Editor’s note: Today, we’re sharing an important essay from RiskHedge Director of Trading Justin Spittler... one that will help you not just survive—but thrive—in today’s markets.
You’ll see how to think like a trader and get out of “hard mode” once and for all.
And quick reminder, today is the last day to join Justin’s premium trading room—RiskHedge Live—at the steep discount we’ve prepared for you.
Join a great community of traders and see how to access Justin’s up-to-the-minute trades here. But act before midnight; that’s when the door shuts on this deal.
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Trading isn’t about gut feelings or chasing the hottest headlines.
It’s about thinking clearly, managing risk, and knowing when to play offense or defense.
In short: It’s a mindset.
That mindset is the biggest difference between traders who succeed and those who crash out. Today, I’ll show you how to develop the right one.
Because unless you’re thinking like a trader, you’ll always be stuck in “hard mode.”
Below, I’ll show you how to fix that…
Step 1: Protect yourself at all times
“Protect yourselves at all times, gentlemen.”
If you watch boxing, you know this is the last thing the ref tells both fighters before the start of Round 1.
It’s a simple, but powerful, statement.
It means never let your guard down… not even for a second.
Fighters who ignored this advice have paid the price dearly.
Remember when Floyd Mayweather knocked out Victor Ortiz after Ortiz tried to hug Mayweather in the middle of a fight?
Source: The Times
Ortiz was trying to be a good sport after headbutting Mayweather just moments earlier. Silly mistake.
Mayweather made Ortiz pay the price… delivering a brutal hook to the chin.
Some called it a “sucker punch.” But if you know boxing, it was fair game. Ortiz let his guard down during the middle of a fight. He didn’t protect himself.
The same rules apply to trading.
Your #1 job is to protect yourself. Most traders obsess over potential profits when they should be obsessing over risk management.
One bad trade—one moment of carelessness—and your capital can take a hit that’s hard to recover from.
It’s not the losses you see coming that hurt you. It’s the ones you don’t.
Step 2: Don’t try to “bottom fish”
Paul Tudor Jones—one of the greatest traders of all time—famously had these three words pinned above his desk: “Losers average losers.”
Source: Mind the Product
This quote should be burned in your memory.
Buying laggards is a recipe for disaster. You’re much better off adding to winning positions.
See, trends in motion tend to stay in motion. In other words, stocks that are rising are more likely to keep rising… and vice versa.
Many traders try to “bottom fish” and buy when the market is still falling. This exposes them to quick losses that make it hard to stay in a trade.
Always remember: Cheap stocks are often cheap for a reason. There’s no reason why a stock down 20% can’t fall another 20% or more.
This is why bottom fishing is so risky. You need to nail the timing!
To sum it up: Ride winners. Cut losers.
Step 3: Remember the 80/20 rule
Let me tell you something most people don’t want to hear: Trading isn’t a shortcut to getting rich.
That doesn’t mean you can’t make great money in the markets. But most people don’t fall in love with trading and make it their full-time job.
They fall in love with the idea of trading and the kind of life it could give them. They want to ease financial pressures… retire sooner than they would have… or supplement a retirement income.
That’s possible, but most people fail for one primary reason: Failure to respect the “80/20 rule” (Pareto Principle).
The Pareto Principle is the inescapable fact that, in most areas of life, 80% of the results come from 20% of the input.
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It’s true in the mundane aspects of life—most people wear 20% of their wardrobe 80% of the time.
And it holds true in matters of wealth: 20% of people make 80% of the money.
And professional traders—the ones who achieve lasting success—know the 80/20 rule determines their results.
The average guy rarely hears about the 80/20 rule because it’s not marketable.
Peter Brandt, of Market Wizards fame, is one of my biggest trading influences. He’s on the short list of the greatest traders alive today. He talks about 80/20 every chance he gets.
A direct quote from Brandt: “If you want to trade, learn that 20% of your trades will produce 80% of your profits.”
Said differently, your biggest winners will come from a small slice of your overall number of trades.
What matters is how you handle both your winners and losers.
That’s why, if a trade doesn’t go as I expect, I’ll usually cut it quickly with a small profit, or at breakeven, or with a small loss.
What you do with your profitable and unprofitable trades is far more important than your “win percentage.”
There are over 5,000 stocks out there. Why waste time in a stagnant trade when you can be in a “20% trade” that moves the needle?
Here’s the bottom line...
If you want to become a successful trader, you need to start thinking like other successful traders.
That means:
- Protecting your capital at all costs.
- Cutting losers fast and riding winners.
- Ignoring the crowd and following price action.
- Accepting that the majority of your profits will come from a small number of trades.
Thinking like a trader isn’t about making constant predictions.
It’s about adapting, managing risk, staying patient, and—above all—recognizing when the market gives you a real opportunity to trade on “easy mode.”
Master this mindset, and you won’t just survive the markets. You’ll thrive in them.
Justin Spittler
Director of Trading, RiskHedge
PS: By now, you know my RiskHedge Live trading room—which I created for members to access my best trades the moment I spot them—is on sale. But the special discount is only available until midnight. So if you’d like to join us, please go here to review the details one last time.