Specific practices: Schwartz uses the Dow Jones Industrial Average, short-term operating indicators, Staples 500 stock index and other operating tools for short-term trading.
Views on investment tools: Ten-day moving average index (E MA) is Schwartz's favorite technical indicator to judge major trends. He believes that if you want to be a skilled trader, you must find convenient tools and use them repeatedly until you know clearly what their functions are, how to play their functions and how to give full play to their efficiency.
Famous sayings and opinions:
Martin Schwartz is always frustrated in his trading career of 10, and is usually on the verge of bankruptcy. However, he finally turned Gan Kun around and became one of the smartest traders in the world.
The first factor of his success is that he found his own trading method. Schwartz decided to trade on the basis of basic analysis in unhappy years, but when he switched to technical analysis, his career began to be smooth sailing. Schwartz wants to emphasize that this is not to say that technical analysis is better than basic analysis, but that he has found a trading method that suits him.
From 65438 to 0978, Schwartz began to subscribe to many securities information and magazines. He regards himself as a synthesizer, and does not need to design new trading strategies, but only needs to integrate the advantages of others into his own trading strategy. Later, it was discovered that a man named Terry Wen Lan invented a unique trading method called "magic forecasting method". He is a high flyers who graduated from department of mechanical engineering, Massachusetts Institute of Technology, and he is very talented in mathematics. The central theory of this method is that the rising and falling time of the stock market is actually the same, but the rising and falling time is different. Because before the stock market falls, there is always a period of resilience, and before the rise, there is always a period of cohesion. When calculating time, we should start from this period, not wait until the stock price reaches a high point or a low point. This theory is completely different from what Schwartz learned in the past, but it helps Schwartz a lot.
Schwartz transformed the technical analysis and operational strategies he learned into his own style.
He said: "The first thing I have to do is to formulate a set of operation methods that conform to my style." He believes that it is the most important part of his plan to formulate a set of operation methods suitable for his personality. Without operating methods, there is no profit advantage.
At that time, Schwartz has always been a person who pays attention to fundamentals. He pays attention to inflation rate, interest rate, company growth rate, cost-benefit ratio, dividend yield, gross profit margin, market share, government policies and all other long-term factors that will affect the stock price. Now, he will begin to transform himself into a technical analyst, a master of market timing, an operator, and a person who pays attention to the buying and selling signals sent by market price changes. This is basically the biggest difference between operators and investors. An operator regards the market as a living and breathing individual, not just a collection of many stocks.
After nine years as a securities analyst, Schwartz decided to completely change his decision-making basis, from basic analysis to technical analysis.
He said that your trading method must match your personality completely, and you must understand the advantages and disadvantages of your personality. It took him nine years to really discover his own personality.
Schwartz's strengths are that he can work hard wholeheartedly, abide by his own principles continuously, concentrate for a long time and hate the essence of failure. His weakness is insecure personality, fear of losing, strong demand for the continuous support of others and the satisfaction of winning often. A trader, like a chain, is connected by fragile links, and the weakness of your own personality is the most common factor affecting your operating style.
Schwartz made an ultra-short series. This means that his entry and exit speed is always, always, always very fast! He usually goes in and out in a few minutes or less, and never stays in this position for more than a few hours. Basically, Schwartz uses a short-term operating system, because he has only limited resources, so he must use a series of small profits to accumulate working capital. But when Schwartz became more and more successful, he found that short-term operation could give him the greatest psychological support and regular satisfaction. So he designed his own tools according to these characteristics.
From 65438 to 0989, Schwartz set up an investment fund with a capital of 80 million dollars, but it has been in operation for more than a year and the effect is not satisfactory. Schwartz found that the reason is that large-scale funds are not suitable for his short-term operation style. He likes to get in and out of the market in a short time, but it is quite difficult to operate a lot of money. This is also the main reason why Schwartz decided to start his own business and run his own fund. Finally, he decisively dissolved the fund and re-operated his own fund, making a lot of money every year.
