Larry’s note: Welcome to Trading with Larry Benedict, the brand new free daily eletter, designed and written to help you make sense of today’s markets. I’m glad you can join us.

My name is Larry Benedict. I’ve been trading the markets for over 30 years. I got my start in 1984, working in the Chicago Board Options Exchange. From there, I moved on to manage my own $800 million hedge fund, where I had 20 profitable years in a row. And, I’ve been featured in the book Market Wizards, alongside investors like Paul Tudor Jones.

But these days, rather than just trading for billionaires, I spend a large part of my time helping regular investors make money from the markets. My goal with these essays is to give you insight on the most interesting areas of the market for traders right now. Let’s get right into it…

Most of us have seen interviews with a hedge fund manager or analyst as an eager host peppers them with questions on a range of views.

They may ask whether the market is too expensive and headed for a fall, or maybe when a particular sector or stock will rally.

The hosts know that their viewers eagerly want to know (and trade) the hottest stock or sector that could pull in massive profits.

However, by focusing on the next big move, these viewers often miss out on a lot of market action… and potentially lots of profits.

While some markets run hot, others do very little at all… Often they’ll trade sideways in a range between price levels.

But don’t be fooled – a sideways market can provide lots of trades too.

In fact, rather than going for big swings like other traders do, my focus is on the sideways markets.

My goal is simply to generate lots of tiny profits. By doing this regularly, these smaller profits can add up to something much bigger…

It’s actually how I built myself up as a trader.

So instead of forming a view about a sector or broader market – and trading with it – I simply focused on finding the next trade.

In other words, my only “view” was about the potential success of my next trade.

If you want to make it as a trader, I can’t emphasize enough how important this distinction is.

For example, even if a share price is trending down, I look to trade any short-term bounce that goes against the overall trend.

By doing so, you can use your capital much more efficiently to generate healthy returns.

So, instead of going for one trade and hoping for a 100% return – which will have less chance of paying off – I focus on trying to generate multiple 10% returns.

While that might seem like “chump change” compared to a multi-digit return, there’s a much higher chance of achieving it.

Do that a handful of times in one market over a year, and each 10% return soon jumps up to something much more exciting…

Do that across multiple stocks or sectors and those returns grow even more. It’s this simple approach you need to consider when trading.

When starting out, so many traders keep looking for the next big thing. I know that’s what I did… and it cost me my trading account several times over.

However, once I figured out how to trade – by aiming for lots of little profits – I was able to swing things around.

Not only did my account grow, it also launched my career as a professional trader.

For those that like to hold views on what a stock or sector will do, what they are really talking about is capturing long-term trends.

And for traders with lots of time and capital, it might be the right way to go.

However, by scoping out lots of little trades every week (or every day), you’ll build up substantial profits over time.

More importantly, you’ll develop the habits that’ll truly enable you to make it as a trader.


Larry Benedict
Editor, Trading With Larry Benedict

Reader Mailbag

Is there a view you hold about a specific sector or stock? Has that proven to be successful over the long term?

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