Page 31 - Ray Dalio - Principles

While I worked in the brokerage business, I also traded my
own account. Though I had many more winning positions than
losing ones, I can only recall the losing ones now. I remember

one big one when I owned pork bellies. For several days the
market for them was limit down—meaning that the price had
fallen so low that trading had to be stopped. I later described
the impact of this experience to Jack Schwager, the author of
Hedge Fund Market Wizards:

In those days, we had the big commodity boards, which
clicked whenever prices changed. So each morning, on the

opening, I would see and hear the market click down 200
points, the daily limit, stay unchanged at that price, and
know that I had lost that much more, with the amount of
potential additional losses still undefined. It was a very
tactile experience . . . [and] it taught me the importance of
risk controls, because I never wanted to experience that
pain again. It enhanced my fear of being wrong and taught

me to make sure that no single bet, or even multiple bets,
could cause me to lose more than an acceptable amount.
In trading you have to be defensive and aggressive at the
same time. If you are not aggressive, you are not going to
make money, and if you are not defensive, you are not
going to keep money. I believe that anyone who has made

money in trading has had to experience horrendous pain at
some point. Trading is like working with electricity; you
can get an electric shock. With that pork belly trade and
other trades, I felt the electric shock and the fear that
comes with it.

After Dominick & Dominick closed its retail business, I

moved on to a bigger, more successful brokerage firm. During
my short stay there, it took over numerous other firms and
changed its name several times, eventually becoming
Shearson, though Sandy Weill stayed in charge through it all.

Shearson put me in charge of its futures hedging business,
which included both commodity futures and financial futures.
I was the person helping clients who had price risks in their

businesses manage them by using futures. I developed quite an
expertise in the grain and livestock markets, which often led
me down to West Texas and the agricultural areas of