Since STAP index futures first appeared in the market, it has become Schwartz's food. He goes in and out of the futures market every day. In order to monitor the troubles in the futures market, Schwartz must carefully study two sets of technical drawings printed from the "futures information" quotation machine every day. All his information about futures is obtained from the "futures information" single machine. The stand-alone computer on his desk picks up four screens, one on top of the other, so that he can see 20 pre-selected technical drawings at the same time. On weekends, his assistant will print out charts of different technical indicators according to different futures contracts (stamp 500, Eurodollar, currency, bonds, dollar index, CRB price index and petroleum products) and different time points (2, 3, 6, 12 minute line and daily line, weekly line and monthly line). Schwartz draws trend lines on these technical charts to help him feel the current situation of each futures market, and uses their exponential moving averages to determine whether each futures market is in a bullish or bearish trend. Going long when the futures price is higher than the index moving average, or shorting when the futures price is lower than the index moving average, is the best way to conform to the old law-let the trend be your friend.
Schwartz's most impressive transaction was his operation in the stock market crash of 1987. On Friday, 1, 987, 10 and 16, the Dow Jones industrial average fell for three consecutive days, with a drop of more than 108 points, and the trading volume was unprecedentedly enlarged to 338 million shares. Most technical analysts said that Friday's decline, combined with the huge amount of the previous trading day, may indicate that the market will perform better in the future. Schwartz also believes that the market has bottomed out. After all, there is not much room for a big bull market callback. Just before Friday's close, Schwartz bought 40 S&P index futures contracts at the market price.
However, at the weekend, US Treasury Secretary Baker accused the German authorities of letting the mark interest rate rise, which made Schwartz very worried. Baker's tough remarks are tantamount to releasing the atmosphere that the United States is about to raise interest rates to the market, which makes the market very uneasy. As expected, the market immediately went crazy when the bells of 10 and 19 rang on Monday. The Dow Jones Industrial Average immediately fell 150 points within one minute of opening, and fell more than 200 points within half an hour. On the same day 10: 30, the market temporarily stopped falling and began to rebound. Schwartz decisively sold 40 S&P index futures contracts he just bought last Friday at the market price, with a loss of $365,438 +0. Five million. On that day, the Dow Jones Industrial Average fell by 508 points, a record drop of 22 points. 6%. The S&P index also fell by 67. At the same time, global stock markets fell sharply. This is the famous American "Black Monday".
Many people didn't expect the stock market to adjust sharply in the form of "crash", but one person not only predicted the stock market crash in advance, but also planned to make a fortune in the stock market with this godsend opportunity. This man is the famous Soros.
1987, Soros judged that the bull market, which lasted for five years from 1 982, was coming to an end, and the bubble in Japan's stock market was the most serious, so the stock market crash must start from Japan's stock market. Although the stock market bubble in the United States is also very serious, the market mechanism and corporate financial situation are generally better than those in Japan. According to the above judgment, Soros made a big short on the Japanese stock market and long on the American stock market.
However, the mistake is that on Black Monday, 1987 10, 19, Japan did not want the stock market to crash, but went into the market to support the market in a big way, resulting in the Nikkei 225 index closing down only slightly by 2. 35%. Soros's quantum fund has almost no profit in the Japanese market, but it has suffered huge losses in the American market. What would Soros do? Soros sells stock index futures and Schwartz makes a comeback.
After the plunge on Black Monday, the US stock market stopped falling and rebounded. As of Wednesday's close, the Dow Jones Industrial Average rebounded 1 6.63%, and the Standard & Poor's Index also rebounded 1 4.9%. However, as soon as the market opened on Thursday, someone sold the 65438+February contract of Standard & Poor's index futures and immediately lowered the contract by 32%, but the Standard & Poor's index did not fall sharply. Schwartz, who had been waiting for two days, was keenly aware of the changes in the stock index futures market and did not hesitate to buy the 12 S&P index futures contract at a low level. Sure enough, the market rebounded quickly, and Schwartz earned $290,000 that day.
Afterwards, Schwartz learned that there were more than 1 000 lots sold in the 65438+February contract at the opening, and such a big deal was made by Soros's Quantum Fund. So why did Soros short stock index futures? In order to adjust his investment strategy, Soros took advantage of the rebound of the US stock market to sell index futures contracts, thus keeping a large number of stock portfolios of Quantum Fund in the US market. On the surface, Schwartz made Soros's money in the stock index futures market. However, Soros is not a loser. By selling and hedging in the stock index futures market, he locked in the downside risk of the quantum fund stock portfolio in the US market. Therefore, this is a well-deserved ending.
