Table of Contents
In this interview, the Words of Wisdom podcast sits down in Miami with 40+ year market veteran Larry Benedict—featured in Hedge Fund Market Wizards and former manager of a top-100 global hedge fund. Benedict’s track record includes two decades without a losing year, and here he breaks down the mindset and money management behind those results, from floor-trading grit to modern macro execution.
You’ll learn the core of Benedict’s approach: hard daily drawdown limits (think ~1.5% then flatten), no averaging losers, sizing up only when you’re green, and why specializing beats chasing every ticker. He explains how to stack “easy money” singles instead of hunting home runs, keep emotions in check, and build a repeatable process that scales from a small account to institutional size—practical takeaways any trader can plug into their strategy today.
Larry Benedict Playbook & Strategy: How He Actually Trades
Benedict’s edge starts with discipline and repeatability. He focuses on stacking small, high-probability wins, cutting losers fast, and keeping risk steady so no single idea can sink the day. The goal is consistent P&L, not lottery tickets.
- Trade only setups you can define in advance; skip anything you can’t explain in one sentence.
- Aim for many small gains; avoid “all-in” mindsets and oversized bets.
- Never average down on losers—reduce risk, don’t recycle it.
- Specialize: limit your active universe to instruments you truly understand (e.g., a few stocks, an index future, or one FX pair plus a hedge).
Risk Management: Hard Stops, Harder Limits
Risk is controlled before entry and enforced during the session. Benedict treats daily and weekly limits as non-negotiable—hit the level, flatten, and shut it down.
- Per-trade risk: 0.25%–0.50% of account equity for day trades; 0.15%–0.35% for swing attempts.
- Daily loss cap: 1.5% of equity. If reached: close all positions immediately; no re-entry that day.
- Weekly loss cap: 3× the daily cap. If hit: stand down until next week.
- No widen-the-stop behavior. Move stops only to reduce risk (breakeven or better).
- Position sizing anchored to volatility: size = (risk $) ÷ (stop distance in $).
Trade Selection: Find the “Easy Money” Windows
Benedict filters for conditions where the tape is clean and participation is strong. He avoids murky markets with choppy ranges and poor liquidity.
- Favor sessions with catalysts (earnings, macro prints, sector news) and high relative volume (RVOL ≥ 2 intraday).
- Skip names with unreliable liquidity or spreads > 0.5% of price or > 10% of the 1-min ATR.
- Trade with the dominant intraday bias (above VWAP = long bias; below VWAP = short bias) unless a clear reversal pattern triggers.
- If your first three scans show nothing A-grade, don’t force trades—protect your daily cap.
Entries: Let Price Confirm Your Idea
Entries are about alignment—bias, structure, and flow must point the same way. He buys strength on controlled pullbacks, sells weakness on controlled bounces.
- Longs: price above VWAP and 20-EMA (1–5m), fresh higher-low forms, and RVOL on the setup bar ≥ 1.5 of its 5-bar average.
- Shorts: price below VWAP/20-EMA, fresh lower-high forms, and RVOL confirmation as above.
- Avoid first entry if the initial pullback retraces > 38.2% of the opening impulse; wait for a second, tighter pullback.
- Enter on the break of the setup bar high (long) or low (short) with a stop just beyond the structure that invalidates the idea.
Stops & Exits: Codify the Get-Out
Protective exits happen automatically; profit exits are rule-based to avoid giving back gains when momentum cools. The emphasis is on trimming into strength and letting the rest ride with structure.
- Initial stop: below/above the most recent swing that defines the setup (or just beyond VWAP if tighter).
- First target: opening range high/low or prior pivot; take 30%–50% off.
- Second target: measured move = length of opening impulse projected from pullback.
- Time stop: if price fails to progress in 10–15 minutes after entry and RVOL decays, cut it.
- Full exit triggers (any one):
- Two consecutive 5-minute closes against your bias with higher RVOL on the adverse bars.
- Loss of VWAP with no reclaim in 10 minutes after a news halt or fast flush.
- Spread widens beyond your threshold, or liquidity dries up.
Scaling: Add Only When You’ve Earned It
Adds are performance-gated. Benedict increases size only when the trade proves itself and your P&L is green—never while fighting a loser.
