“I am really good at taking losses.” That is the thought process Jack Schwager has noticed among all of the traders who appear in his Market Wizards series. Those unique individuals with a long track record of success have learned that making fabulous gains is more about taking your losses quickly and moving on. 

The mentality: “The most harmful indicator to focus on is the percentage of winning trades, Schwager said.” This approach gets a lot of traders into trouble. They lose sight of what is most important; capital preservation. Focusing all of your effort on good setups and cutting your position quickly when it goes against you is what allows the big winners to offset the small losses. 

Change your opinion on a dime. Schwager noted that this is a quality held by superstar trader Stanley Druckenmiller. This is a quality shared by Peter Brandt, who is featured in the latest Market Wizards. Schwager notes that Brandt is quite prominent on Twitter and frequently shares ideas.  Both found that Brandt is often subject to scrutiny by followers and users of the platform.  However, they fail to realize that Brandt is looking at that trade in the immediate circumstances. 

“Peter’s thing is he puts on a trade, he thinks it is good to go but if it goes a little bit against him, he is out. He is not predicting. He is saying, here is a spot I think the return risk on a trade here is good. I know if I make enough of these trades, I am going to make money, but if the trade starts going against me, I am out, and that is that. He is not predicting.” 

The Method: Find trade setups that you are comfortable with and continue to repeat them. Understand where your entry point is, set your stop loss and have a favorable return to risk on the exit.

“Their return to risk is sometimes just totally amazing,” Schwager said. “Could be 10 to one, could be the one that sometimes, and for some, it is three to one, four to one, but it is not people get hung up on trying to have a high percentage of winning trades.”

The Mastery: Do your own research. If you compare yourself against others and/or listen to the recommendations of others – even if they are better or more experienced than you – you can get into trouble. 

“Even though you are listening to somebody who has an edge and is good, not only does not mean it is going to work for you, it very well will not work for you, Schwager said.”

Watch the Full Interview – 54 Minutes

Check out Jack Schwager’s first appearance on Real Vision as he explains how emotional discipline is the best friend of a trader. Also, watch Peter Brandt’s interview with Raoul Pal earlier this year as they talk about gold, bitcoin, commodities and currencies.