EP 045: Global macro trading, the nature of probability, and when to place ‘big bets’ w/ Jack Litle

Aaron Fifield Podcast 0 Comments


My guest on the podcast this week is Jack Litle of MercenaryTrader.com.

Jack is a global macro trader who originally started out as an international commodity broker – today, he now has more than 17 years of market experience and is a very competitive trader. He’s also a keen poker player, and believes there are many crossovers between poker and trading (which of course, makes for some interesting conversation during this episode).

Also during this episode, we speak about how Jack thinks of trading in terms of probabilistic outcomes, instead of attempting to ‘predict’ the future – we spend quite some time on this subject, and I myself found his views on this particularly interesting.

Another highlight, would be mastering the art of the big bet – where Jack shares insight to the times when you should press hard on a trade to make profits that have real impact.

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“The purpose of being in markets is not to predict anything, it is simply to assess odds and probabilities.”

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“When you understand the nature of probability it actually changes the way you trade (and think about trades).”

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Lessons learnt in this interview:

  • Jack shares insight to his unique global macro perspective, what economic factors he takes into consideration, and how he analyses markets with a top-down/bottom-up approach.
  • An example of a recent macro ‘theme’ in energy stocks, and what gives Jack final conviction before entering a position.
  • How Jack thinks about trading as a game of expectation and probabilities. And why most traders have an obsessive hunt for certainty, which is impossible to find.
  • Ways to shift your mindset from predicting to probabilistic outcomes – when you don’t care about predicting the future, only about the odds of winning trades.
  • Why poker is an excellent training ground for trading, and the study of how professional players make money can be beneficial in many ways.
  • Mastering the art of making the big bet – the four considerations that fuel Jack’s instinct to press harder on a trade.
  • How you can be spending time more wisely, without wasting energy on things that don’t directly (or indirectly) impact your PnL. And what separates average traders from serious competitors.
  • Plus much more…

Links and resources mentioned:

  • The Investment Biker by Jim Rogers – The story about an ex hedge fund manager who takes a motorbike trip around the world to decide which countries he’ll invest in. This is also the book that originally piqued Jack’s interest in markets.
  • Stock Market Wizards by Jack Schwager – A series of interviews with some of the worlds greatest stock traders, and was a solid building block during the early stages of Jack’s trading research.
investment biker jim rogers
stock market wizards jack schwager
the black swan nassim taleb
trading risk kenneth grant

  • The Black Swan by Nassim Taleb – This is one of the books Jack recommended if you’d like to learn more about the philosophy of uncertainty, probability and statistics.
  • Trading Risk by Kenneth Grant – As Jack recalls, Ken was a risk manager for top hedge funds and writes about the persistence of profit distributions following the 90:10 pattern.
  • On Form and Technique (in Poker and Trading) – An article by Jack, where he expands on the topic of average traders verse serious competitors.
  • How Experienced Traders Die (Going Out Like Broomcorn’s Uncle) – Another brilliant article by Jack, elaborating on the subject of wasted time (and more).
  • MercenaryTrader.com – To learn more from Jack and his ‘community of ruthless profiteers’ you can visit his website here.
  • @MercenaryJack – Be sure to follow Jack on Twitter, especially if you enjoy occasional sarcastic humor.

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