I’m a scalper. By that I mean that I’m in and out quickly, always, always, ALWAYS!

I’m often in and out

in five minutes or less, never more than a couple of hours. Initially, I adopted a short-term trading system
because I had limited resources and needed a consistent string of small winners to build up my capital
base, but as I became more successful, I discovered that short-term was what gave me the most
reinforcement and gratification. I just love to hear the cash register ring. It’s the sound of the market
telling me that I’m a winner, again and again and again. Most books on trading say that you only have to
be right 3 or 4 times out of ten if you cut your losses quickly and let your profits ride. That doesn’t work
for me. I cut my losses quickly, but I take my winners just as quickly. I need to be right 7 or 8 times out
of 10. Marty Schwartz

If you book a profit every day, every week, every month, and every year, nothing bad will ever happen to
you. Marty Schwartz

Divorce your ego from the game. Don’t get emotionally involved. If you let your ego into the game, the
temptation is to double up after a few good bets. You have to be unemotional, like the house at casinos.
The house never takes anything personally. Marty Schwartz

Manage your money. Don’t over bet. Marty Schwartz

Change tables after a winning streak. Cash out your winnings consistently. Marty Schwartz

A down Friday is usually followed by a down Money. Marty Schwartz

Stay away from option expiration day. It’s very hard to trade because there are many fake-out moves due
to unwinding of positions. Marty Schwartz

Planning is the objective part of trading. Start with the worst case scenario and work from there. You will
never be more objective than before you execute a trade. Once you are in a trade, emotions take over, so
your plan must be in place beforehand. Know when your wrong and admit it. Marty Schwartz

Always fight the temptation to start dancing before you hear the cash register ring. When you feel like
dancing, it’s a visceral clue that you’ve lost your objectivity, you’ve gotten too emotional, and you’re
about to go into the shitter. Marty Schwartz

A consistent winner has mastered their ego and realizes that being profitable is more important than being
right. Marty Schwartz

You have to prove your abilities and test your methods by actually trading, and making real money,
before you depend on trading for your livelihood. Marty Schwartz.

I am a singles hitter. I am not looking for a home run. My trading style is to take a lot of small profits
rather than go for one big one. Marty Schwartz

I became a winner when I was able to accept being wrong. Before, admitting I was wrong was more
upsetting than losing the money. I used to try and will things to happen – “I figured it out, therefore I
can’t be wrong.” When I became a winner, I said “I figured it out, but if I’m wrong, I’m getting the hell
out, because I want to save my money and go on to the next trade.” I live the philosophy that my winners
are always in front of me, so its not so painful to take a loss. If I make a mistake, so what! Marty
Schwartz

Whenever there is a really tough period, I play defense, defense, defense. I believe in protecting what you
have. Marty Schwartz

Don’t freeze if you are getting hell beat out of you. The most important thing you can do is keep enough
power to make your come back. Marty Schwartz

Whenever you get hit, you are very upset emotionally. Most traders try to make it back immediately; they
try to play bigger. Whenever you try to get all your losses back at once, you are most often doomed to
fail. After a devastating loss, I always play very small and try to get black ink, black ink. Its not how
much money I make, but just getting my rhythm and confidence back. And it works. Marty Schwartz

Bottom fishing is one of the most expensive forms of gambling. And I am always trying not to break it.
Marty Schwartz.

I love taking profits. I hear music when the cash register rings. The irony is that I’m willing to risk 400
points on the downside and only take 200 points of a 1,000 point move on the upside. Marty Schwartz

If you are very nervous about a position overnight, and especially over the weekend, and you’re able to
get out at a much better price than you thought possible when the market trades, you’re usually better off
staying with the position. Marty Schwartz

I am very concerned about controlling the downside. I probably don’t make as much money as I could of.
Over 90 percent of my months have been profitable. Marty Schwartz

I take my losses very quickly. That is probably the key to my success. You can always put the trade back
on, but if you go flat, you see things differently. You achieve much greater clarity because you don’t feel
the pressure when you are in a position that is not working put you in a catatonic state. Marty Schwartz

Most traders lose because they would rather lose money than admit they’re wrong. The ultimate
rationalization of a trader in a losing position is that I will get out when I’m even. Why is getting out so
important? Because it protects the ego. I became a winning trader when I was able to say “To hell with
my ego, making money is more important.” Marty Schwartz

You can be more successful than you ever dreamt, because that’s what happened to me. Marty Schwartz

Don’t increase your position until you’ve doubled or tripled your money. Marty Schwartz.

