Welcome to Trading With Larry Benedict

If this is your first time reading Trading With Larry Benedict, thanks for joining us. You can catch up on all previous issues right here.

If you have any questions for Larry, or feedback, shoot us a note anytime at [email protected].

Daina’s note: On Monday, Larry revealed the best three ways new traders can begin to find their discipline: finding a mentor, becoming an expert at one thing, and maintaining consistency. 

Today, Larry dives into the first of those three. While Larry has what he considers to be an “it” factor, he’s had some help along the way, too. It’s what allowed him to become a billion-dollar trader, hedge fund manager, and go-to expert for news outlets like Barron’s and Bloomberg.

Below, Larry shows readers how his mentor not just helped him in his early days, but saved his career from ruin…

Daina Schnese: The last time we spoke, you said that finding a mentor is an important step towards finding the discipline necessary to be successful as a trader. Can you give more on why finding a trading mentor is so important?

Larry Benedict: Sure. It’s like anything in life. If you want to be really good at something, you have to start somewhere. You won’t have 30-plus years of experience from the jump.

And there’s no better place to start than by learning from someone who’s already paved the way. You want to learn and take advantage of someone that you think is better than you… That way, you don’t go at it alone. 

Daina: What’s an example of something a good mentor would provide a new trader?

Larry: A good mentor provides a methodology to follow and the discipline you don’t yet have. Like we touched on last time, most traders struggle because they have terrible risk management skills. They just don’t know how to take a calculated risk. You have to be able to deal with the finality of a loss on the downside, and know when to take profits on the upside. 

Taking a loss properly is one of the hardest things in trading, and something we’ve covered already. But, when you take that loss, you’ve now locked in that loss and have to make it back. If you don’t believe you can make it back, you’ll never get out of a losing trade.

Having a mentor to show you how to execute trades, things like when to get in and when to get out, will help you develop the ability to take a loss and move on. That’s a crucial piece of discipline that’s extremely difficult to just figure out on your own.

Daina: Have you had any mentors who helped shape the successful trader you’ve become?

Larry: I’ve had a few, yes. But one sticks out… because he saved my career. 

When I started out on the trading floor, it was common that most floor traders didn’t go to college. They just learned everything on the floor. So, while I went to college, they all had the advantage of four years on the floor over me. I was blind coming in. I had no idea what was going on.

As I continued to grow, I’d be drawn to the traders who were outliers… The one or two guys who were really good. They were able to consistently grow their positive P&L [profit and loss] and put on larger position sizes. 

One of those guys was Larry LaVecchio. I worked under him at the firm Spear, Leeds & Kellogg. He was the best mentor I ever had, and a lot of it was wisdom and age. I was just 27 or so at the time, and he was in his mid-30s. 

Daina: You say he saved your career. What was it that he taught you, specifically, that attributed to that?

Larry: He taught me discipline that I never had. I’d just watch him and be in awe of how incredible he was as a trader. I was like a wild stallion that was out of control. I had the “it” factor, aggressiveness, and the will to win… but I didn’t understand how to make it all work together. LaVecchio was really aggressive, but also incredibly disciplined.

That’s really why I say he saved my career. I’ve said this before, but I burned through all of my capital on several occasions as a young trader. I was just throwing all of my money into one trade, swinging for the fences. It’s not easy to bounce back, time after time, after you’ve lost it all. And I probably would have continued to do that until I was out of options, had LaVecchio not pulled me under his wing.

The critical thing he taught me was the importance of position sizing. Essentially, how to earn your risk. Where other traders would hold on to losers too long, freak out at their massive losses, and stagnate, I learned to cut my losses early. After booking some wins, I could size up to bigger and bigger levels comfortably. 

Daina: If I were a new trader and I wanted to know the first step to becoming disciplined, what would you tell me as my mentor?

Larry: You want to be able to grow. That’s the key to trading. I didn’t start out doing 50-70 trades per day like I do now. I started out with just one trade per day. My position sizes were extremely small, meaning I put a very small percentage of my overall capital into each trade.

Then, I started to get better. I started accumulating one small win after another, and started adding more trades each day and sizing up my positions. But I had to watch someone else do it to learn that aspect. I had no other experience to draw from.

But I also had to do some work on my own, and every new trader does. And one of the best things you can do is figure out what you’re good at, early on, and become an expert on it… Just like LaVecchio did. 

So I’d tell you to start out small and slow. Don’t overleverage your trades. Never put more money into a single trade than you’re willing to lose. And once you start seeing small gains, find whatever it is that you’re good at… which sector you seem to trade the best… and become an expert on that one sector.

Daina: Yes, you said the second key step towards discipline as a trader is to become an expert on one thing, rather than trying to be just good at many things. Let’s jump into that second step next time. Thanks for your time today, Larry. 

Larry: Sure, no problem. 

Daina’s note: Next time, Larry will continue to show traders how they can find discipline… this time, proving that doing too much could be your demise. He’ll also give his quick Monday “market outlook” that’ll give us a glimpse into his mind before a big trading week. Keep an eye on your inbox Monday morning for your next issue of Trading With Larry Benedict. 

About Larry Benedict…

Larry is a former hedge fund manager with over 30 years of investing experience. He’s also known as one of the world’s best traders… and for good reason.

From 1990 to 2010 – when he was actively running hedge funds – Larry never had a single losing year.

Larry’s market commentary is frequently featured in Bloomberg, Barron’s, and The Wall Street Journal, among other major news outlets.

That’s why we’re publishing this limited-edition interview series over the next couple months. When we saw what Larry could offer to everyday investors, we knew we had to share everything we could with you.

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