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Market Wizards - Interviews with Top Traders

Larry Hite: Respecting Risk

Larry Hite started his career as an Actor and Screenwriter. He later switched to become a Rock Promoter to a Broker and eventually to a Trader. According to Larry, The very first rule that he follows when trading is not to lose more than 1% of total equity on any trade. Secondly, he always follows the trends and never deviates from his methods. In fact, he was into a written agreement that he can never countermand the organisation's system. 


Thirdly, he diversifies in 2 ways. He and his company used to trade in more markets worldwide than any other money manager. They also used lots of different systems ranging from short term to long term. 4th is tracking volatility. When the market volatility increases a lot, it adversely skews the expected return/risk ratio; so they stop trading in that market.


Larry believes if the market does not respond to important news in the way that it should, it is telling you something very important. Also, when a market makes a historic high, it is again telling you that something has changed.


He suggests that a trade has to work if the risk is controlled and it is going with the trend.


He lays out 2 basic rules for a beginner trader:

1) If you don't bet, you can't win
2) If you lose all your chips, you can't bet


Larry Hite’s system never trades counter to the market trend.

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