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Larry Hite-Trend Following Legend Who Respects the Risks

  
  Education
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Larry Hite was featured in Market Wizards. Market Wizards is a must read for all trend followers. On one level you will learn various trading tips however on the other hand, do not be think that your trading will be so easy. Trend following as easy as it is, is very difficult.

Try to internalize some of Larry Hite’s trading tips for trend followers:

I have noticed that everyone who has ever told me that the markets are efficient is poor.

People develop systems and people will make mistakes. Some will alter their system or jump from system to system as each one has a losing period. Others will be unable to resist second-guessing the trading signals. People don’t change.

The very first rule we live by at Mint is: Never risk more than 1% of total equity on any trade. Secondly, we always follow the trends and we never deviate from our methods. In fact, we have a written agreement that none of us can ever countermand our system. Thirdly, diversify in two ways. A. we trade more markets worldwide than any other money manager. B. we use lots of different systems ranging from short term to long term.

Over-rated indicators: Overbought/oversold indicators.

Two basic rules: (1) if you don’t bet, you can’t win. (2) If you lose all your chips, you can’t bet.

Never trade counter to the market trend.

Do You want to Win or Lose at Trading?

  
  Education
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There are things that make you win in the stock market over the long term and then there are things that make you lose quickly even in the short term. The key to trading success is learning the difference quickly and doing what really works not what you emotions or opinions tell you to do.
If you want to win then you must create your own trading plan and follow it, if you want to lose just trade whatever you want whenever you want based on your own opinion.
If you want to win then you must control your risk carefully with only 1% or 2% of your capital at stake in every individual trade, if you want to lose then just trade huge position sizes, put all your chips on the table.
If you want to win plan your entries and exits before you enter a trade then follow them, if you want to lose ask for everyone’s opinion and just make decisions based on other people.
If you want to win cut your losses short and let your winners run, if you want to lose hold your losers and hope that they come back and sell your winners quickly to lock in gains.
If you want to win trade only the best high quality stocks in the market, if you want to lose trade the junk and hope for a miracle come back.
If you want to win then build complete confidence for your system through chart studies and back testing, if you want to lose trade with no idea of if what you are doing even works.
If you want to win go with the current trend of the market, if you want to lose fight the trend and trade against it.
If you want to win then go long the hottest stocks in a bull market, if you want to lose short the hottest stocks in a bull market.
Do what makes money not what you feel like doing.

Dont Take Too Much Risk

  
  Education
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Dont Take Too Much RiskOne of the most devastating mistakes any trader can make is risking too much of  their capital on a single trade. One thing is certain in trading and that is if you lose all your capital you are out of the game. Why risk so much you could be prevented from continuing? There is a saying in poker than going all-in (risking all your chips) works every time but once. This is true of trading.

If you risk all your account on every trade it only takes one loser to wipe you out (and no trading method is 100% accurate), so you will be out of the game at some point it is only a question of time.

In general, we only risk 1-3% of the available capital allocated to a system on any individual trade. This is calculated using the size and, the difference between our entry price and our maximum stop price, and the amount of capital allocated to the system. With the win probability and ratio of size of winning trades to losing trades we are almost certain never to lose all of our trading capital. In fact, the chance of us hitting our maximum drawdown for the year is tiny. (more…)

Lose the bad attitude ,Better attitude equals better decisions

  
  Education
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You can’t be a winner in the markets or in life if you don’t also have a winning attitude and surround yourself with those who offer the same. It is far too easy when the chips are down and our strategies are out of sync to start beating ourselves up and feel like a worthless moron. That comes with the territory. If it would be easy, everyone would be making loads of the money in the market and we know that isn’t true as most can’t even keep up with the S&P. Remember, trading and investing is not a precise science and a lot more luck is involved than many will tell you. So, in this business, when you fall down, you’ve got to dust yourself off and get back on the horse and, more importantly, keep plugging away. When you start thinking negative thoughts, and we all do, stop them immediately. You can’t consistently win in the markets if you can’t consistently foster and maintain a positive attitude in everything you do.

Trading Wisdom – Larry Hite

  
  Education
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Larry Hite – Turned a $2 million managed account into $800 million in 8 years.
LarryHite

Throughout my financial career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t take a hard look at risk, it will take you. If you argue with the market, you will lose. It is incredible how rich you can get by not being perfect. Never risk more than 1% of your total equity in any one trade. By risking 1%, I am indifferent to any individual trade. Keeping your risk small and constant is absolutely critical. I have two basic rules about winning in trading as well as in life:

  1. If you don’t bet, you can’t win. 
  2. If you lose all your chips, you can’t bet. Frankly, I don’t see markets. I see risks, rewards, and money.

 

Dont take too much Risk

  
  Education
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dontakeriskOne of the most devastating mistakes any trader can make is risking too much of their capital on a single trade. One thing is certain in trading and that is if you lose all your capital you are out of the game. Why risk so much you could be prevented from continuing? There is a saying in
poker than going all-in (risking all your chips) works every time but once. This is true of trading.
If you risk all your account on every trade it only takes one loser to wipe you out (and no trading method is 100% accurate), so you will be out of the game at some point it is only a question of time. (more…)

Win or Lose -It's Upto You

  
  Education
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If you want to win then you must create your own trading plan and follow it, if you want to lose just trade whatever you want whenever you want based on your own opinion.

If you want to win then you must control your risk carefully with only 1% or 2% of your capital at stake in every individual trade, if you want to lose then just trade huge position sizes, put all your chips on the table.

If you want to win plan your entries and exits before you enter a trade then follow them, if you want to lose ask for everyone’s opinion and just make decisions based on other people.

If you want to win cut your losses short and let your winners run, if you want to lose hold your losers and hope that they come back and sell your winners quickly to lock in gains.

If you want to win trade only the best high quality stocks in the market, if you want to lose trade the junk and hope for a miracle come back.

If you want to win then build complete confidence for your system through chart studies and back testing, if you want to lose trade with no idea of if what you are doing even works.

If you want to win go with the current trend of the market, if you want to lose fight the trend and trade against it.

If you want to win then go long the hottest stocks in a bull market, if you want to lose short the hottest stocks in a bull market.

Do what makes money not what you feel like doing.

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