Portfolio Review: Ride the Winners, Cut the Losers
The timeless rule that keeps traders alive — and compounding.
One of the simplest rules in trading is also the hardest to follow: ride your winners and cut your losers.
It sounds easy, but human nature fights against it. When we’re down, we want to hold on, hoping things turn around. When we’re up, we want to cash in quickly, afraid the market will take it back. That’s backwards. Great traders flip that script.
Paul Tudor Jones put it bluntly:
“Losers average losers.”
Think about that. If you add to a position that’s going against you, you’re compounding weakness. You’re standing in front of the market saying, “I know better.” That arrogance destroys accounts. The market doesn’t care what you think should happen. It only cares about price.
Larry Hite echoed the same lesson:
“Throughout my financial career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t bet, you can’t win. If you lose all your chips, you can’t bet.”
It’s not about being right — it’s about surviving long enough to compound. The only way you get to play tomorrow is by protecting your downside today.
That’s why cutting losers fast is non-negotiable. If something breaks down, if it invalidates your setup, you move on. No hesitation, no emotion. Losing trades are tuition. Pay it, and keep moving.
On the flip side, the real money comes from letting winners run. When a trend is working, you don’t strangle it by taking profits too early. You trail stops, you manage risk, but you stay in the game as long as the market keeps rewarding you.
Larry Hite again:
“Good traders don’t think in terms of being right or wrong. They think in terms of being able to make more on the winners than they lose on the losers.”
That’s the math of compounding. You don’t need to win all the time. You just need to win big enough when you’re right, and lose small when you’re wrong.
Look at any legendary trader’s P&L, and it’s never smooth. It’s lumpy. A handful of big winners pay for a long string of scratches and small losses. The discipline is in staying alive long enough for those big winners to show up — and not cutting them short when they do.
The formula is simple:
Cut losers quickly.
Ride winners patiently.
Size so you can survive the noise.
That’s it. It’s not sexy. It doesn’t make for dramatic headlines. But it’s how fortunes are built.
As Paul Tudor Jones once said:
“The most important rule of trading is to play great defense, not great offense.”
Defense is cutting losers. Offense is letting winners do the heavy lifting. Master both, and the game gets a whole lot simpler.
🔹 Futures: Macro Multi Strategy Portfolio (Leverage)
Audio Review (Bonus rant):