spent years going nowhere with his trading. Not until his wife and friends told him to make a written trading plan, did he ever take the time to sit down and actually think about how was going to make any money.
– A plan, Buzzy, Susan Said. “You’ve got to have a plan.”
– “A plan?” I said. “I get up, I go to work, I come home. I hope I have enough energy left to get laid, and I go to bed. That’s my plan.”
The more I heard, the more I began to realize that sitting down and seriously developing a plan might not be a bad idea. I needed to do something. Despite all my college degrees and experience, I had yet to achieve success. Developing a plan with specific goals and setting a time frame for achieving them would at least get me thinking about what I should be doing. But I hated the thought of setting goals.
What was the trading plan? It was pretty basic and reads like this:
- Become a trader.
- Develop a methodology for trading that fits his style.
- Accumulate a grubstake of 100 000 USD within one year.
- Make a guy named Zoellner my mentor.
- Get a seat on some exchange.
That was it – nothing more. He understood early on the importance of having the correct mindset in trading and having a methodology that fits his personality.
Most traders underestimate the psychological aspect because when you are trading real money, your own money, you get stressed when things start popping. You have to take immediate action. Attack or retreat – there is little time to think. However, having a methodology gives you the strength and confidence to pull the trigger when necessary.
Marty Schwartz always kept a written checklist in front of him. A checklist is a written plan, more like bullet points, that need to be checked off before you do any trades to avoid any unforced errors.
Passion for trading
Another takeaway is that you need a passion for trading and success. It’s pretty obvious that Marty Schwartz has an immense drive and self-confidence, but perhaps a bit too much ego. It’s hard not to get motivated after reading this book!
Marty Schwartz’s Magic T
From the moment I saw it, I knew the Magic T was the key to my new methodology…..With the Magic T, there was order in the universe. The Magic T and I became as one.
Marty Schwartz doesn’t use mechanical trading strategies as we do. He is mainly a discretionary trader and uses his “gut feel”, but we do believe he has a trading tool or two up his sleeve. One of them is an indicator or theory that is mentioned a few times throughout the book: the Magic T.
What is Marty Schwartz’s Magic T trading strategy?
Unfortunately, he doesn’t really go into any details whatsoever on the nitty-gritty of his trading. But the main principle in his Magic T theory is that the markets spend the same amount of time going up and down. We believe this is the reason for his “T” (the length of either side is the same).
We are, to say the least, skeptical about this theory because the markets are not normally distributed. Prices and distributions are skewed something we have explained in these two articles:
Nevertheless, Marty Schwartz has made more money in trading than we have, so we should, of course, be humble. If it works for him, then great. It might not work for us or others.
Marty Schwartz writes a lot about the psychological aspects of trading. Here’s what you’ll read:
- How does he react after a big loss?
- How does he react after a big gain?
- How do high pressure and inner motivation influence his health?
- How does he improve and go to the next level?
- When do you have enough?
Ending remarks about Marty Schwartz’s Pit Bull:
We recommend the book as an easy and motivational read about trading and life as a trader. This is a book you bring to the beach to relax or when you sip a coffee after breakfast!
Quotes from Marty Schwartz’s Pit Bull:
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.”
To be a winner, you have to be willing to toe the line and pull the trigger.
Preparation pays. It’s essential to know more than the other players in the game.
Dare to dream. It’s not where you are, it’s where you-re going that counts.
If you don’t have a dream, how you gonna make a dream come true?
Don’t beat yourself; if you’ve got a plan that’s working, stick to it.
For the pure gambler, there’s no other place on earth like Vegas
God gamblers keep their bets in balance. You have to have a life beyond brokers and bookies.
Nothing can beat knowing what’s going to happen before it happens, except when it doesn’t.
Keep your priorities straight.
Show me a great trader and I’ll show you someone who understands gambling.