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A Legendary Trader's Advice On Defensive Trading: Don't Make The Same Dollar Twice

Wayne Duggan

Factor Trading founder Peter Brandt joined PreMarket Prep last week to share some words of wisdom about how traders can minimize risk in unpredictable markets.

Brandt said he's looking forward to trading in his sixth decade when 2020 rolls around, and he shared some of his perspective and tricks of the trade with listeners.

Playing Defense

Brandt sees few trading opportunities in the commodity space given the extreme pricing in many markets. Brandt said he’s a defensive trader by nature and avoids trying to pick market bottoms and tops.

“I like playing the game between the 30-yard lines,” he said, suggesting the regions near market tops and bottoms are too volatile and unpredictable to trade consistently. “I’ll leave the red zone for other people to attack and defend.”

Don’t Make The Same Dollar Twice

Brandt also talked about defensive trading strategies and how he manages risk in an unpredictable market.

“I hate to have to make the same dollar all over again,” he said. “When I make a dollar, I want to be able to keep it or have a reasonable chance of keeping it so I don’t have to make it all over again in another month or another period.”

When the market isn't providing clear trading opportunities, there’s nothing wrong with focusing on retaining profits rather than adding to them, Brandt said. Only a relatively small percentage of Brandt's trades need to be big winners, he said.

“Year in and year out, 15 percent of my trades are going to produce between 85 and 100 percent of my net profits, and the rest are going to be throwaways,” he said. “Out of 100 trades, my challenge is to make sure that on 85 trades I’m as close to break-even as possible.”

Too many traders are focused on offense when they instead need to be patient and not try to force trades when the opportunities aren’t there, Brandt said.

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