troy

Risk Manager

[Camus @newstart_2024]

Dana White straight fire on Lex Fridman:

“If losing wrecks you, get the hell out of the game.”

Winning feels god-tier; business, fighting, gambling, life. But the beatdowns? They break most people. He’s seen guys sink into depression after one bad night. Social media hate? Same thing. If you can’t handle it, this arena isn’t built for you.

The real ones? They wake up, lace the shoes, and charge back into war the next day.

I’ve eaten some brutal Ls — projects that flopped, threads that got ratio’d hard. The easy move is to disappear. But every time I swallowed it and kept swinging, the next win felt earned. Dana’s been through it at UFC scale and still talks like this. Respect.

In a soft era of safe spaces and highlight reels, this is the uncomfortable truth most creators, founders, and fighters need to hear.

What’s the hardest loss you’ve taken that ended up leveling you up?

[Mike Bellafiore @MikeBellafiore]

"Do you have something to go to when you are not feeling great?" 👇👊

One Good Trade.
One Good Trade.
One Good Trade.

[Lance Breitstein 🇺🇸🌎 @TheOneLanceB]

YOU NEED TO GIVE YOURSELF TIME TO GET LUCKY!

Caught up last night with one of my favorite traders in the world.

He had a REALLY tough first half of the year. Family health issues, kids, financial pressure, pulled in a million directions with his focus fragmented.

As a result, his trading suffered.

External pressure is the death of all traders and he was feeling a ton of it.

Nobody is more resilient than this trader though. He doubled down on his process and worked his ass off.

Sure enough, while everyone is on holiday, he gets “lucky” and a trade falls in his lap.

That trade released all the external pressure on him.

Turned his whole year around from there, especially as his market started to heat up.

What looks like “luck” is often preparation meeting opportunity.

Here is the thing though… if your external pressures are too high, you never make it long enough to hit the lucky patch.

Always always always do everything in your power to reduce outside pressure.

Stash some acorns, live way below your means, and never get complacent in this game.

Proud of my good mate for his turnaround 🙏❤️

[Mike Bellafiore @MikeBellafiore]

Some of our traders are experiencing this as well. Here are some of the lessons our traders have learned:

1) Commodities do not trade like equities. You need a separate PlayBook for each.
2) When learning a new product, earn your risk. Do not trade it with the same risk as your equities PlayBook, where you have a history of success. Prove you can trade the new product consistently. Add risk from success.
3) This is NOT the market to be playing for a Grand Slam.
4) Do not cede your structural edge in the market. As active traders, we can enter and exit much easier than bigger players. Book profits. You can always reenter.
5) Do not miss what you do best, hawking a new product.
6) Past success doesn't have to continue. Adjustments must be made in different market regimes and new products.
7) Being in your seat for the easy market is how you really get rich. Do not let hard markets, bad traders keep you from being around for those easy markets.
8) Shark and Druckenmiller push risk when they are trading well and making money. When in a drawdown there should be only one focus- consistency.

This is a tough market. There have been some trading products, if playing for a grand slam. But if you are learning a new product and learning from this drawdown, this will make you a better trader:
a) your PlayBook will be more comprehensive.
b) your ability to trade more products will pay dividends in the future.
c) you will reinforce the importance of building your trading business within market principles and guardrails.
d) your trading skills will improve.

Often the hardest markets, bad trading products, most painful trading times, propels elite traders to even new heights. We have seen that on our desk. They key is learning, making adjustments, and staying in the game.

Here is to many years of future trading success.

[Brett Steenbarger @steenbab]

This is the single most powerful strategy for dealing with stress and the possibility of burnout: https://t.co/DDQdTlv4YF

[Lance Breitstein 🇺🇸🌎 @TheOneLanceB]

Over the last year I’ve worked directly for 2 trading firms, mentored multiple 8-figure P&L traders, many 7-figure traders, and everything in between.

Different styles, different personalities, but 4 universal truths.

1) Everyone starts this job clueless.

At Trillium we'd joke that every top trader starts with:
-The same company-issued monitors
-The same company-issued keyboards
-Zero idea what they were doing

At @traders4acause, I remember Gregg asking the audience how many people had blown a trading account before. It was half the people in the room, including most of the panelists.

Rough starts are COMMON in future great traders.
It's not a red flag or an omen.

I had one of the slowest starts in @TRLM history. Meanwhile, many fast out of the gate didn't make it.

Speed at the start has nothing to do with distance traveled at the end.

2) There is no “best” strategy.
Some traders I work with:
-Scalp
-trade breakouts
-Trade reversions
-Trend follow
All strats can work.

What separates winners? Once something makes sense to them hey go deep enough to see the other side.

