These are the concise notes from Christian Flanders’ podcast with Richard Moglen on his 433% success in the US Investing Championship (part 2).
For the full notes, click here.
1. Limiting Monthly Drawdowns
Capping monthly losses at levels like 5%, 4%, or lower is crucial to prevent significant damage in unfavourable markets. By reducing position size and keeping losses in check, traders can transform a large annual drawdown into a more manageable outcome. Once risk is controlled, they can focus on increasing trade size strategically.
2. Mental Toughness
Traders with strong conviction can be at risk of blowing up if they fail to manage risk effectively. On the other hand, risk-averse traders struggle to grow their accounts and must develop confidence over time. Mental toughness, like weightlifting, is built gradually—starting with small risks and increasing exposure as resilience improves.
3. Dealing with Stress in Trading
Trading is a high-pressure environment that can lead to anxiety and sleepless nights, unlike poker, where players can walk away at any time. Managing stress may require working with a trading coach or psychologist to overcome mental barriers. The uncertainty of trading can be exhausting, and exiting a trade often brings emotional relief, regardless of the outcome.
4. Risk-Adjusted Sizing & Position Management
Position sizing should be determined by the risk of each specific trade rather than a fixed percentage of the account. A trade with a tight stop can support a larger position, but it must show immediate strength. Whether to hold or exit a trade depends on portfolio risk, individual trade risk, and overall market conditions.
5. Progressive Exposure & Cutting Trades
Abandoning an all-or-nothing approach to trade exits is key to effective risk management. If uncertain, reducing the position gradually—such as cutting half or a quarter—can help manage risk while staying in the trade. Traders must avoid revenge trading, as attempting to recover losses quickly by increasing size can lead to even deeper drawdowns.
6. Risk-Averse Mental Composure
Risk-averse traders generally manage their emotional and mental capital better, avoiding reckless decisions. Progressive exposure allows them to rebuild confidence after losses, with small wins reinforcing a positive trading mindset.
7. Holding Winners—The Hardest Part of Trading
Holding onto large winners is one of the most emotionally difficult aspects of trading, as it involves managing substantial unrealized gains. While entries can follow structured strategies, selling is more of an art that depends on market conditions. Traders must adapt their approach based on whether they are in a trending bull market or a more volatile, choppy environment.
8. Creating Model Books for Learning
Reviewing past trades—both successful and unsuccessful—is essential for improving trading skills. Building a model book of proven setups helps refine strategies and boosts confidence in position sizing. Only a small percentage of traders achieve exceptional returns, making continuous learning a key factor in long-term success.
9. The Challenge of Long-Term Performance
Achieving extraordinary yearly returns, such as 433%, requires relentless effort and discipline. Even in bull markets, only 20-25% of traders remain consistently profitable. Rather than chasing big wins, traders should focus on steady, controlled returns to avoid the boom-and-bust cycle.
10. Trading for a Living—A Difficult Goal
Trading full-time is different from trading as a sole source of income. Having other income streams reduces pressure and improves decision-making. A large trading account and years of consistent profitability are necessary before relying on trading for a living. Careful financial planning, including cost-of-living considerations, is essential for long-term success.
11. Full Commitment is the Key to Success
Succeeding in trading requires complete dedication and continuous self-improvement. Engaging with experienced traders, studying different strategies, and learning from past mistakes are all crucial. However, trading isn’t for everyone, and for some, alternative investment strategies like index funds may be a better choice.
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