Millionaire TradersQ: Is there any percentage number that you could lay down that
would be just psychologically hobbling? On one trade?
A: Yes. I don’t like to lose more than 5 percent on a position or
any amount of capital that I’m committing. So, if I’m in some type
of deal and this is threatening my account equity by five percent,
warning bells and warning alarms are going off. I’m not quite
interested in putting myself in that situation. You guys had asked
what is your number one rule of trading and it actually occurred to
me, this might have been about a year ago I was on a business trip
in the Caribbean and the movie came on,Million Dollar Baby.I
think Clint Eastwood would be a great commodity trader because
he told the Million Dollar Baby that rule number one in boxing is
to protect yourself. And I think the same is true in trading, if you
love trading. If you want to trade, your capital is everything. So if
you want to be a great trader, you have got to protect that capital.
No capital, no trading, no life and its the same whether you want
to be a Million Dollar Baby in boxing or a Million Dollar Baby
in commodity trading, I think it’s the same thing—protect your
capital. I don’t have solid formulas or Kelly formulas, or betting
things like that. But I do study what I’m risking on each trade, what
the risk reward ratios are. What my worst-case scenarios are, and
is it strategically threatening to me.
Q: Now along those lines, how often do you revisit your earnings?
Do you pay yourself on a weekly, monthly, yearly, or quarterly
basis?
A: I’ll tell you how I deal with it honestly, I get paid w-e-a-k-l-y
[laughter]. Very weakly. In other words, I live below my means.
It’s like I said, capital to me is the most important thing, I want to
be in the trading business, that’s what I know and love. So what
I do is I pay myself as weakly as possible. I think that you asked
about how you deal with the pressure to make money. I think
that the pressure on a trader to make money is what kryptonite
is to Superman. It will hurt you. I am not aware of any market