Cutting Losses

Rieder was an original Peloton investor and watched it explode during Covid, but he held well past the peak. His post-mortem: the real lesson wasn't about timing — it was about management quality. Companies must pivot as technology and industry evolve; some CEOs know the numbers, understand the business, and can adapt; others chase trends and fall behind. He now prioritizes time with CEOs and leadership teams before any major investment.

“The one thing that I learned is the person running your company is a huge deal — companies evolve, the industry evolves, technology evolves, and you've got to pivot.”

Mark's maximum stop on any individual stock is 8%, so his maximum drawdown from principal is also 8%. When trading leveraged positions, he watches them intraday and pares back quickly if they move against him — the stop on a 4x leveraged position is microscopic compared to a normal-sized one. Once he has profits, he nails them down aggressively. The tradeoff: he very seldom holds for a monster move because he gets clipped out on pullbacks. Going for shorter, more controllable moves allows rapid compounding — he rolls gains from one trade into the next rather than riding through corrections.

Mark shows four breakouts that failed and the specific violations that gave early warning. Burlington (BURL): perfect tight base, good breakout, strong volume — but over the first 6 days, only 2 up days and 4 lower lows with rising volume. Activision (ATVI): clean breakout, then day 2 sold off on higher volume — low volume out, high volume in, a classic distribution pattern. ZLAB: tried to buy the pullback, immediately got 4-5 lower lows with closes on the low and zero follow-through. SNAP: Mark originally bought much earlier, sold too early into earnings, tried again, got stopped out on the outside day — then the big earnings collapse that surprised everyone. The thread connecting all four: the violations were visible in the first week of price action well before the major drops.

Lance candidly shares a trade where he broke his own rules: Tesla in late 2022. Despite Tesla holding up well versus a crumbling tech sector, the Elon Musk Twitter saga began cracking the stock. Rather than waiting for the turn, Lance got caught fighting an accelerating downtrend — the stock started sinking, he kept pressing, broke multiple rules, and took losses. The lesson: nobody is perfect, and the discipline of waiting for the counter-trend confirmation is what separates ego-driven trading from process-driven trading. The market doesn't care how smart you think you are.

Addressing the question of where to place a stop after a capitulation low: Lance acknowledges that sometimes the low is briefly breached before the real move begins. His approach is to accept missing some trades rather than getting whipsawed by setting stops too tight. When the capitulation is genuine — high volume, fast price movement — the turn usually holds, and the times it does not are the cost of doing business. The alternative of trying to catch every tick of the turn leads to overtrading and larger losses.

Ryan's sell discipline works at two levels. For a stock just bought that fails: if it breaks back into the base after a breakout, it goes — no questions, no rationalizing. For a stock with a significant gain: he watches for a change in the angle of ascent — when a stock that has been climbing steadily begins moving more vertically on high volume, the climax run is near. He trims into strength incrementally rather than waiting for an obvious top, because obvious tops only become obvious after the stock has already given back a large portion of the gain. The discipline is proactive: take partial profits when the angle steepens, not when it breaks.

Gon shows PXM: a bull flag setup that looked valid technically but had only 200k volume — well below his normal threshold. He took reduced size because of the weak volume, but when the stock ran 80% he froze instead of peeling off into strength. The mistake was two-layered: taking a substandard setup at all, and then not executing the exit correctly when it worked anyway. He includes this in his playbook alongside successes because training his eyes to recognize substandard setups is as important as recognizing great ones.

Tito's most painful trading day came in December 2021. Heading into it, he had recovered from the ARKK bust and was having a profitable year. The day started with a $4-5,000 loss — already significant on a graduate student stipend of $40,000 a year — but it snowballed into revenge trading and tilt, ending with a $33,000 loss. That evening, he had dinner reservations with his girlfriend (now wife) to celebrate her new job, and he sat through the meal emotionally absent, unable to be present. He didn't tell her the amount until 2025. The embarrassment and self-disgust took months to process.

