Marty Schwartz spent almost a decade losing money before he became one of the most successful traders in America. That fact is the most important thing about him. Not the U.S. Investing Championship he won in 1984, not the $40,000 account he built into over $20 million, not the Market Wizards profile or the book that followed. What matters most is the decade of losses and what he finally did about them. The turning point, when he separated his ego from his trading and accepted that being wrong was acceptable but staying wrong was not, produced a transformation that he could describe clearly and that every serious student of markets should study.

Schwartz was not a Turtle. He did not go through Richard Dennis‘s experiment or learn the systematic rules that William Eckhardt designed. His approach to the markets, short-term, technically driven, disciplined by moving averages and price action, is different in its mechanics from the long-term trend following commodity trading the Turtles were taught. But the principles he arrived at through ten years of losing, cutting the ego from the trade, defining risk before entry, never letting losses get out of hand, are the same principles that Dennis built into the Turtle system from the start. Schwartz learned them the hard way. The Turtles were given them on day one. The destination was identical.

Amherst, the Marines, and E.F. Hutton

Martin “Buzzy” Schwartz was born in 1945 and graduated from Amherst College in 1967. He went on to earn an MBA from Columbia University in 1970, and served in the U.S. Marine Corps Reserves from 1968 to 1973, reaching the rank of captain. The Marines gave him something he drew on throughout his trading career: a belief that discipline and preparation could produce outcomes that exceeded what natural talent alone would deliver. Amherst and the Corps together, he later said, convinced him he could do almost anything if he worked hard enough.

After his military commitment he worked as a financial analyst at E.F. Hutton, the same firm where Paul Rabar would later train under Chuck Le Beau. Schwartz spent years as a securities analyst, accumulating $100,000 while watching traders make money in ways he could not replicate from the analytical side. When he had enough capital, he bought a seat on the American Stock Exchange and began trading stocks, options, and futures directly.

That transition, from analyst to trader, required a fundamental reorientation. Analysts are trained to form views about value and to defend those views with evidence and argument. Traders need to form views about price and to abandon them instantly when the market proves them wrong. For Schwartz, making that shift took nearly a decade of losses. The analytical mind, trained to be right, kept fighting the market rather than listening to it.

A Decade of Losses and the Moment Everything Changed

The losses were real and sustained. Schwartz was not dabbling. He was working full-time, putting in long hours, applying serious analytical effort, and still losing. The problem was not intelligence or effort. It was ego. He was trying to prove he was right rather than trying to make money, and the distinction turns out to be everything.

The transformation came when he accepted a simple reframe: the goal is not to be right. The goal is to hear the cash register ring. Being wrong on a trade is not a personal failure. It is information. The correct response to being wrong is to exit, preserve capital, and move to the next opportunity. “I became a winning trader,” he said, “when I was able to say, to hell with my ego, making money is more important.”

That sentence should be printed above every trading terminal. It describes the exact psychological shift that separates the traders who last from the ones who blow up. Paul Tudor Jones kept a piece of paper on his desk reminding himself of a catastrophic early loss. Ed Seykota said everybody gets what they want from the markets. Schwartz found the same truth through a different path: his own losses finally became more expensive than his ego was worth.

After that shift he began winning consistently. He ran a $40,000 account into more than $20 million. Across that period, his maximum drawdown measured on month-end data never exceeded 3 percent. He was careful to note that his two worst months, losses of 3 percent and 2 percent, were the months his children were born and he was inevitably distracted. The discipline was real enough that he could account for every deviation from it.

The 1984 U.S. Investing Championship

Schwartz won the U.S. Investing Championship in 1984, turning a $250,000 trading account into more than $1 million in profits within the contest year. He entered ten public trading contests in total. The championships were not abstract exercises. They were real-money competitions judged on percentage return, with no second-chance if things went wrong. Winning required executing the same discipline in a competitive, public context that Schwartz had developed in private.

David Ryan won the same championship three consecutive times in the mid-1980s using the CANSLIM methodology. Ryan and Schwartz operated from different technical frameworks, but both were defined by the same structural approach: small losses, large winners, and the psychological capacity to hold positions that were working without interfering with them prematurely.

The Technical Framework: Moving Averages, Price Action, and Red Light / Green Light

Schwartz’s technical approach was built around a few core tools applied with exceptional discipline. His primary indicator was the 10-day exponential moving average. When price was above the 10-day EMA, he was in buying mode. When price was below it, he was in selling mode. He called it his red light / green light system, and he almost never traded against it. His reasoning was direct: going against a moving average is self-destructive. The average shows the path of least resistance. Fighting it is fighting the market itself.

That philosophy connects directly to the Turtle rules‘ logic. The Turtles were taught to enter breakouts in the direction of price momentum, never to fade trends. Schwartz’s moving average filter served the same function: it kept him on the right side of the prevailing directional force and prevented the ego-driven countertrend trades that had cost him money during his losing years.

He also paid close attention to how markets responded to news. When a market fell despite positive news, it was a signal of underlying weakness. When it rose despite negative news, the underlying strength was significant. This reading of market reaction, rather than the news itself, reflects the price-first orientation that all the best systematic and discretionary traders share. Price is the truth. Everything else is commentary.