********

Professional traders live with uncertainty because, in the end, they can never remove it entirely. All you
can do is take consistent small loses and make sure that no single trade defines your career. Ed Seykota
You will grow as a trader when you accept the fact you have no control over what happens or the results
once the trade is put on. Ed Seykota

People trade for more than the profit motive. When your feelings are the goal (the desired outcome of
trading), all you can do is study yourself and determine your motive. Ed Seykota

How do you know your wrong? Easy. You’re losing money on the position. Surrendering requires that
you hold out an olive branch to your emotions while you trade. They want to help you—all you have to
do is let them. Ed Seykota

The most successful traders surrender their egos to not knowing the frequency or magnitude of any trend.
They quiet their mind and follow their inner voice. Elite traders remember one thing: Gains look like
gains only to the extent you keep your losses small. Most of the world can’t do it, so on some level,
professional managers who’ve been around for decades play the best defense. Ed Seykota

Surrendering is knowing things can happen in the markets for reasons that you don’t understand.
Surrendering is knowing that you’re still powerful because you can come back and trade tomorrow.
Surrendering means stopping and listening to your feels and emotions and embracing them because they
teach you something about yourself. Ed Seykota

All feelings are good when they teach you about yourself. When you listen to what they teach you, your
motions are your allies, not your enemies. Ed Seykota

I’ve paid a great deal in tuition to develop my inner voice, mostly in the form of trading losses. You learn
the most from your losses. As a trader, my profit and loss statement is the best reflection of my inner
voice. Ed Seykota

I learned that the professional traders (guys who have a wise inner voice and are smarter) had been
watching the price movements far longer than me. So they had an exit plan when to take profits, and then
re-enter the trade at a cheaper price. Ed Seykota

The traders depicted in Market Wizards have all developed their inner voice by learning from their
technical and emotional mistakes. The difference between investors who are unlucky and unknown and
these market wizards lies in how the traders recovered from their mistakes. If developing their inner
voices was the deciding factor (and intentions equal results), the market wizards manifested their own
destinies. This is not random. Ed Seykota

If you trade correctly, you will spend the majority of your time taking small, consistent losses more than
half the time.

So if a trade didn’t work today, no big deal. There was no guarantee that it would work anyway. Bill
Dunn

When you endure a trading loss, the voice you need to begin to hear is your own inner voice of
encouragement, not one that admonishes you. When you are a professional trader, losses are part of the
business. Ed Seykota
You need to manage the stress of trading. Stress is a big part of trading. I don’t feel stress at this point in
my career because I interpret my trades with a degree of detachment. No single trade means anything, and
I don’t have a sense of entitlement that I am likely to win more times than I lose. I redirect stress by
focusing energy on the productive steps that I can control. Thinking of losses in a broader perspective
improves your ability to manage them. Ed Seykota

Emotion control is much more important than technical insight. Ed Seykota

If you learn what feelings you like and don’t like, you’ll be far ahead of your competition. But you have
to starting with your feelings and emotions. When you figure out who you are emotionally, deciding on
the vehicle, the degree of leverage, and the frequency of trading will be easy. Ed Seykota

Don’t professional commodities traders love risk? Professional traders are like a fireman, which means
they do not love risk—they are just able to deal with risk better when they rely on their inner voice.

When you trade forex or commodities, the financial goals exist only on the surface. The real goals are
churning away inside your skull, an internal debate in your inner voice. Surrender to those feelings and
learn from them, because they aren’t going away. Your emotions and feelings are your master as they
control your behavior. If you can surrender to the fact that price tells you everything you need to know,
you can forfeit your ego and let the nature flow of things take over, both in your head and in the market.
Ed Seykota

You can learn a lot about your feelings by studying price. When you become too emotionally attached to
the entry price, you are going to miss opportunities. Let go of how exact you have to be with your entry.
As in real estate, you make money when you get out: selling to keep your losses small and selling via a
trailing stop to make sure you don’t give back all of your gains. Ed Seykota

If you like the idea of trying to grow your trading account, you must also embrace the feeling of the
potential downside that goes with it. They are perfect emotional complements, and you cannot take one
without the other.

