“Throughout my financial career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t take a hard look at risk, it will take you.”
Larry Hite

“Frankly, I don’t see markets; I see risks, rewards, and money.”
Larry Hite

“My philosophy is that all stocks are bad. There are no good stocks unless they go up in price. If they go down instead, you have to cut your losses fast… Letting losses run is the most serious mistake made by most investors.”
William O’Neil

“[Michael Marcus – another top trader] taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgement, being wrong, making your next best judgement, being wrong, making your third best judgement, and then doubling your money.”
Bruce Kovner

“That cotton trade was almost the deal breaker for me. It was at that point that I said, ‘Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?'”
Paul Tudor Jones

“If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.”
Paul Tudor Jones

“Don’t focus on making money; focus on protecting what you have.”
Paul Tudor Jones

“The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance.”
Ed Seykota

“When I get hurt in the market, I get the hell out. It doesn’t matter at all where the market is trading. I just get out, because I believe that once you’re hurt in the market, your decisions are going to be far less objective than they are when you’re doing well… If you stick around when the market is severely against you, sooner or later they are going to carry you out.”
Randy McKay

“I’ll keep reducing my trading size as long as I’m losing… My money management techniques are extremely conservative. I never risk anything approaching the total amount of money in my account, let alone my total funds.”
Randy McKay

“When I became a winner, I said, ‘I figured it out, but if I’m wrong, I’m getting the hell out, because I want to save my money and go on to the next trade.'”
Marty Schwartz

“Learn to take losses. The most important thing in making money is not letting your losses get out of hand.”
Marty Schwartz

“I always define my risk, and I don’t have to worry about it.”
Tony Saliba

“The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading… I know this will sound like a cliche, but the single most important reason that people lose money in the financial markets is that they don’t cut their losses short.”
Victor Sperandeo

“I think investment psychology is by far the more important element, followed by risk control, with the least important consideration being the question of where you buy and sell.”
Tom Basso

What These Fifteen Traders Agree On

Fifteen different traders. Multiple decades of combined market experience. Different asset classes, different time horizons, different personal styles. Every single one of them places cutting losses at the center of their trading philosophy. This is not coincidence. It is convergence on the single most important truth about trading: the size of the loss, not the frequency of the loss, is what determines whether a trader survives and compounds or eventually gets carried out.

Larry Hite sees risks, rewards, and money rather than markets. William O’Neil says all stocks are bad unless they go up. Paul Tudor Jones says the solution to a losing position is always the same: get out. Ed Seykota reduces the entire discipline to three rules, all identical. Randy McKay reduces size as long as he is losing. Tony Saliba defines risk in advance so he never has to worry about it. Tom Basso ranks psychology first, risk control second, and entry/exit last. These are not different philosophies. They are one philosophy expressed through fifteen different personalities and trading styles.

The Kovner quote about Michael Marcus is worth examining separately. Being willing to make mistakes regularly, making your best judgment, being wrong, making your next best judgment, being wrong, and then doubling your money is a precise description of the trend following trade sequence. Multiple small losses, each one cut correctly, followed by the large winner that the previous losses were the cost of finding. The psychological requirement is the willingness to be wrong repeatedly without losing conviction in the process. That willingness is what separates traders who can follow a system through a losing streak from those who abandon it at the bottom.

Tom Basso’s ranking is the clearest statement of trading priorities available from any source. Psychology first. Risk control second. Entry and exit last. The industry obsesses over entry and exit: which indicator, which time frame, which signal. The practitioners who have actually done this for decades consistently say that is the least important piece. The most important piece is the part no one wants to discuss: the psychological discipline to follow a defined process consistently, and the risk control rules that make each individual mistake survivable.

Frequently Asked Questions

What is the single most consistent theme across all fifteen Market Wizards quotes?

Cut losses short. Every trader quoted places some version of this principle at the center of their approach. Whether expressed as “get right out,” “cutting losses is the only rule,” “define risk in advance,” or “the most serious mistake is letting losses run,” the message is identical. The loss that is taken immediately is the loss that is survivable. The loss that is held and allowed to grow is the loss that eventually ends the trading career.

Why does Tom Basso rank entry and exit as the least important element?

Because entry and exit contribute less to long-run performance than psychology and risk control. A mediocre entry system with excellent risk control and consistent psychology will produce better long-run results than an excellent entry system paired with poor risk management and emotional override. The entry gets you in. Risk control and psychology determine whether you are still trading five years later.

What did Bruce Kovner mean by making your best judgment, being wrong, and doubling your money?

He described the trade sequence that produces trend following profits: take the entry based on the best available signal, accept the loss when it fails, take the next entry when the next signal appears, accept that loss too, and then hold the winning position when one finally develops into a large trend. The small losses are the cost of participation. The large winner that eventually comes more than covers all of them. The psychological requirement is tolerating the losses without abandoning the process.

Trend Following Systems
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