Exploration is totally normal in the beginning! That's how you find your strengths and interests and what works for you!

It is just like dieting. Many diets work. Most fail, because very few stick through the plateaus.

Results tend to only come after the long valley of despair.

3) Trading doesn’t require genius. In fact, high IQ can becomes a liability in discretionary trading.

What matters more:
-Resilience
-Coachability
-Urgency
The best traders I know are never satisfied.
Even after great months, they want more progress.

The combo of traits I’d pick in any trainee?

Daily improvement + Real urgency to succeed.

That combo beats raw intelligence every time.

4) Treat trading like pro sports. Trading from home is dangerous.

No start time, no end time, no boss watching over you.
Structure disappears and you're left to your weakest safeguard: willpower.

Especially early on, you need to force structure:
-Fixed start and end times
-Phone away
-Distractions eliminated
-Scheduled reviews
-Routine performance checks

Just like athletes structure drills, practice, film review.

You should know EXACTLY:
-When you journal
-When you review trades
-When you analyze mistakes

Structure matters because it carries you through the bad days. And there are many bad days. The days you want to log out early are the days you learn the most.

Your trading day is game day. Sleep matters, gym matters, health matters.

THE TAKEAWAY??

Every successful trader started out right where you are. It wasn’t a matter of special unique intellect, but specific daily actions and a sense of urgent to get better each day while giving this job the professionalism it deserves.

[Mike Bellafiore @MikeBellafiore]

"The struggle is the point. That is where you are becoming different." 👇👊

Jerry Seinfeld on Giannis Antetokounmpo's "Failure" Speech https://t.co/D6KOOhRe9U via @YouTube

[Mike Bellafiore @MikeBellafiore]

PREORDERED! 👇👊

[Lance Breitstein 🇺🇸🌎 @TheOneLanceB]

WHAT ACTUALLY IS RISK MANAGEMENT??

As a fun challenge following the “why does technical analysis work?” video, I’ve wanted to dissect concepts that are foundational to trading and build a framework for each of them them from scratch.

Risk management is critical to every decision we make, not just for trading, but also life more broadly. One can’t ever remove risk and that isn’t the point of risk management. The point of risk management is to come to a decision that accurately reflects the level of risk you are willing to take in exchange for the hope of a desired beneficial outcome.

Risk management, to me, really comes down to 4 skills:

1. Being aware of the risks of a certain action. Everything we do has risk. Eating the sushi from the sketchy Midwestern restaurant buffet. Asking the girl out. Investing in Bitcoin. Taking a road trip.

The first step is being aware of what the potential negative outcomes of a decision might be. In the case of sketchy sushi - poorly tasting sushi, food poisoning, hospitalization, maybe even at the extreme end some near zero chance of death. In the case of asking a girl out, perhaps the feelings associated with rejection or embarrassment. Perhaps if less emotionally stable, there is a chance of depression. And of course with investments or trades, you not just risk loss of capital, you also risk the opportunity cost of the money elsewhere. You also risk stress, time invested in the decision, and the psychological effect of any outcome.

This alone is already a critical point to make. Often, we miss some of the secondary effects. Traders, wrongfully, only tend to think of risk in terms of dollar loss. Not opportunity cost or the emotional and psychological cost of a loss and what the downstream impacts it will have on future decisions.

It is my view, that good risk management involves properly identifying all the risks, accurately assigning a likelihood to the best of one’s ability, and accurately assigning the full costs.

Good risk managers identify that the risk of death from sushi is likely near 0%. They don’t overweight an extreme unlikely outcome. Good risk managers also accurately identify that the risk of food poisoning though isn’t zero. If one wrongly handicaps the percentages, it often leads to poor decision-making.

Think of the person that is scared to death to fly and therefore misses out on the conveniences and pleasures around flying while ignoring or unaware of the safety data, yet at the same time believes their risk of death on a motorcycle is something that only happens to other people.

This was relevant back during the SVB crisis in 2023. Many traders were scared of halt risk in $WAC. When I forced traders to put numbers and data to that ephemeral risk, the risk profile changed drastically.

Now keep in mind, there is never one right answer or decision. Eating sketchy sushi might be an acceptable risk for one person. For another, it might be drastically wrong. Decision making and risk-taking, at its essence, is always a personal decision that others can only guide but not answer for you. But doing it well means you are coming to your own subjective decision based on YOUR values, but while operating on ACCURATE data.

So first step - accurately and objectively weighting the negative outcomes of a decision.

2. Being able to viscerally relate to the risks and how those risks relate to YOUR subjective values.

Ok, so you’re aware of the risks. The next step that I think is essential for good risk management, is being able to truly emotionally relate to those risks.