Despite the brutal 2022 bear market, Tito ran a $15,000 account to just under $90,000 by September. His best month ever — August 2022 — netted about $25,000. Then came the September FOMC day: the market initially popped on Powell's rate decision, and Tito bought Tesla calls at the 314 resistance breakout. The market reversed violently, and Tesla didn't see 314 again for over a year. Instead of accepting he was wrong, he averaged down at multiple support levels — committing the cardinal sin of adding to a loser. He lost $15,000 on back-to-back days, giving back all of August and more. The next day brought more random trades and more averaging down — a lag effect of not accepting the loss the day before.

In February 2025, Tito took his biggest loss of the year so far on MicroStrategy. The setup looked promising — a higher-timeframe wedge building, horizontal resistance at 340, and an inside day on Tuesday after a strong Monday. His plan was to buy the inside day breakout. His mistake: he entered cents before the trigger actually broke, anticipating the move rather than waiting for confirmation. MSTR never made a new high and became the high of the day. In hindsight, the SMAs were stacked to the downside — he was fighting overhead resistance — and Bitcoin was similarly weak. Anticipating the entry turned what should have been a missed trade into a real loss.

After the MSTR loss, the stock set up perfectly for the downside — a textbook breakdown that dropped 70 points in three days. Tito recognized the opportunity but was unable to size it properly because the recent memory of the loss was still fresh. He caught the move but with far less size than he should have. This reveals a hidden cost of big losses: they don't just hurt the P&L, they constrain your ability to take the next good trade. The emotional hangover is what makes cutting losses quickly so essential — every dollar you let a loser run is a dollar you won't have the conviction to redeploy on the next setup.

Kristjan buys everything at once and aggressively — no scaling in, no waiting. He uses opening range highs (the high of the first one, five, or sixty minutes) as entry triggers, with the corresponding low as his initial stop. A one-minute opening range gets you in earlier with a tighter stop but has a higher failure rate; the sixty-minute range has fewer false starts but a wider stop. He accepts being stopped out intraday frequently — sometimes within two minutes of entry — because getting out fast and getting in precisely is how you keep losses small. Hesitation, he argues, only makes entries more expensive: you wait, the stop doubles in size, and now the risk-reward is broken before the trade has even started.

Weinstein walks through a series of stocks on his sell list, demonstrating the recurring patterns that signal stage 3 and stage 4 breakdowns: double tops followed by 50-day MA breaks, systematic series of lower peaks indicating distribution, and head-and-shoulders patterns that breach both the 150-day and 200-day moving averages. Each break of the 50-day MA is a warning — individually survivable but collectively diagnostic. Using live chart examples from multiple names, he shows how the accumulation of these warning signals makes the eventual stage 4 breakdown predictable rather than surprising, even in what he considers a neutral market.

“Each one is a small warning — a warning heart attack.”

Williams recounts his worst loss — a cattle trade where he averaged down repeatedly, violating every rule he now teaches. The loss crystallized what he calls the whole secret to making money in markets: trend is a function of time, so the more time you give a trade, the more trend potential you capture. The corollary is to bet small and catch large moves — never put everything on any single trade. A small position catching a big trend makes far more money than a big position trying to scalp a small move, because by the time a large position gets stopped out on a minor adverse move, the loss exceeds what was ever available on the upside. This principle — small size, long runway — is what Bill taught him and what he considers the ultimate money management secret, beyond any formula.

“Bet small and catch large moves.”

After a brief detour through PTJ's memorable commencement speech — pulling out a bow and arrow and smashing an apple with the line "aim high and shoot straight" — Patrick moves to the core question: the difference between an investor and a trader. PTJ begins in 1976 on the commodity floor during raging inflation. Bunker Hunt was squeezing silver, accumulating 200 million ounces at roughly $3 an ounce. Between 1976 and 1980, silver went through the roof, reaching $50. At the peak, Hunt was worth approximately $11 billion — five to six times the next richest person on earth. Then COMEX, overwhelmed by commercial hedgers being destroyed on margin calls, declared liquidation-only. Silver collapsed from $50 to under $10 in about eight weeks. The richest man on earth was virtually bankrupt in six to seven weeks. Right then, PTJ decided he would never own anything for the long term or trust anything for the rest of his life. This was reinforced by his grandfather's aphorism: "Son, you're only worth what you can write a check for tomorrow." Two beliefs — liquidity as survival, the fleeting nature of any position — were seared into him at 24.