- Add on a constructive higher-low (long) or lower-high (short) that keeps the stop no worse than breakeven on the composite.
- Each add must improve the average entry and keep the total risk within the original per-trade dollar risk.
- Maximum of two adds per position; no pyramiding past your daily heat limits.
Session Planning: Routine Over Randomness
Preparation reduces decision fatigue and keeps emotions in check. Benedict maps scenarios, trigger levels, and invalidation points before the bell.
- Pre-market (20–30 min): define A/B setups, key levels, and the news calendar; write the exact conditions that would trigger a trade.
- First 15–30 minutes: observe tape and RVOL; trade only if an A-setup fires.
- Midday: reduce frequency; take only premium signals with RVOL ≥ 1.5.
- Power hour: re-engage if trend structure is intact and spreads/liquidity are favorable.
Tools & Metrics: Keep It Simple and Consistent
He avoids indicator clutter and focuses on price, volume, and a few well-tested tools. Consistency in tooling makes outcomes comparable.
- Chart: 1- and 5-minute for execution, 30-/60-minute for context; VWAP + 20-EMA; no more than one oscillator (e.g., RSI) if you must.
- Volume: RVOL (current volume ÷ 30-session average for that bar/time) to validate interest.
- Volatility: ATR for stop distance and position sizing; avoid names with ATR too small to cover costs.
- Tape cues: time-and-sales for impulsive prints around key levels; Level 2 only to confirm liquidity, not to predict.
Playbook by Market Type: Trend, Range, and News
Different regimes call for different risks and expectations. Benedict adapts his triggers and exit pacing to what the market is actually giving.
- Trend day: enter with the bias, trail behind higher-lows/lower-highs, widen the target to measured moves; allow one add-on structure.
- Range day: fade extremes only when RVOL is low and wicks reject the edges; targets are the mid and opposite edge; take profits faster.
- News/catalyst: trade only in the direction of the first clean leg after the headline; stop = beyond VWAP or the consolidation low/high; flatten quickly if VWAP is lost and not reclaimed in 10 minutes.
Psychology & Behavior: Protect the Operator
The method works only if the operator stays disciplined. Benedict’s rules prioritize your ability to show up tomorrow with a clear head.
- Stop trading immediately after hitting the daily loss cap; review, don’t revenge.
- If you break a rule, scale it down to the minimum for the next five sessions.
- Use a checklist before each order: bias, structure, RVOL, stop distance, risk $, target plan.
- Keep a “Do Not Trade” list (times, symbols, patterns) that historically hurt your stats.
Record-Keeping: Turn Trades into Data
He treats each session as an experiment. Metrics and annotated charts reveal what to do more of—and what to cut.
- Journal every trade with a screenshot, setup tag, entry/exit rationale, R multiple, and whether rules were followed.
- Weekly review: top 10 winners and top 10 losers—identify common setups, average hold time, RVOL at entry, and slippage.
- Cut the bottom decile setups each month and reallocate that risk to the top performers.
- Maintain a rolling equity curve; reduce risk 25% whenever you dip below the 20-day EMA of your curve, restore when back above.
Stack Singles: Daily Profit Targets, Hard Stops, Zero Averaging Down
Larry Benedict keeps it simple: protect the downside, book the base hits, and live to trade the next session. He treats a daily profit target as a ceiling, not an invitation to press, and a daily loss cap as a hard stop that ends the day—no debates, no “one more try.” That structure frees his attention to execute instead of rationalize, because the playbook decides before emotions ever show up.
For entries, Benedict wants clean alignment—trend, VWAP bias, and participation—then he sizes by volatility so one trade never hijacks the day. If a position goes red, he cuts it; he never averages down because “adding to pain” compounds uncertainty, not edge. When price works, he trims into strength and trails behind structure, letting the market pay him for patience while he defends the gains with non-negotiable rules. The result is a drumbeat of small wins that stack, and a disciplined exit routine that keeps a single mistake from becoming the headline.
Size by Volatility: Position Risk Equals Dollars Divided by Stop Distance
Larry Benedict sizes trades by what the market can actually move, not by gut feel. He starts with a fixed dollar risk per trade, then divides by the stop distance derived from current volatility to get share size—simple math that keeps every idea on the same leash. Using ATR, recent range, or structure-based stops, the position automatically shrinks when the tape is wild and grows modestly when it’s calmer. That way, one trade never dominates the day just because volatility spiked.
