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Gary Stevenson—ex–Citibank rates trader and author of The Trading Game—sits down on the Words of Wisdom podcast to talk shop. Known for his blunt macro takes and long-horizon positioning, Gary explains how coming from a non-elite background helped him spot when consensus was dead wrong after 2008. He’s traded eye-watering size, held conviction through volatility, and still frames markets through real-world economics rather than screen-watching noise.
In this piece, you’ll learn his trader strategy in plain English: why fewer, bigger, higher-conviction macro bets beat constant tinkering; how to avoid “hurricane insurance” trades that win often but blow up catastrophically; and simple risk rules like “be right at the end—and be alive at the end.” You’ll also see how he used gold as an inflation and currency hedge, how he sizes and adds when a thesis is intact, and how to spot red flags in the online “get rich trading” circus—so beginners can focus on durable edges, not dopamine.
Gary Stevenson Playbook & Strategy: How He Actually Trades
Core Philosophy: Fewer, Bigger, Truer
Gary trades macro with conviction. He isn’t trying to win every skirmish; he wants to be right at the end of the campaign and still be alive. His edge comes from spotting where the crowd is wrong and concentrating risk only when the thesis is rock-solid.
- Trade mid-to-long-term macro themes; ignore intraday noise unless it improves your entry.
- Put on far fewer trades than most; only act when you’re “very, very, very confident.”
- Your job: identify precisely how and where consensus is wrong before you size up.
Building The Thesis: Real Economy First
He builds trades from first-principles economics, not screen superstition. When repeated “recoveries” failed to arrive post-2008, he questioned the models and asked what real people were doing with money. That mindset led him to asymmetric macro views that most missed.
- Start with a concrete macro question (e.g., “Where is policy/consumption actually heading?”) and test it against lived behavior, not just forecasts.
- Write the one-sentence statement of crowd error (what they believe vs. what will really happen).
- Only proceed if you can explain the edge in plain English to a non-trader.
Position Sizing: Concentrate When It’s There
When he goes, he goes hard—and if the market moves against him while the thesis is intact, he’s prepared to add. This is not a casual martingale; it’s concentration in a macro view with a defined end-state and capital rules.
- Initial risk: size so a 1–2 standard-deviation adverse move doesn’t violate your max drawdown.
- Add only on thesis-confirming adversity (macro unchanged, price dislocated); never add just because “it’s cheaper.”
- Cap total exposure ex-ante (e.g., 3 planned adds at pre-set levels, fixed notional per add).
Risk Management: Be Right At The End—and Still Be There
His biggest lesson came from an 8-figure drawdown: you can be fundamentally right and still get taken out if you can’t hold. Survival, funding, and rules that let you reach the destination matter more than “being right now.”
- Define your runway (capital, margin, mandate) before entry; do not exceed what lets you hold to your horizon.
- If structure forces you to puke before the end-state (risk limits, funding), the trade is smaller or not a trade.
- Use time-to-resolution instruments (e.g., rates along a known policy path) where carry to maturity aligns with your thesis.
Entry & Timing: Use The Market’s Overreaction
He prefers instruments and setups where temporary mispricings are likely, yet resolution is anchored by macro outcomes. Entries are built around pullbacks and dislocations that don’t change the end story.
- Plan entries at levels where you can add if price overshoots without breaking the thesis.
- Ignore most signals that “prove” nothing (after-down-day backtests, etc.); avoid fallacy logic.
- Let positioning extremes and consensus narratives guide timing, not dictate the idea.
Exit & Profit-Taking: Target The End-State
His ideal trade resolves when the macro variable lands where he forecasted—policy rate, inflation path, or growth impulse. He’s not scalping ticks; he’s harvesting the move from mispricing to outcome.
- Define “end-state” before entry (e.g., terminal rate X% by date Y); exit when realized or when probability materially changes.
- If you’re forced to flatten early, do it by rule (volatility breach, liquidity stress, mandate change), not by feeling.
- Scale out into convergence; avoid overstaying after the thesis is fulfilled.
Instruments & Structures: Trade What Lets You Hold
He gravitated to short-term interest rates because you can, in principle, hold to the policy outcome. Choose products where structure and liquidity support your horizon and add a plan.
- Favor instruments with clear carry-to-outcome mechanics (STIRs, swaps, futures) for macro theses.
- Keep the book simple: a few core lines expressing the same view, not a zoo of uncorrelated micro-bets.
- Avoid products with unlimited downside or unclear end-states for core risk.
What He Deliberately Avoids: The “Win Often, Blow Up Big” Trades
He warns about trades that pay 99% of the time but carry hidden tail risk—the kind that flatters your hit rate until it wipes you out. He also rejects strategy “proofs” built on biased backtests and selective memory.
- Do not chase strategies that “always work” for small gains; quantify the tail explicitly.
- Treat any edge that needs data-mined filters to look good as a suspect; prefer causal logic.
- If you can’t describe the blow-up scenario, you haven’t finished your homework.
Mindset & Craft: Kill The Gambler, Train The Analyst
Early on, he burned out the “slot-machine” habits and absorbed mentorship from ruthless pragmatists. The craft is understanding more than the next person and expressing it with discipline.
- Track process metrics (thesis quality, add levels, risk usage) more than the win rate.
- Do post-mortems that separate thesis error from execution/funding error.
- Keep the book small enough that you can explain every position in one minute.
Practical Template You Can Use This Week
Here’s how to apply his approach without copying trades: pick one macro idea, plan the whole campaign, and execute mechanically. The key is to survive long enough for your edge to play out.
