Trading Like Larry Hite
Lawrence D. Hite or Larry Hite is a hedge fund manager who, along with Ed Seykota, is one of the forefathers of system trading. He actively shaped the upcoming landscape of system trading as early as the 1980s. In 1990, Jack Schwager dedicated a chapter of his bestselling book, Market Wizards,to Hite's trading and risk management philosophy.
Life of Larry Hite
During college Hite was a rock music promoter, as well as an occasional actor and screenwriter. However, after several incidents, caused him to question his career path, he decided to enter the world of investments as a stockbroker in 1968. Soon he made a fortune in trading commodities.
In an interview with author Jack D. Schwager for the book Market Wizards, Hite reminisces how he got started in commodities trading. He reveals that his college professor referred to commodities traders as crazy enough to trade on just 5% margins.
Hite co-founded Mint Investments in 1981. By 1990, Mint had become the largest commodity trading advisor in the world in terms of assets under management. In 1994 he retired from his role as hands-on fund manager at Mint.
Larry Hites 's Trading Strategy
Larry Hite's path to successful commodities trading relies on two things: SOLID RISK MANAGEMENT and TECHNOLOGICAL EDGE. Risk management is a means for reducing the risk inherent to trading. Technology, in the form of computerization, largely eliminates the human error component when analyzing data.
In risk management, Larry Hite focus on what he can afford to lose, rather than how much his trading can give him profits. This differentiates his trading viewpoint from the other aggressive traders.
In technology, as computers and programs became more commonplace, Hite upgraded his software to remain on the cutting edge of the business.
What can we learn from Larry Hite?
To become a successful trader, Larry Hite emphasizes on risk management and technology. First we must manage our risk before entering the market. Second, use technology to minimize bad human emotions such as greed and fear. For example, we can use technology by using automatic pending order such as to enter and exit the market.
Hope this article inspires