It is my belief (and scientific literature) that most people underweight the impact of uncertain negative outcomes, but overweight the impact of certain negative outcomes.

Most people know smoking is bad. But are smokers truly able to relate to what that X% chance of cancer or emphysema would feel like?

When you think of the sushi food poisoning risk… is a 5% chance negligible to you or are you actually able to grasp how that might impact your plans and repercussions on your life?

Especially for most health outcomes, many of these are not only uncertain, but the impacts are far off into the future.

How many obese people that die of a heart attack, given the chance to go back, would never miss a day in the gym or eat a donut again? Yet in the moment, it didn't matter since risk of death seemed intangible to them.

Good risk management is understanding that risk isn’t theoretical. Every negative outcome is a roll of the dice, whether it occurs or not, it existed.

IMO, the hardest part about life and risk management, is that one often needs to experience the pain to learn from it. Most hard lessons aren’t learned from books or from the lessons of others; they’re learned from fucking up and living another day but being so scared shitless it changes you.

3. Risk management is about only taking actions that ensure acceptable outcomes based on one’s risk tolerance.

So you know the sushi has risk, you know that you absolutely can’t afford to get food poisoning ahead of your wedding, yet you eat that sushi anyways. No good, right?

Good risk management is building systems and processes to ensure that the actions you take actually reflect the intentions you’ve set in the prior steps.

How many drunk drivers know of the risks? They know it’s bad and against their values. Yet they take unthinkable risks that could end their career or life as they know it anyways. Especially around Christmas and New Year’s many are taking those risks thinking it could never happen to them.

That is bad risk management. When you know the risks, you know how bad it would be, but you don’t have processes to protect you from making the wrong decision anyways.

Truly exceptional risk management is a series of systems and processes that does NOT ALLOW YOU to make the decisions that are not true to your intentions and values. For example, taking an uber to the bar proactively while sober, rather than driving. Or giving your keys to a sober friend before you start drinking.

4. The final step to good risk management is accepting the outcome and not letting the outcome wrongly bias future decisions.

What happens to most poor risk takers is that they let the outcome bias their decision in the future, even when the underlying probabilities don’t change.

For example, the person drives drunk, gets away with it, so then, rather than believing themselves to be lucky and committing to never do it again, they instead wrongfully infer that the risk of harm or ruin must not be there or must be far lower than perceived.

This is particularly dangerous in the cases of tail risk.

Most times you drive drunk, you get away with it.
Most times you do sketchy drugs, you get away with it.
Most times you write naked calls, you get away with it.

That does NOT change the underlying risks, yet many people consciously or mostly subconsciously, interpret that outcome as so.

TAKEAWAYS:

So what is one to do? I think good risk management in trading and life comes down to these actionable steps.

-List out the risks before major decisions. Actually put math to them. Obvi these are estimates.

-Think of the second order effects of those risks.

-Write down your values and benefits to see if it justifies the risk.

-Make the intentional decision but also build safeguards from your weaker safe. Sober you will call an uber. Drunk you might not. You with no exposure won’t average down, but you down a ton of money might.

-Reflect on the outcome and assess probabilistically to make sure you made the right decision. Do any probabilities ACTUALLY deserve to be updated?

-Do this exercise as often as possible. What’s the risk of a parking ticket versus paying the meter? What’s the risk of showing up late? What’s the risk of eating the 3-day-old leftovers?

-Learn the first time from your mistakes and those of others. Ask yourself what the lesson from the article or book or podcast is. It isn’t easy to do so, going back to the point of how important it is to visceral feel something. But I think the smartest minds find a way to do so (Munger, Buffett, Marks, etc.)

[Brett Steenbarger @steenbab]

Perhaps the most distinguishing aspect of trading success: the continuous drive for self-improvement: https://t.co/EfKtRihGBS

[Ray Dalio @RayDalio]

If you don't let up on yourself and instead become comfortable always operating with some level of pain, you will evolve at a faster pace. That's just the way it is.

Every time you confront something painful, you are at a potentially important juncture in your life--you have the opportunity to choose healthy and painful truth or unhealthy but comfortable delusion. The irony is that if you choose the healthy route, the pain will soon turn into pleasure. The pain is the signal! Like switching from not exercising to exercising, developing the habit of embracing the pain and learning from it will "get you to the other side." #principleoftheday

[Brett Steenbarger @steenbab]

What is the most destructive emotion in trading, the one most likely to sabotage us? When we take our ambitions too far, they become our greatest obstacles: https://t.co/M4GK8s8Gix

[Lance Breitstein 🇺🇸🌎 @TheOneLanceB]

NYC is the best food city in the world. Incredible restaurants at any cuisine and every price level.