- Choose 1 macro theme with a dated end-state (e.g., “Policy will finish ≤ X% by Q₄”).
- Pre-commit: initial size, three add levels, max book risk, and the invalidation conditions.
- Execute only at plan levels; no ad-hoc adds. If invalidated, flatten and stand down 48 hours before re-analysis.
- Review weekly: has anything changed that affects the end-state probability? If yes, adjust; if no, hold.
Size Like a Pro: Risk First, Conviction Second
Gary Stevenson hammers a simple truth: conviction doesn’t matter if your sizing is reckless. He starts with max portfolio heat, not the shiny upside, and sizes each idea so a normal adverse swing can’t knock him out. Before pressing any thesis, he writes down invalidation and the absolute dollar risk he’s willing to lose. Only then does he ask whether the trade deserves more than a “token” allocation.
His rule of thumb is volatility-aligned sizing: higher vol, smaller notional; lower vol, larger notional—always capped by a pre-set drawdown limit. Adds are pre-planned and only happen when the thesis remains intact despite price noise, never as a panic average-down. If conditions change or funding risk rises, he cuts size first and ego second. That’s how Gary trades big ideas while staying alive long enough for them to pay.
Let Volatility Lead Your Allocation, Not Your Emotions
Gary Stevenson treats volatility like a speed limit for capital, not a thrill ride. When realized or implied vol spikes, he automatically dials down notional and widens breathing room so a normal swing doesn’t become an account event. In quiet regimes, he sizes up cautiously but still respects a maximum portfolio heat number that doesn’t change just because a setup “feels” safer.
He also separates signal quality from market temperature: a great thesis in a hot tape still earns small size, staged entries, and pre-planned adds only at defined levels. Gary avoids emotional toggling by using a simple checklist—current vol versus historical bands, expected path to his end-state, funding runway—and lets that decide allocation. The result is a process where volatility dictates position size, and conviction dictates whether the trade exists at all.
Diversify by Underlying, Strategy, and Time—Not Just Tickers
Gary Stevenson doesn’t call it diversification unless the payoff drivers are actually different. Owning five tech tickers is one bet; owning rates, gold, and an FX cross with distinct macro levers is three. He stacks exposures across underlyings that respond to separate forces—policy path, inflation pulse, and growth surprises—so one narrative can’t sink the whole book. Within each sleeve, Gary mixes defined-risk structures with directional exposure to keep tail risk from clustering.
He also diversifies by strategy and time. A core macro swing sits alongside a shorter tactical expression or a carry/relative-value position that pays while you wait. Exit clocks are staggered—some trades resolve with the next policy meeting, others with a quarterly data trend—so he’s not forced into all-or-nothing decisions on one date. That’s how Gary keeps conviction high without letting a single theme, tactic, or timeline control his P&L.
Trade the Mechanics, Not the Story: Rules Over Predictions
Gary Stevenson strips trading down to repeatable mechanics and lets the market prove him right, not the narrative. He defines the setup, the trigger, the invalidation, and the add/exit ladder before a single lot is placed. If price prints the trigger, he acts; if it hits invalidation, he’s out—no debate, no “maybe it comes back.” Forecasts are allowed for planning, but the order ticket only listens to rules.
He treats stories as context and mechanics as law. When a thesis is strong but the tape says “not yet,” Gary waits for the mechanical signal instead of negotiating with the price. If the story changes but the mechanics haven’t confirmed a reversal, he scales down risk rather than flip impulsively. That’s how Gary turns opinions into disciplined campaigns—and keeps prediction from hijacking execution.
Choose Defined Risk, Manage Undefined Risk, and Survive Drawdowns
Gary Stevenson separates what he can cap from what can capsize him. He prefers structures with natural brakes—spreads, limited-loss options, or linear exposure sized so a standard shock can’t torch the book. When he must hold undefined risk, he treats it like a hazardous material: smaller size, hard stops, and explicit “kill switches” tied to volatility, liquidity, and funding. The goal isn’t to avoid pain; it’s to make sure pain is measured and survivable.
He also plans for the ugly middle—when a good thesis bleeds before it pays. Gary cuts leverage, widens time to outcome, and keeps dry powder for pre-planned adds only if the thesis remains intact. If the environment turns truly hostile, he flips from offense to capital preservation until the tape cools. That discipline keeps Gary in the game long enough for edge—rather than variance—to decide his P&L.
Gary Stevenson’s core lesson is brutally simple: survive first, then be right at the end. He builds a few high-conviction macro bets from real-economy logic, sizes them by volatility and funding runway, and pre-writes the whole campaign—trigger, adds, invalidation, and exit—before the first ticket. That’s how he avoids the trap of “winning often, blowing up once.” Fewer trades, bigger when deserved, always within drawdown limits that let him hold through normal turbulence.
He treats stories as context and mechanics as law. Price action must confirm the setup; if it doesn’t, he waits. If it invalidates, he’s out—no haggling with the market. He diversifies by what truly matters—underlying, strategy type, and time horizon—so a single narrative or data print can’t sink the book. Defined-risk structures and linear exposure are chosen explicitly for their ability to be carried to the thesis end-state; undefined risk is handled like a hazardous material with a smaller size and hard kill-switches.
The practical takeaway for traders: write the thesis in plain English, identify exactly where consensus is wrong, and decide your end-state before you click. Cap portfolio heat, scale position size to volatility, and only add on adversity when the thesis remains intact. Keep the book simple enough to explain in a minute, run post-mortems that separate thesis from execution errors, and prioritize capital preservation over dopamine. Do that—and you give yourself the only edge that compounds: living long enough for a good idea to prove itself.
