S03E06: Tom Hougaard: “It’s the best loser that wins”
Nov 19, 2020
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Tom Hougaard, a high stakes trader with 11 years of experience, discusses topics including his journey from humble beginnings in Denmark to trading in London, the importance of transparency in the trading industry, risk management, driving at high speeds, analyzing weaknesses in trading, and trading book recommendations.
Mental preparation and understanding emotional biases are crucial for successful trading.
Avoiding strict risk-to-reward ratio calculations and embracing a flexible mindset can maximize profit potential.
Managing risk by taking small losses and knowing when to cut losses is essential in trading.
Deep dives
Trading Insights from Tom Hoegaard
Tom Hoegaard shares his background and what first got him interested in trading. He explains how his upbringing and motivation to make money from a young age drove him towards a career in trading. After struggling early on and blowing up his account, he eventually found success through working for brokerage firms and gaining insight from experienced traders. He emphasizes the importance of being focused, prepared mentally, and constantly learning and adapting to become a successful trader.
Managing Clusters and Emotional State
Hoegaard discusses the importance of managing emotional states during winning and losing clusters. He explains how he prepares mentally for each trading day by looking back at past trades in a PowerPoint presentation. By analyzing past trades and understanding his own tendencies and weaknesses, he is able to consciously address and overcome emotional biases that can lead to poor decision-making. He also touches on the concept of risk-reward ratio, highlighting the limitations and potential pitfalls of a strict risk-reward approach in trading.
Rejection of Risk-to-Reward Ratio
Hoegaard challenges the conventional idea of risk-to-reward ratio in trading. He argues that trying to predict a fixed reward is impossible and that limiting oneself on the reward side can be detrimental. Instead, he focuses on understanding his risk and being open to letting his winners run as far as possible. By avoiding strict risk-to-reward ratio calculations and embracing a flexible mindset, he aims to maximize profit potential and adapt to market conditions.
Importance of Mental Preparation in Trading
The podcast episode emphasizes the importance of mental preparation in trading. The speaker highlights that successful trading is not just about technical analysis, but also about having the right mindset. He believes that many traders fail because they lack the understanding of how their mind works and how emotions can interfere with their decision-making. The speaker stresses the need to be mentally prepared and to overcome emotional biases such as the fear of missing out or the temptation to buy something that has already risen in value. He encourages traders to spend time understanding themselves and their emotions, as well as developing a solid trading method.
The Role of Small Losses and Risk Management
Another key point discussed in the podcast is the importance of managing risk and taking small losses. The speaker shares his personal approach, stating that he regularly blows up accounts but has a smaller amount of capital in his trading account. He believes that small losses are an inevitable part of trading and that traders should focus on keeping their losses small while allowing their profits to run. He emphasizes the need to know when to cut losses and not to be overly optimistic or hopeful when in a losing position. The speaker also shares his belief in taking calculated risks and being willing to risk a significant portion of trading capital on a trade, as long as it aligns with a strong trading idea and proper risk management.
Tom Hougaard is a high stakes trader. He’s been trading for his own account for 11 years after a career with various brokers in the city of London. He came from humble beginnings in Denmark and has pulled himself up by his own bootstraps. He’s a straight shooter. His views are quite different to a number of other traders I’ve interviewed. I found this a very captivating interview. You can also catch this episode on my Youtube Channel on the following link: https://www.youtube.com/watch?v=rlRhzghvnY8 Interview Video · Facebook · IG
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