Risk Management: Knowing the Loss Before the Entry

Schwartz’s approach to risk was built on a principle he stated clearly and applied without exception: before taking a position, always know the amount you are willing to lose. Define the stop before you enter, not after the position moves against you. That sequencing matters because the emotional experience of a losing trade compromises judgment. If you wait until you are down to decide how much you are willing to lose, you will almost always decide to wait a little longer, and then a little longer after that, until a small loss has become a large one.

He also warned specifically against increasing position size too quickly after a winning period. His observation that his biggest losses always followed his largest profits is a precise description of a recurring pattern. After a winning streak, confidence becomes overconfidence, position sizes expand beyond what the risk framework justifies, and the next loss, which would have been manageable at normal size, becomes a serious setback. The discipline to maintain consistent position sizing regardless of recent results is one of the hardest things in trading and one of the most important.

He put it plainly: do not increase your position size until you have doubled or tripled your capital. Most people make the mistake of scaling up as soon as they start making money. That is a quick way to get wiped out. The Jerry Parker approach to scaling, gradual and calibrated to actual account growth rather than recent performance confidence, reflects the same principle.

The Attempt to Clone Himself

Schwartz’s attempt to train other traders produced a telling result. He hired four people and taught them his complete methodology. None lasted. They became intimidated. His conclusion was direct: you can teach the intellectual side, but you cannot teach the stomach. The capacity to hold a losing position to the stop without flinching, or to sit in a winning position without taking profits prematurely, requires a psychological disposition that either exists or does not.

This is precisely the question Dennis and Eckhardt were debating when they designed the Turtle experiment. Dennis believed that disposition could be cultivated. Eckhardt was skeptical. The Turtle results partially supported Dennis: some of the students succeeded, demonstrating that the methodology could be learned by people without prior trading experience. But others washed out. The intellectual rules were teachable. The stomach, as Schwartz put it, was something else.

What the Turtle experiment contributed that Schwartz’s private attempt did not was systematic selection. Dennis and Eckhardt screened for psychological fit before teaching anything. The students who received the rules had already been evaluated for the disposition to follow them. Schwartz handed the rules to employees without the same filter and found that the rules alone were not enough.

Pit Bull and the Public Record

In 1998 Schwartz published Pit Bull: Lessons from Wall Street’s Champion Trader, a memoir that traced his evolution from losing analyst to champion trader. The book is notable for its candor about the losing years, an unusual quality in trading memoirs, which tend to emphasize the wins and treat the losing period as a brief prelude rather than the central learning experience it actually was. Schwartz understood that the decade of losses was not background noise. It was the education.

The Market Wizards interview preceded the book by nearly a decade, appearing in Schwager’s original 1989 collection. Schwartz’s chapter gave a generation of traders their first detailed account of what the discipline of cutting losses actually felt like from the inside, not as an abstract principle but as a daily practice that required overriding instinct and ego every time it was applied.

Short-Term Trading and Its Real Requirements

The turtletrader.com observation about Schwartz is direct: unless you have sizable investments in staff, equipment, and access, it is nearly impossible to win short-term. That framing is important context for his career. Schwartz’s short-term approach worked because he brought to it the same preparation and discipline that long-term systematic traders apply to their methodology. He put in approximately twelve hours daily, calculating ratios and oscillators and posting his own charts. He was not trading casually on instinct. He was operating a disciplined, intensive process applied to short time horizons.

The caution about short-term trading is not a dismissal of Schwartz. It is a realistic assessment of what the edge requires. The managed futures industry, built largely on longer-term trend following in the Turtle tradition, produces its returns over time frames that allow systematic rules to play out across many trades. Short-term trading compresses that time frame and raises the bar on execution quality, information advantage, and psychological discipline. Schwartz met that bar. Most who attempt it do not.

Frequently Asked Questions

Was Marty Schwartz a Turtle trader?

No. Schwartz built his career independently through short-term technical trading in stocks, futures, and options. He was profiled in the original Market Wizards alongside Turtle-connected figures but was not part of Richard Dennis’s experiment. His inclusion here reflects the convergence of his core principles, particularly on risk management and ego discipline, with those the Turtle system was built around.

How did Marty Schwartz go from losing to winning?

The transformation came when he separated his ego from his trading. After nearly a decade of losses as a securities analyst turned trader, he accepted that the goal was not to be right but to make money. Once he was willing to exit losing trades immediately rather than defending his position, his results changed completely. He summarized it himself: he became a winning trader when he could say, to hell with his ego, making money is more important.

What was Marty Schwartz’s drawdown record?

While building a $40,000 account into more than $20 million, Schwartz never experienced a drawdown exceeding 3 percent on month-end data. He noted that his two worst months, drawdowns of 3 percent and 2 percent, were the months his children were born and his attention was unavoidably divided.

What is the 10-day EMA rule Schwartz used?

Schwartz used the 10-day exponential moving average as his primary trend filter, which he called his red light / green light system. When price was above the 10-day EMA, he looked for buying opportunities. When price was below it, he was in selling mode. He almost never traded against this filter, viewing countertrend trades as self-destructive regardless of other signals.

What is the book Pit Bull about?

Published in 1998, Pit Bull: Lessons from Wall Street’s Champion Trader is Schwartz’s memoir of his trading career, covering his decade of losses as a securities analyst, the psychological shift that turned him into a consistent winner, his U.S. Investing Championship in 1984, and the discipline that sustained his performance over the following years. It is notable for its candor about the losing period, which most trading memoirs minimize or skip entirely.

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