“Son, you're only worth what you can write a check for tomorrow.”

Tangen asks what's the key to selling losers quickly. Druckenmiller's rule: if the reason he bought a stock is no longer valid, he doesn't care what he paid for it. If the market has discovered a problem before him and the stock is down, he has no emotion whatsoever — he just gets out. Soros reinforced this discipline. He admits he always measures from the top, finding reasons to hit himself in the head, but never lets that prevent him from taking the loss and moving on.

“If the reason I bought a stock is no longer the case, I don't care what I paid for it. If I bought it at 60 and it's 50 because the market's discovered the problem before me, I have no emotion whatsoever.”

Rochon outlines four reasons to sell. First: you realize you made a mistake — just sell, accept it as part of the process, and move on. Second: the nature of the business has changed — a new competitor, new technology, or deteriorating economics made it less great than when you bought it. Third: you disagree with a management decision, usually a large acquisition — investing is a partnership, and if you no longer trust management, there is no reason to remain a partner. Fourth and most common: you found a better opportunity — sell A to buy B, not because A has a problem, but because B offers superior prospects. Rochon emphasizes removing emotion from the selling process while accepting that as human beings, emotion is never entirely absent.

“Investing is — you become partner with the top management. If you don't trust them anymore, there's no reason to be a partner.”

Luk calls his SMTC trade the best trade of 2024 because of what it taught him. He entered near the high of the day, the stock reversed within a minute or two, and he failed to set the hard stop he had planned — telling himself it would find support at premarket highs or rising five-minute EMAs. It kept falling, and he finally took a 10–12% loss around $41; the next day it gapped down another 20%. The lesson: set the stop before entry, and if the setup reverses, there will always be another entry.

“I failed to set my hard stop... I took my loss at 41... around 10 or 12% loss... This is the best trade I've made because the lessons I've learned are the most valuable.”

During a summer drawdown, while interning at a bank and trading at what he calls his D-game, Luk took a random trade with no tightness and price near prior highs. He did not set or follow a hard stop, held through the reversal, and took another gap-down loss of about 10%. Looking back, he cannot explain the entry; the trade is a case study in how poor entries make everything else — stop placement, position sizing, conviction — unclear. Host and guest agree that a proper entry is the trader's best defense because it makes the failure point obvious.

“There's no tightness right here and it's near the previous highs. I don't know what I'm doing... I'm just forgetting to set the hard stops or not following the stops.”

Ang entered 2022 with no framework for market cycles and did not recognise that the market had topped as rates rose and distribution set in. He kept buying long in a downtrend — an energy stock, a biotech, any name that looked like it was resisting the decline — and each one was eventually dragged down with the index. The result was a year of stop-out after stop-out: financial capital eroded slowly and mental capital drained faster, leaving him burnt out by the end of 2022. It is the clearest illustration in the interview of why market environment has to be the first filter, not an afterthought.

“I was basically experiencing a death by a thousand cuts. Every period I put on, I set my stop loss, I stopped out.”

At a dinner in Hong Kong, Christian Flanders gave Ang the rule that reshaped his risk management: if you are getting stopped out on every trade, the market is telling you that you are wrong or the environment is wrong — so cut your size in half, not double it. Ang had done the opposite with Tesla, doubling size after a stop-out; the correct response is to shrink until the equity curve barely moves, even if it feels humiliating to be stopped out on one share. He also sets a monthly loss floor: once the account is down around 5% for the month, he takes a few days off and returns with minuscule size until he regains traction, which keeps drawdowns small enough to recover quickly.

“If you're getting stopped out on all your trades, it's the market telling you something. You want to slash your size in half.”