Larry Hite Insights and Wisdom

Larry Hite, who was profiled in Jack Schwager’s Market Wizards’ series, spoke recently to a group of students. An excerpt:

I believe I had to get into this business because it was simple. There are just a few questions you got to ask yourself. It’s like a checklist that you have to go through. I’m going to go through those questions, discuss them with you, and they can save you a lot of grief. I don’t know that they will make you a lot of money, but mostly they do. I mean, making money in the markets is more simple than it’s not. The trouble is that sometimes you get in the way, or if you’re working for a firm, they get in the way, because there are a lot of social implications. First I’m going to tell you a little about math. I have a guy that works for me, [who] graduated from Wharton, magna cum laude, and we were sitting around one day and we were, I don’t remember what we were doing but we had to figure out the compounded rates of return, and instead of using a calculator we were just looking at the numbers and doing it in our heads. He was young and just out of college, and he kind of felt puffed up about it. You know, it made us feel smart, which is a rare feeling for me. Then I said to him, “You know Michael, the problem with this is anybody can do this with six dollar calculator. You don’t have to be a phi beta kappa. Anybody can do this.”

Later he continued:

One of the great things about the market is, the markets don’t care about you. The market doesn’t care what color you are. The markets don’t care if you are short or tall. They don’t care about anything. They don’t care whether you leave or stay…I met the guy who wrote this best seller now called, Bringing Down the House, it’s about these MIT guys who beat the blackjack tables. And part of the problem, if you’re going to be a blackjack counter is that the casinos don’t like you. They actively don’t like you. And they come and tell you in rather strong things to take your business away. Well, the beautiful thing about the markets, they don’t like you, they don’t dislike you, they just don’t care. They are there everyday. You want to play, you can play. You don’t want to play, don’t play. And you can choose. You sit, there is no penalty. You know, when you stand you know…I don’t know how many of you play baseball…when your at bat if something comes through the strike[zone], if you don’t swing you still get a strike against you. But the markets are a no penalty game. You can stand there and wait. You can go home and wait. It doesn’t matter. And that’s really a terrific thing.

Many people lose sight of the main goal of trading the markets. Instead of worrying about making money, they worry about how much they are trading. Keep Hite’s words close, and don’t forget the main goal.

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