Hello delegates and welcome to this month’s edition to the monthly letter. In this month’s letter I will be giving you all a little insight into hedge funds that I deal with, but most importantly, making you understand their concept of thinking and how vast the difference is between a professional trader versus an amateur trader is.
To give you a straight up answer hedge fund traders know how to capitalise on their winning trades and also know how to manage their losing trades. Full stop. End of story.
Below is part of an email with a hedge fund that I deal with. I won’t mention their name for confidentiality reasons, but let’s say they are from the northern hemisphere. What we see is a month to month break down of last year’s return for the fund at a healthy 59.57%.
What’s more important is their maximum return for a month of 22.35% and their lowest return at a negative -4.11%. This is why we professional traders are professional traders. When we are in a winning trade we make sure that we capitalise on these trades 100%! Whether by scaling in or simply letting those profits run and run fast I say. On the flip side, when we do have a losing trade or a losing month, we must close these when they are not going to our plan.
If I expect a trade to run to a certain price point in a certain time and it is struggling to get there, I say that this trade is failing and not doing what I want it do to. I will firstly move stops to break even or lock in the little profit that is available, to ensure that my losses are kept to a bare minimum.
I won’t ‘hope’ for the trade to go my way if there are signals saying that the market wants to turn around. Don’t hope, just listen and do. Most people do not listen with the intent to understand, they listen with the intent to reply. I will repeat that. Most people do not listen with the intent to understand, they listen with the intent to reply.
A professional trader has been in the markets for years and the reason that is, is that they know how to act in a scenario of a winning month, and they know how to act in a scenario of a losing month. Let me ask you, how do you act in each of the scenarios? So please ensure that when you are winning, capitalise on your winning trades, and when you are losing, manage them effectively to protect your capital.