INSIGHTS INTO THE MINDSET OF SUPER TRADERS – Part 9
“The best strategy loses its effectiveness when you trade
from a place of fear.” - Mercedes
Oestermann van Essen
Name: Lawrence D. Hite
Nationality: American
Profession: Funds manager, trading systems developer,
philanthropist
Career:
Larry Hite is an award-winning funds manager who’s one of
the forefathers of trading strategies. In 1981, he co-founded Mint Investments,
and several years later, the firm became the most successful of its kind (at
that time).
He was featured in Jack Schwager’s book titled Market Wizards. Larry also partnered
with Man Group and started some ground-breaking trading concepts – which also
proved successful. In the year 2000, Larry shifted gears and focused on other
things that also mattered to him, including family, investing, funds management
and philanthropy. For instance, he founded his own foundation, called The
Hite Foundation, which he heads. One source says he also serves as chairman of
the Development Committee for the Institute of International Education’s
Scholar Rescue Fund, whose goal is to provide safe haven for academics and professionals
who are at risk throughout the world.
Insights:
- No matter how great your trading
method or analysis is, no matter how much information you’ve or how much
knowledge you’ve, you can open a position and still experience
negativity. Always see a new trade
as a potential loser. Don’t think of how much you can make, but think of
how much you can actually lose. With that mindset, you’ll risk as low as
possible and trade defensively, thus ensuring your safety. What you can
determine is how much you’ll lose; you can’t determine how much you’ll
gain.
- Protect your wealth. Protect
your capital. You need capital to play the markets, and without playing
the markets, you can’t make money. Without your capital, you can’t play
the markets, and that’s why you need to protect your capital.
- When you’ve a good system,
please be faithful to it. It can’t work always, but try to never deviate
from it. Make this a hard-and-fast rule.
- Always respect the market;
otherwise, you’ll suffer for your stubbornness. Go with the flow.
- Larry says this: “I have a cousin who turned $5,000 into $100,000
in the option market. One day I asked him, "How did you do it?"
He answered, "It is very easy. I buy an option and if it goes up, I
stay in, but if it goes down, I don't get out until I am at least
even." I told him, "Look, I trade for a living, and I can tell
you that strategy is just not going to work in the long run." In his
next trade he put his money in Merrill Lynch options, only this time, it
goes down, and down, and down. It wiped him out.” Lesson: Simply cut your
loss. Never allow it to run.
- What you call markets are really
risks, rewards, money and means to financial freedom. When risks are
controlled and the flow of the markets is respected, things will work for
you as traders.
- Many speculators may have
different kinds of stories to tell, but the truth is that we’re all
speculators. We’re the same. We all have access to a level playing field.
Conclusion: All
challenges we face in trading have their hidden blessings; but we’re often
blind to the blessings and allow disappointment, ire and fear to take control
of our lives when a position doesn’t do what we want it to do. One expert
advises that trading should be treated as another splendid opportunity to learn
something and improve our skill. We shouldn’t concentrate on money alone.
This article is ended with two quotes from Larry:
“There are just four kinds of bets. There are good bets,
bad bets, bets that you win, and bets that you lose. Winning a bad bet can be
the most dangerous outcome of all, because a success of that kind can encourage
you to take more bad bets in the future, when the odds will be running against
you. You can also lose a good bet, no matter how sound the underlying
proposition, but if you keep placing good bets, over time, the law of averages
will be working for you.”
“I met the guy who wrote this best seller now called,
Bringing Down the House, it's about these MIT guys who beat the blackjack
tables. And part of the problem, if you're going to be a blackjack counter is
that the casinos don't like you. They actively don't like you. And they come
and tell you in rather strong things to take your business away. Well, the
beautiful thing about the markets, they don't like you, they don't dislike you,
they just don't care. They are there everyday. You want to play, you can play.”
Further reading: Advfnbooks.com
What Super Traders Don’t Want You To Know: http://www.advfnbooks.com/books/supertraders/index.html
Source: www.tallinex.com
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