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In this episode of the Market Mamas podcast, host Becky Gaskell welcomes Richard Weissman, a trading veteran who started his career on the exchange floor in 1987. Richard, a startup CTA with products like Return in Alpha and Tara, brings decades of wisdom, discussing his journey from the market crash of '87 to his current role overseeing risk for algorithmic models. The conversation dives deep into the philosophy of risk management, finding the "sweet spot" for aggressive yet calculated trading, and his "casino paradigm" for consistent success, which he details in his book, Trade Like a Casino.
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Key Takeaways:
- To balance risk and reward, Richard accepts 20-30% drawdowns for the potential of triple-digit returns (100%+) in a strong year.
- Success in trading, like in a casino, relies on two pillars: a positive expectancy model and strict risk management to prevent catastrophic loss.
- For highly correlated assets like major equity indices, manage them as a single, unified risk basket with one higher risk ceiling, rather than individual assets.
- Richard's scaling technique involves entering small, adding on pullbacks, taking partial profits at your goal, and trailing the stop on the remainder of the position.
- Richard's models are built on the twin concepts that markets trend and offer great risk/reward and that low-volatility consensus is unstable, leading to high-volatility breakouts.
- The most common paths to failure are breaking risk limits and system hopping during a cold streak; therefore, emotional persistence and a long-game mindset are key to success.
Episode Breakdown with Timestamps:
[00:00:00] Discussion on finding the "sweet spot" between risk management and earning enough. Introduction of guest Richard Weissman.
[00:03:54] Learning on the floor of an exchange trading NYSE Composite Index (knife futures) and the CRB Index.
[00:08:47] Using risk ceilings between positively correlated assets as a de facto hedge.
[00:18:21] The combined power of probability skew and table limits (risk management).
[00:25:19] Richard’s two major concepts: markets trend (e.g., Nasdaq, Gold, Silver) and low volatility consensus is unstable.
[00:35:44] Explaining the cyclical nature of volatility—from low vol consensus to high vol trending, and back.
[00:43:22] Advice to his former self: look for the casino paradigm, asymmetry in risk and reward, and opportunities to risk a little to make a lot.
[00:48:02] The power of positive self-talk to let go of negative inner dialogue and build confidence.
🔗 Follow Guest Richard Weissman:
👉 LinkedIn: https://www.linkedin.com/in/richard-weissman/
👉 Email: richard@weissmanconsulting.com
🔗 More from Market Mamas:
👉 Website: www.market-mamas.com
👉 LinkedIn: https://www.linkedin.com/in/becky-gaskell-market-mamas/
👉 Instagram: @mm_marketmamas
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👉 TikTok: Market Mamas on TikTok
👉 Email: contactus@market-mamas.com
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