********

It has never bothered me to lose, because I always knew that I would make it right back. I have a method
that I know will win in the long run. Along the way there are going to be losses. If I lose now, I will win
subsequently. As long as I stick with my methodology and keep doing what I am doing, I am going to
come out ahead. Losing is part of the process and that a trader needs to understand that to be successful.
Linda Rashke

Strive to always be at your high water mark. This is all time highs in your trading account. When you
have a draw down, there is no better satisfaction than making it back up. Thank all the time about
succeeding. Linda Rashke

The way to increase trading profits is to continue to do the same thing but do it on bigger size. Once you
make back the first draw down on bigger size, your confidence will triple. Linda Rashke
Hardships, setbacks and deprivation make a person tougher. People who have experienced adversity
before do well because they know that failures and setbacks are part of the process. Linda Raschke

Now, if you know you’ve won the game of trading before you start, then there is no problem taking a
loss, because you understand that is part of the way of getting to the ultimate gain. Critical belief shared
among elite traders.

Most traders thing there are two types of trades: winning trades and losing trades. Actually, there are four
types of trades: winning trades and losing trades plus good trades and bad trades. Don’t confuse the
concepts of winning and losing trades with good and bad trades. A good trade can lose money, and a bad
trade can make money. A good trade follows a process that will be profitable (at an accept risk) if
repeated multiple times, although it can lose money on any individual trade. Critical belief shared among
elite traders.

Trading is a matter of probabilities. Even the best trading processes will lose a significant percentage of
the time. There is no way of known before hand which individual trade will make money. As long as a
trade adheres to a process with a positive edge, it is a good trade, regardless of whether that specific trade
wins or loses, because if similar trades are repeated multiple times, they will come out ahead on average.

********

Example of commodities: One of the most expensive errors I’ve ever made, but also one of the
funniest, occurred in the early1990s. An extreme heat wave was just sitting on top of the Great
Plains, home of the majority of states growing wheat deliverable against the Chicago Board of
Trade (CBOT) contract. Wheat as a crop is a total wimp, but soybeans can take more extreme
conditions. Too much moisture for too long, and you end up with a rust fungus. Too much heat,
and the arid conditions or drought kills off the crop. Two weeks before the July 4th weekend, the
heat was brutal. I was long on wheat in modest amounts in all my commodity accounts and was
making all the money I could dream of as the fear of damaged crops drifted and crept along the
floor of the CBOT. As we came in to the last trading day before the holiday weekend, I was sure
the contract was going to sell off. Most of the traders on the floor would take their gains and go
home with no open positions. Everyone in the market was long on wheat, and all they needed
was one sprinkle or break in the heat over the holiday weekend, and the contract would have
traded down its allowable limit (the maximum it can trade in one day). The contract had
moved about 80¢ ($4,000 per contract) over that two-week period of time, and I had already
taken decent gains out of the long trade. Now I was going to test my knowledge of how the floor
acts. Obviously, I thought I could take on the traders in Chicago looking at one another on the
floor from my desk in Manhattan. I decided that going short would be the play as a deluge of
selling would surely hit the tape in the last 30 minutes of trading; we’d be good for at least 5¢ to
10¢ of downward pressure. My reasoning was that anyone who was long would have already
been long. No one would be initiating new long positions before a holiday weekend; there was
too much uncertainty. If one floor trader started selling, I figured they’d all pile on and sell.
My risk on the short sale was 2¢ above my short entry, and I was figuring on as much as 5¢ to
10¢ of profit if the contract sold off like I thought it would. So I called my floor trader and sold
50,000 bushels of the July contract with about 30 minutes left in the trading day. But nothing
happened, and the selling didn’t show up. The wheat market, like all commodity markets, is a
living and breathing mechanism. The sum total of all commodity trading in wheat will give you
its pulse and vital signs, not just for one month, but for all the expiration months. I was about to
learn this. What I didn’t notice was that the floor was selling a deferred month’s contract short—
in this case, the December contract—to establish a hedge against the long July contracts. That’s
why the July contracts were not depreciating. The floor traders were selling heavily, but not the
contract I thought they would sell, and it was all happening under my nose. In the end, they had
created a spread position by being simultaneously long the July and short the December
contracts. (In a short sale, you can make money when the instrument declines in price. In
this scenario, the professional traders had two contracts in their portfolios of the same
commodity over the weekend: They kept their July contracts long but sold the December
contract short, in the event that something negative happened. The losses would be offset by the
short December contracts. With this strategy, traders wouldn’t get hammered for large losses by
being long only the July contracts.) Lesson: I was so emotionally invested in making a quick
$0.10 that I had neglected to look at what was happening in the entire wheat market, not just the
front month.