Join 10,000+ savvy traders that get Michael's exclusive insights & podcast episodes.

as seen on:

Ep. 406: Larry Hite Views Outlined with Michael Covel

Michael Covel

Michael Covel

Subscribe to Trend Following Radio on iTunes

On today’s episode of Trend Following Radio Michael Covel features Larry Hite. Larry is unquestionably one of the founding fathers of systematic trend following. In 1981 he founded Mint Investments and by 1990 it was one of the largest trend following funds in the world. At the same time he formed partnership at Man group, which became wildly successful as well. In 2000 he decided to go another direction, focusing on proprietary trading and research, founding Hite Capital Management. Currently, Larry is partnered at ISAM with his long time colleague Stanley Fink.

Throughout today’s podcast Michael pulls quotes and excerpts straight from Larry’s chapter in “The Little Book of Trading.” Quotes range from probability advice to compound interest and one or all of them are certain to spark certain “Ah-ha” moments. Michael starts with Larry giving advice on the notion of being wrong. Larry stresses that being wrong is ok. He was wrong often and always built the possibility of being wrong into his models. He would ask himself, “How much can I afford to lose?” And work his risk in from there. Hite found that even having perfect knowledge of an end of year price wouldn’t guarantee riches. His research proved that you could only bet with 3:1 leverage on a stock, even if you had absolute knowledge of the stocks year end price, because you can’t predict the path a market might take getting there. Respecting leverage is key. Michael then brings up a dating story Larry shared about probabilities.

Michael then goes into Larry’s risk management. He stresses, “Make sure you are as prepared as possible. You can’t know everything but you can certainly be prepared.” Larry always starts from an assumed position of ignorance. You have to know what you don’t know. If you know what the worst possible outcome can be from the outset then you are starting with a great advantage. Mike finishes with one last excerpt from Larry taken from a paper titled “Life is a Bet.” In this excerpt Larry outlines why life is just a serious of bets. Some are large and some are small. Some seem trivial and some seem to have far greater impact on our lives. However, those trivial bets can quickly become paramount. Never discount a decision. It could be the one that makes or breaks you.

In this episode of Trend Following Radio:

  • Respecting leverage
  • Thinking in terms of odds
  • Being wrong is OK
  • Getting the odds on your side
  • Risk management
  • Life is a series of bets

“You don’t trade markets, you trade money.” – Michael Covel

“The first part of the winning process is evaluating who you are and what you’re comfortable doing.” – Larry Hite

Mentions & Resources:

Want a FREE Trend Following DVD? Get it here.

Get the foundation to making money in up, down and *surprise markets on the Trend Following mailing list.

Posted in Multimedia, Podcasts, Psychology, Risk Management, Systems Trading, Trading 101, Trend Following
Free Market Wizard Video!

Receive FREE expert trader video now!

Covel Books & Film
Massive Performance

Trend following performance numbers.

Trend Trading Systems

Pricing for trend following systems. 1000s of clients across 70+ countries.

Live Trend Following

Michael Covel's live events.

Trend Following Podcast

Michael Covel's podcast. 3M+ listens; 400+ episodes: iTunes & Android.


Free Market Wizard Video!

Receive FREE expert trader video now!

Online Payments


Regular guy makes Trend Following fortune. His free video lesson: Watch It Now.