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On the way to the office to record my Trading with Larry Live podcast this week, I was reflecting on questions I receive about my 40-year trading career.
The most common question people ask is: What’s the most money I’ve made on a trade?
I understand why folks ask. Many think that’s what trading’s all about. It’s hitting home runs and buying a fancy house/car/yacht.
Now, I’ve made around $30-$40 million on trades (possibly more) when I was running my hedge fund. But the truth is… I don’t really know my “best” trade. It’s not something that I keep tabs on.
As I learned the hard way, focusing on large one-off wins is the wrong approach if you want to make it as a trader.
But if you flip that around, you’ll greatly improve your performance…
It’s Not About Big Wins
Traders often think trading is about bagging massive gains.
And that’s the approach I took when I started out in the pits of the Chicago Board Options Exchange in my twenties.
I’d jump from one trade to the next, making outsized bets that had little chance of coming off. I tore through my trading account and then had to face the arduous task of starting over again.
Big wins just don’t come around often. For every Nvidia, countless other stocks flame out and collapse once the market moves on to the next hottest thing.
So if you keep looking for the next Nvidia, you could be waiting months or even years. That will distract you from all the other profitable trades out there every day.
Worse still, if you miss out on the next big bagger, you’ll beat yourself up every time it breaks out to a new high. And that can be emotionally destroying.
Instead, stop looking for low-probability big wins. Do the opposite…
Treat trading like any other business where you have to bank regular gains.
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Each week, Market Wizard Larry Benedict goes live to share his thoughts on what’s impacting the markets. Whether you’re a novice or expert trader, you won’t want to miss Larry’s insights and analysis. Even better, it’s free to watch. Simply visit tradingwithlarry.com at 8:30 a.m. ET, Monday through Thursday, to catch the latest. |
Take Regular Profits
By taking regular profits, no matter how small, I got into the habit of trading profitably.
It was just a $200 or $300 profit to start with. But I quickly banked the win and moved on to my next trade. That’s how I steadily grew my account into something much bigger. I call this “snowballing your account.”
Before I knew it, I’d banked my first $1,000 winning day. And that was when I knew that I was finally on my way to making it as a trader.
Remember… this was back in the 1980s. That $1,000 would be multiple times higher in today’s money.
But the point remains…
Once I knew how to achieve my daily profit goal, the next trick was to consistently hit that target. Looking for the next big thing vanished from my mind.
I just put a line under each trade and moved on to the next. That way, I didn’t hang on to profitable trades longer than I should in the hope of unrealistic gains.
Reflecting on big wins can be fun. But it’s not what trading is really about.
When you can consistently pull profits daily, you know you can make it as a trader.
Happy Trading,
Larry Benedict
Editor, Trading With Larry Benedict
P.S. If you missed this morning’s Trading With Larry Live, you can catch the replay here:
Then make sure to tune in live at tradingwithlarry.com on Monday at 8:30 a.m. ET for our next episode!
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