“We approach markets backwards. The first thing we ask is not what can we make, but how much can we lose. We play a defensive game.”
I was a rock promoter in college, and on one weekend, there were three separate shootings in clubs at which the groups I managed were working. I decided it was an opportune time to change careers and pursue my true interest–the financial markets. I didn’t have any idea how to look for a job in that field, so I decided I would start out as a stock broker.
More on how Larry Hite got into trading (source: Market Wizards by Jack Schwager)
Q. How did you first get interested in the markets?
A. When I was in college, I took a business course with a professor who had a trenchant sense of humor. To give you an example, he also worked as a bank examiner. One day, before leaving the bank following an audit, he turned to the bank president and, as a joke, said, Got you! The man had a heart attack on the spot. After that, they did another audit and found that the bank president had embezzled $75,000. Anyway, in class one day, this professor is reviewing all the financial instruments: stocks, bonds, and so on. Then he says, Now we come to the craziest market of all–commodities. These people trade on only 5% margin–and most of them borrow that. The whole class laughed, except me. For some reason, the idea of trading on 5% margin made perfect sense to me.
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