This approach also clarifies entries and exits before clicking buy. If the stop needs to sit too far away for your risk dollars to make sense, Benedict skips the trade or waits for a tighter setup. When the position is on, he trims into strength and only scales if the structure allows a tighter composite stop without increasing total risk. The outcome is consistent heat across trades and a P&L shaped by discipline, not random leverage.
Trade the Tape, Not Predictions: VWAP Bias and RVOL Confirmation
Larry Benedict doesn’t forecast; he follows the tape. If price is above VWAP with higher lows forming and RVOL is expanding, his bias is long—no crystal ball required. He wants the setup bar to show participation (e.g., RVOL ≥ 1.5 of its 5-bar average) and a clean structure like a controlled pullback that holds the 20-EMA.
When the tape flips, he flips—quickly. A fade back through VWAP with rising RVOL is a warning; two consecutive closes against the trade are often his cue to trim or exit. He avoids trades where spreads widen and RVOL disappears, because weak participation makes edges unreliable. In short: let VWAP set the bias, let RVOL confirm the crowd, and let Larry Benedict’s discipline keep you out of the prediction game.
Diversify Smartly: Underlying, Strategy, and Timeframe—Not Just Tickers
Larry Benedict spreads the edge across how he trades, not just what he trades. That means mixing instruments with different drivers (index futures vs. a catalyst-driven stock) and pairing defined-risk plays with straightforward directional trades. He also diversifies by strategy type—trend-following on RVOL days, mean-reversion at range extremes, and catalyst follow-through after clean opening legs. The point is to avoid having five positions that are secretly the same trade in disguise.
Timeframe is another layer Benedict uses to smooth the P&L. Intraday executions ride the VWAP bias while higher-timeframe context filters the noise and prevents overtrading chop. If volatility contracts, he scales down size and shifts toward setups that harvest smaller, faster moves; when volatility expands, he tightens risk and lets measured moves work. Diversification this way isn’t scattershot—it’s a controlled mix that keeps correlation and heat in check while the process stays consistent.
Process Over Ego: Pre-Market Plan, Session Rules, Automatic Shutdowns
Larry Benedict wins by obeying the process when it’s hardest to do so. Before the bell, he writes a quick plan—A-setups, key levels, RVOL expectations, and the exact invalidation that kills each idea—so he’s not negotiating with himself later. During the session, he follows a short checklist before every order: VWAP bias, structure, stop distance, dollar risk, and a target path. If any box fails, the trade’s a pass, not a “maybe.”
The ego-killer is his shutdown protocol. Hit the daily loss cap and he flattens instantly; hit the daily goal and he stops pressing for “one more.” After the close, Benedict scores each trade on rule-adherence first and P&L second, cutting repeat offenders from the playbook and scaling what worked. That loop—plan, execute, audit—keeps emotions out and consistency in, turning discipline into a measurable edge.
Larry Benedict’s core lesson is ruthless risk control: define your dollar loss per trade, place a real stop, and honor a daily hard cap (he cites ~1–1.5%) that ends the session the moment it’s hit. He never averages down—ever. Positions are sized by volatility and structure, so the same losing streak that would wreck an undisciplined trader becomes survivable noise. When conditions change or liquidity/spreads go against him, he pares risk or flattens without debate. The job isn’t to predict; it’s to respond—trade the tape, not a story.
Process sits above the ego. Benedict plans before the bell, trades only clearly defined A-setups (clean VWAP/structure alignment with participation), and uses simple, testable tools over indicator clutter. He trims into strength, lets measured moves pay him when the market cooperates, and enforces time stops when momentum dies. If a rule is broken, size steps down; if the daily cap is hit, the day is over. He diversifies by instrument, strategy type, and timeframe—not just tickers—to keep heat and correlation in check. Most of all, he treats P&L as numbers, not emotions: stack base hits, protect mental capital, and show up tomorrow with the same playbook. That’s how consistency beats brilliance over a career.
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
Education: Computer Engineering and Ph.D. in machine learning.
Igor regularly publishes trading-related videos on the Fxigor Youtube channel.
To contact Igor write on:
igor@forex.in.rs