Hard work is the main reason for Schwartz's success, but hard work is only part of his success. Schwartz works alone in his home office, and he is proud that he didn't hire an assistant. It's like a lone trader. Although he is quite successful, he often enjoys no reputation. However, Schwartz has established a high reputation because of his frequent victories in national investment competitions. Schwartz's operation does not have the principle of "following the trend". Surprisingly, he does the same homework every day. Even in an interview, he never stopped working. Although he looked tired, he waited until the end of the analysis. For nine years, Schwartz has been doing his daily homework with this fanatical spirit without interruption.
Schwartz believes that if you want to listen to what the market is saying, you must pay a high degree of concentration. Just like doctors diagnose patients' health with medical instruments, draw their own technical drawings, calculate their own technical indicators, and check them every 10 minutes in the disk to monitor market trends.
He draws a line around the index every half hour to record the market dynamics. Then add a golden or green arrow between each box to reflect whether the composite index of new york Stock Exchange has gone up or down in the past 30 minutes, and record its fluctuation range. This forced him to pay attention to the direction and operation mode of the market. This work is particularly important when the market fluctuates greatly.
Let's see how Schwartz's day works:
Seeing this timetable, I feel like a machine, definitely better prepared than my competitors. To do this, we must work hard every day. You probably understand why these successful people and investment experts can make money steadily. This is how investment experts put into investment work. The so-called "no pains, no gains".
Schwartz's success stems from his change of attitude. He separated his self-esteem from his desire to win money. In the past, because he wanted to maintain his self-esteem, he refused to admit his wrong views, which often had a disastrous impact on the speculative results.
When analyzing himself, Schwartz said that only when he can separate self-esteem from whether he can make money can he become a market winner. In other words, start by accepting mistakes. Until then, admitting your failure is worse than losing money. Schwartz used to think he couldn't make mistakes. After becoming a winner, I will tell myself: "If I am wrong, I have to get out quickly, because there is a saying that' there is no firewood to burn, and I am not afraid of burning without firewood'. Schwartz must save some capital for the next transaction. " Under this concept, Schwartz always puts making money before maintaining self-esteem. In this way, it will not be too sad in the face of losses. What's the big deal about making a mistake once?
In fact, it is impossible to make a mistake in the transaction, and Schwartz also made a very serious mistake. At that time, stock index futures and treasury bonds futures were shorted, but the price of corporate bonds rose above its moving average, and Schwartz began to get nervous. Fortunately, the price of national debt has not changed in step with the price of government bonds. One of Schwartz's trading principles is that when the moving average price of national debt deviates, that is, when the moving average price of any tool is higher than that of another tool, according to his own trading principles, he should reduce his short position in national debt, but Schwartz is idling more. As a result, the wrong decision led to the loss of six figures in one day. This is Schwartz's biggest failure in recent years. The most attractive thing about market trading is that you always have room to improve your ability. People engaged in other industries may be able to make up for their original mistakes in other ways, but as investors, they must face up to their mistakes, because numbers will not deceive people.
Schwartz believes that the most important thing in speculation is to win money, and whether the view is correct is not the key issue. Losing money is a mistake that must be corrected. He can easily admit the error of market measurement and then follow the trend to win the money that can be covered up.
Schwartz's trading philosophy is to make a profit every month, even every day. The result is actually quite good. In Schwartz's trading career, 90% of the months were profitable. I am particularly proud that I have never suffered a loss before April every year. Because they would rather lose money than admit their mistakes. The reaction of most investors to losses is: "As long as I don't lose money, I will go out." Why do we have to wait until we lose money? It's just a matter of face. Schwartz can be a successful investor because he can finally put his face aside. "Never mind his self-esteem and face, making money is the most important thing."
Trading is a psychological game. Most people think they are competing with the market, but the market doesn't care about them at all! You are really fighting yourself.
