How The Market Reacts To News – Marty Schwartz ‘Pit Bull’ Market Wizard Lesson

by Olivier on August 9, 2016

We are in the midst of earnings season. The perfect time to remind ourselves that it is not the news itself that is important. What is important is how price reacts to news!

Here is the passage with timeless trading wisdom from Marty Schwartz: ‘The Pit Bull Guide to Successful Trading’ explaining that key issue. This is crucial information as it is a great reminder successful trading is often counterintuitive. A concept most traders struggle with.

Marty Schwartz Market Reaction to News Price Counterintuitive Psychology Quote Pit Bull Success

How the Market Reacts to News

Bob Zoellner taught me a very important indicator about how the market reacts to news. If the market gets negative news and the market shrugs it off and it continues to go up, this is a bullish reaction because it means the market has already discounted the news. On the other hand, a sign of a fully priced market is one that reacts poorly to good news. In terms of stocks, some investors are puzzled when good news causes a decline in stock price. Investors should understand that this “good news” had already been priced into the issue. My favorite lesson that Bob Zoellner taught me is that when the stress gets so great that you think you might vomit, you should probably double your position, but only if you are then willing to use a tight stop loss on the entire position. – Marty Schwartz

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Marty Schwartz Trading Psychology Quotes

And last but not least, another great quote from Market Wizard Marty Schwartz speaking at Amherst College:

“I like to compare markets to natural events… markets are living, breathing organisms. You have to adjust with them and continually change your methods.”

Lean back and watch Marty’s speech on FinanceTrends. A written summary is included:

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