Marty Schwartz: Career, 10-Day EMA Rule and Trading Lessons

Marty Schwartz is a short-term American trader, born in 1945, who won the U.S. Investing Championship in 1984 and wrote the memoir Pit Bull (1998). His method is easy to state: trade only in the direction of the 10-day exponential moving average, and keep position size steady after big wins. What makes him worth studying is the record of how he got there, after almost a decade of losing money.

Most of the detail below comes from the profile published by TurtleTrader, his 1989 interview in Market Wizards and the 1998 review of his book. We could not find a reliable, current source for his net worth or his status today, so this page gives neither.

From analyst to champion trader

Martin "Buzzy" Schwartz graduated from Amherst College in 1967, earned 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. He then worked as a financial analyst at E.F. Hutton. Once he had saved $100,000, he bought a seat on the American Stock Exchange and traded stocks, options and futures for his own account.

The first years went badly: according to TurtleTrader, he spent nearly a decade losing money. The turn came when he stopped defending his analysis against the market and started exiting losing trades at once. He then ran a $40,000 account to more than $20 million, with a maximum month-end drawdown of 3%, and won the 1984 U.S. Investing Championship by making more than $1 million on a $250,000 account in the contest year. He entered ten such contests in total. These figures come from his own account as reported by TurtleTrader; no audited statement is public.

The 10-day EMA rule: red light, green light

Schwartz's primary indicator was the 10-day exponential moving average of the price. Above it, he was in buying mode; below it, in selling mode. He called it his red light, green light system and almost never traded against it, on the reasoning that the average shows the path of least resistance. The rule does not tell you when to enter; it tells you which side you are allowed to be on.

The chart applies the same filter to the daily S&P 500 ETF. In a clean trend, price stays on one side of the line for weeks and the light barely changes. In a range, price crosses the 10-day average every few bars, and a trader who flips sides each time pays the spread and the losses of every whipsaw. On this window the close crossed the 10-day EMA 24 times in 120 sessions and never stayed on one side for more than 13, even in a rising market: the light flickers more than the rule suggests. The table below turns the light into rules, with a third case for those flickering periods.

The last row is our reading, not his: a filter based on a short average will switch often in a sideways market, so a trader applying it needs a rule for that case. Our guide to the moving average indicator explains how an exponential average weighs recent prices more than a simple one.

Managing the account after wins and after losses

Schwartz observed that his biggest losses always followed his largest profits. After a winning streak, confidence turns into overconfidence, position size grows faster than the risk plan allows, and a loss that would have been minor at normal size becomes a setback. His answer was to keep size consistent whatever the recent results and to warn against increasing it too quickly after a good period. He also noted that his two worst months, down 3% and 2%, were the months his children were born, when his attention was elsewhere.

Pit Bull, the book

Pit Bull: Lessons from Wall Street's Champion Trader, written with two co-authors, came out on April 1, 1998. A review published at the time describes him as a day trader who had run hedge funds before heart disease led him to stop, and who was then trading for himself in Florida. The book is candid about the losing years. His earlier chapter in the 1989 book Market Wizards is titled "Marty Schwartz: Champion Trader". Quotes attributed to him circulate widely; we could not check them against the books, so none is reproduced here.

Schwartz was not one of the Turtles: his approach is short-term and discretionary, unlike the long-term trend following taught by Richard Dennis on the Turtle Traders page. Other traders with documented records are on our list of the most successful stock traders and in the famous traders section.