In all my time as a trader and a broker, I’ve interacted with hundreds of successful traders, both large and small. The one common element to their success and longevity is risk management. This has become all the more important in markets like these when fear takes over and having an objective mindset becomes harder.

I wanted to share a few insightful tips from an old Jerry Parker podcast:

On living to play another day.

“This is a Turtle Rule. That when you have a drawdown, you reduce your positions twice as fast as the drawdown. So, if you’re down 10%, you should reduce your positions by 20% and so on. And that’s a different day when we were trading really large, very few markets, very short-term. But I think it still kind of applies that you want to have that one rule that always works. It’s always going to work. It’s going to keep you from losing too much. And that is just to reduce your positions and live to play another day.”

On cutting your losers and letting your winners ride.

“I used to say, when you have a loss, you’re thinking, I’m hopeful that it’s going to come back and turn into a winner, but that’s when you should be fearful that the loss is going to get bigger. And then the biggest mistake is when we have big profits, we’re very fearful. We’re fearful it’s going to turn into a smaller profit, but that’s when we should be very hopeful that it’s going to be a big, huge winner. So, I think that, you know, we’re always going against the way we’re wired.”

On mistakes.

“But most of that has come from, honestly, from over-trading and not following my systems to a T, as a 100%, as much as I could have. Yeah. So, most of that was all self-induced anxiety. The markets I can kind of get over, I can turn it into a game, I love the game. I love playing and I love competing. But, yeah, that’s the two most important things. And I got that from Rich. I asked him, like, one day, what’s the two biggest mistakes we make? Or what are the biggest mistakes we’re going to make? And he’s like, oh, over trading and not following your system.”

Check out the link to the interview here.

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