Chris’ note: The stock market is getting tossed around like a rag doll. For most folks, it’s a brutal time to be an investor.
But as I’ve been showing you, it’s a dream market for traders. They can profit from falling, as well as rising, stocks. And the higher the volatility, the higher their potential returns.
It’s what allowed trading “wizard” Larry Benedict to close out last year in the green across his three trading advisories. And at one of them, One Ticker Trader, he gave his subscribers the chance to finish last year up 240%.
He’ll be lifting the lid on his newest strategy to profit from surging volatility during a free online strategy session next Wednesday, March 8, at 8 p.m. ET. So, if you haven’t already, you can secure your spot with one click here.
For more on how Larry achieved wizard status… and how he scored a triple-digit win for his readers during the bear market… read my Q&A with him below.
Chris Lowe: Your trading record is legendary. Between 1990 and 2010, you didn’t have a single losing year. It earned you a place in Jack Schwager’s 2012 book, Hedge Fund Market Wizards.
Chapter 2 featured Ray Dalio, manager of the world’s largest hedge fund. Chapter 3 featured you.
As Schwager put it, you’re one of America’s most prolific moneymakers. You’ve profited $1 million on more than 500 occasions. And in 2008, as the financial world was falling apart, your hedge fund made $95 million.
And you’ve continued that success over at your trading advisories. Last year at One Ticker Trader you made 11 trade recommendations. All of them were winners. Subscribers who followed your recommendations had the chance to close out the year up 240%.
Larry: I’m happy with that performance. I’m even happier for subscribers who followed my recommendations. But just finishing 2022 without losing money was an achievement.
Chris: What’s the key to your success?
Larry: I trade with no bias. I’m neither bullish nor bearish.
I can profit from stocks going down as markets crash. I can also profit from short-term rebounds in stocks along the way. Buy-and-hold investors can’t do that. They have to sit through the losses… and wait until the bear market ends.
Then there’s the higher levels of volatility that come during bear markets. It may sound strange if you’re a buy-and-hold investor. But traders like me love when the stock market is volatile.
If stock prices don’t move, traders have zero chance of making money. As price swings – aka volatility – get more dramatic, the profit potential also rises.
This cuts both ways. When volatility is high, there’s also the potential for steeper losses. But if you have a strong risk management policy, like I do, you can keep your downside low.
Chris: How you would describe your approach to risk?
Larry: I never let my trading account go too far below zero. A lot of rookie traders swing for the fences. If that works out, great. But if it doesn’t it will blow up their account.
And I traded like that when I was getting started. But I soon learned that I could make a lot of trades. And that one trade didn’t have to define me.
If a trade goes against you, cut your losses and move on to the next one. There’ll be other opportunities. I’ve often made 100 trades in one day.
I learned to accept losses. And I learned to keep them small. Knowing that any one trade doesn’t have to be the trade… and accepting being wrong… are key to keeping your risk under control.
Chris: You often talk about “earning your risk.” What does that mean?
Larry: It means you shouldn’t take on much risk until you’ve had a string of smaller wins. When you do that, you build a pile of capital you can use to snowball your account.
If you don’t have a big enough base of capital, you shouldn’t take on any high-risk trades. You should target 5%, 10%, 25% returns, and grab these smaller wins when you can. Same goes for if you’re just not trading well, for whatever reason. You want to cut your risk as much as possible.
You never go broke taking a profit. Once you’ve built up profits, you’ve earned the ability to take on more risk.
Chris: That’s not the way most people approach trading. They want to knock the lights out on every trade.
Larry: I’ve known people who lost their homes or committed suicide because of their trades. They had a gambler’s – not a trader’s – mindset. When they were losing, they were always looking for one trade to make it all back.
You can start out as a small trader… gain experience… then make bigger bets. The common mistake new traders make is thinking there’s some shortcut to success. They get frustrated. They quit because they haven’t succeeded overnight.
You can develop an edge as a trader. But it takes time. I developed my edge over nearly four decades.
Chris: What can Daily Cut readers who are interested in trading do to boost their odds of success?
Larry: First, find a mentor. Someone like me who’s been at this a long time and can show you the fundamentals.
Next, don’t spread your focus too wide. Tom Brady isn’t training to become the next great Major League Baseball pitcher. He’s a seven-time Super Bowl-winning quarterback because football is what he lives and breathes.
So don’t try to trade every stock in the market. Pick a handful and get to know them inside and out.
Finally, stay disciplined. Earn your risk. Build up a cash pile with smaller, lower-risk trades. And swing for the fences only when you know you can afford a loss.
If you follow these tips, you can become a successful trader. Just remember it takes time. So, stick with it. And earn your risk.
Chris: Thanks, Larry.
Larry: Thanks, Chris. It was a pleasure speaking with you.
Chris here again – To hear more from Larry, join his online strategy session next Wednesday, March 8, at 8 p.m. ET.
It’s about a volatility “shockwave” about to slam the stock market. And it’s not just Larry who’s sounding the alarm. Billionaire trader Stanley Druckenmiller and fellow Market Wizard Ray Dalio are issuing similar warnings.
That may sound scary. But remember, higher volatility means higher profits for traders. And he’ll be taking a deep dive into the trading strategy you can use double your money or more when the shockwave hits. Use this link to automatically secure your spot.