Schwartz stressed that every trader has to face it, and only real experts know how to deal with it. A series of annoying losses occurred in a short period of time, always appearing again and again, which deeply troubled great traders. It makes you lose your judgment and gradually consumes your confidence. Sometimes, it can make you fall into a low tide that you can never escape. You are quite sure that something is wrong, which makes you lose your sensitivity to the market, and you can no longer win in the market. Once you fall into it, you will feel that everything is not going well as if it is endless. Usually your judgment and feeling about the market rhythm will disappear. At this time, the only thing you have to do is to temporarily stop trading and calm down first.
The best way to end a series of losses is to stop immediately and completely exclude your self-esteem from this money game.
Schwartz believes that one of the best trading tools is stop loss. Separate your emotional reaction from your self-esteem at the stop loss point and admit your mistakes. Most people face great difficulties when doing this, but generally they will not sell the loss, but put their hands together, expecting the market to understand that this is wrong, and then turn around and develop according to the trend they think should appear.
This attitude usually leads to self-destruction, because as Joe glanville once said, "The market doesn't know whether you are long or short, and it doesn't care." You are the only one who has an emotional reaction to his role. The trend of the market only reflects the change of supply and demand. If you cheer for the trend of the market, when the trend of the market is unfavorable to you, someone must also cheer.
Shu Hua once shorted the S&P 500 index futures, and the SP500 stock futures index rose rapidly because of the Republican election victory. Schwartz, under the control of personal emotions, increased the price all the way, even at the final daily limit. The loss of that day reached a record $654.38 million +0 million.
That night, under the guidance of his wife and teacher, he realized: "Only by closing the position first and returning to the neutral state of not holding positions can we see the market clearly. Moreover, shorting also violates its own trading principles, and indicators such as moving averages indicate buying signals. " The next day, he decisively closed his position and stopped the loss, allowing Schwartz to regain his rationality and calmly analyze the market. In that month, he made up most of the losses, leaving only $57,000.
It is difficult to accept the loss, because a stop loss is to silently admit that you have done something wrong. However, in the financial market, mistakes are inevitable and inevitable. At the same time of each transaction, we must set a "throw-in point" in advance. As long as the price reaches this point, you will stop, and you must have this kind of psychological cultivation and actually stop when the price reaches this point.
Schwartz pointed out that what most people can't understand is that when they are losing money, they begin to lose objectivity. It's like at a gambling table in Las Vegas, when you are losing money, a fat woman in sequins is shaking her hand, and you are determined not to let her win your money. You forget that she doesn't care whether you lose or not, she is just playing her own gambling game. Every time you start to feel jealous, emotional, greedy or angry, your judgment will be greatly reduced. The market is like that fat woman who shakes her head. It doesn't care what you are doing! This is the main reason why you should put down your self-esteem and flatten your loss position when you reach the stop loss point. If you are like most people, you have insurmountable difficulties in this respect, you should learn from Odysseus in Greek mythology: tie yourself to the mast of the ship-use automatic stop-loss instructions to help you keep your emotions out of the game.
Schwartz also concluded that stop loss can be executed in two ways: place a stop loss order with your broker to set the price, or set the price in your own mind. No matter what happens, as long as the price reaches, stop loss. No matter which method you use, stop loss is a self-protecting investment. Because as long as your view of the market is wrong, stop loss will prevent you from suffering more serious losses because you keep the loss part, and prevent you from falling into a bottomless pit that may dig deeper and deeper, so that you can retain the power to make a comeback. Stop loss automatically pulls your head back from negative thinking to neutral thinking. Although your money will not return to the original point after the stop loss, your thinking will return to a state where you can reorganize and generate new ideas, and your thinking will no longer stagnate because of the loss position.
The more you lose in the transaction, the lower your objectivity. Getting rid of losses quickly can clear your head and rebuild your objectivity. After a short breath, if you can objectively and rationally prove that the original idea is still feasible, you may re-establish the same part, but always remind yourself that there are many opportunities in the market and you don't have to be obsessed with a flower. With a stop loss, your trading funds can be preserved, and you can also win the right to participate in the next high-profit and low-risk trading opportunity.