Bookmark this list and thank me later… or return the favor and show me yours 😉

NEW YORK CITY FAVS (*** = 👑🐐)

-JAPANESE & SUSHI
***Kaoru***
***Sozai***
***Tomo21 Sushi (formerly Tomoe Sushi)***
Sakagura
Nakazawa
Sushi Yasuda
Sushi of Gari
Shuko
Sho
Masa
Ramen Ya (9th Ave)
Ippudo (10th & 3rd)
Momofuku Noodle Bar
Coco Rohn
Raku
Sake bar decibel
Lucky Cat

-CHINESE & ASIAN FUSION
***The Best Szechuan***
***Cafe China***
***Uluh***
***Xi'an Famous Foods***
***The Handpulled Noodle***
The bao
Tuome
Five Spices
Red Farm (Christopher St)
Lan Zhou (Noodle soup and dumplings, Chinatown)
Golden Steamer (Little Italy)
Mei Li Wah
Golden Unicorn (Chinatown)
Shanghai Asian Manor (Chinatown)

-THAI & VIETNAMESE
***Mithr***
***Thai Villa***
Soothr
Sappeisan
Xe May (Banh Mi, 9th & 1st)
Banh Mi Saigon (Little Italy)

-ITALIAN & PIZZA
***L’Industrie***
***Osteria Nonnino***
***Don Angie’s***
***Ace’s Pizza***
Ceres
Emily (pizza + burger)
Mama’s Too (pizza + heroes)
scarr’s
Piccolo Angelo
Bar pitti
Carbine
L’artusi
Parm
Da Andrea (by Path)

-BREAKFAST
***Golden Diner (Pancakes + Breakfast Sandwich)***
***Popup Bagels***
***Russ and Daughters Cafe ***
***Sunday Morning***
Clinton st Baking Co
Bubby’s
Sadelle's
Barney Greengrass
Salt Hank’s

-LATIN & SPANISH
Tulcingo del Valle (47th/6th & 10th)
Los Tacos No. 1 (16th & 9th)
Margon (Cuban)
Socarrat (Chelsea/Paella Bar)
Pio pio

-DELI
***Katz’s***
***Faicco’s***
***M&P biancamaria*** (Hoboken)
***Vito’s*** (Hoboken)

-AMERICAN, BBQ, BURGERS
***Four Horsemen***
***Gotham City Smash Burger***
***Four Charles***
The Burger Joint (9th St Path)
Mighty Quinn’s
Hill Country BBQ (Flatiron)
Paul's Da Burger Joint (Soul Burger)
Amy Ruth
Family Meal at Blue Hill (formerly Blue Hill, Christopher St)
Bob White (Chicken)

-Mediterranean, Middle Eastern & Indian
***Eyval***
Taim (Falafel, 10th & 7th)
Thelwala
Uncle Gussy's (Gyro, 51st & Park)
Adel’s

-FRENCH
Raoul’s
Chez Francis

-INDIAN
Kati Roll
Semma
Junoon
Bungalow

@TheShortBear @timothysykes

[Brett Steenbarger @steenbab]

Great point, @Andrew_Menaker; self management is a huge part of risk/position management--

[Brett Steenbarger @steenbab]

What we can learn from the recent price action in US stocks: updating what is happening *within* the market enables us to update our market views and profit from changes in direction and volatility: https://t.co/Im1UpEEEAX

[Lance Breitstein 🇺🇸🌎 @TheOneLanceB]

My advice:

Read this, log out of social media for the weekend, reflect on it 🪷🕊️

[Seven Points Capital @SevenPointsCap]

Gratitude 🙏📊

#trade #trading #trader #stockmarket #stocks #finance #tradingquotes #gratitude #winning

[Mike Katz @Michael_Katz11]

Its now how you play when you are winning, Its how you play when you are losing that shows the mark of a champion.

-Phil Ivey

[Killer T @KillerT_]

Something I wrote in a review over the weekend after a bad week..

Overcoming any inertia in trading requires some difficult self reflection. Looking outward to what others are doing is rarely the answer for my own progress. When Im stuck in a cycle of underperformance I need to do an internal inventory asap. I think this is why daily journaling/deep reviewing exections is so beneficial. Also having people I can stay accountable to. I can adapt my systems quickly when I have a magnifying glass on my own behaviors. I think waiting until Im desperate enough for change (max pain) is a fatal approach to trading. Facing errors as early as possible and tripling down on the things that work is how I stay sharp and out of deep waters.

[Riley Gahan @rgahan94]

Love this. Will be at the forefront of mind coming into the New Year.... Less is more, be addicted to discipline... build that self trust.