Larry Tentarelli has been trading for over 20 years. He grew up around the brokerage business – his family was involved, and by age seven he was visiting the firm after school. He started trading his own money in 1998, spent the first decade struggling to find a consistent style, and eventually discovered trend following as the approach that fit both his personality and his results.
Today he runs a simple, no-nonsense approach. He does not use fundamental analysis, chart patterns, Elliott Wave, or traditional technical indicators in the conventional sense. He follows price. In this episode, he shares the four-leg framework he has built, his specific approach to entries and exits, and why he believes most traders lose because they focus on the wrong thing.
Watch the full episode below, then read on for the complete breakdown.
The Turning Point – Livermore and the Real Money in Markets
After ten years of mixing different styles, timeframes, and indicators without consistent results, Larry read Jesse Livermore’s Reminiscences of a Stock Operator. One idea changed his direction entirely: the real money in markets is made by sitting in winning trades, not by trading frequently.
That single insight shifted his entire approach. He stopped trying to be a short-term trader. He moved toward longer holding periods – it is not unusual for him to be in a winning position for one to two years. He stopped watching TV, stopped following other traders’ positions, and developed a set of written rules he could follow without needing to make decisions in the moment.
“Until you find a system that works for you and your personality, you’re going to be making emotional decisions. Anytime you have to make an emotional decision, it’s usually a bad decision.”
The Four-Leg Framework for Trading Success
Larry’s framework breaks down what a trade needs to succeed into four components, which he calls the four legs of a table. A table with only one or two legs falls over. All four need to be in place.
The four legs are: the overall market environment (is the broader market trending up?), the sector trend (is the sector showing strength?), the individual stock (does it have strong momentum and a clear trend?), and trade management (position sizing, stop placement, and exit rules).
“Entries are 25% – one of the four legs on the table. If you don’t have the other three ingredients, it’s not going to work out. Most traders focus on entries and charts and setups, and they don’t pay any attention to the things that can make you lose money.”
He is also direct about finding stocks: it is not hard. Running a scan for new highs or checking the advance-decline line on any given day produces a large list. The challenge is not finding candidates. It is having a framework that lets you manage them properly.
Entries – Reactive, Not Predictive
Larry’s approach to entries is what he calls reactive technical analysis: he waits until price does something before taking a position. He does not predict breakouts. He does not buy in anticipation of a move. He waits for confirmation.
His primary tools are moving averages. If a stock bounces off a key moving average and shows strength, that is a valid entry signal. He will not buy into a downtrend. He wants the bounce to happen first.
This reactive approach reduces the number of trades significantly compared to an anticipatory style. It also reduces the emotional strain of watching a setup develop that never fires. The tradeoff is that entries are slightly later than they could be. The benefit is that the trade has already shown direction before capital is committed.
Position Sizing – Conservative by Design
Larry’s position sizing is deliberately conservative. For individual stock positions, he risks 25 to 50 basis points per position – far below the 1-2% that most position sizing guidelines suggest. He holds 20 stocks plus four or five ETFs.
This small position size has a specific psychological benefit. Because no single trade represents a large portion of the portfolio, he is not emotionally attached to its outcome. When the position sizing is too large, traders become reactive to every tick in that position. They exit winners early to lock in profits before they disappear. They hold losers too long because the loss feels too significant to realise.
“Because my position size is small, I’m not attached to the outcome of any one stock. Once I set my stop, I let it go.”
His stop on the core 200-day moving average program is 280 ATR units – a wide stop designed to stay in through normal volatility. The logic: if the position is sized correctly, a wide stop is tolerable. If it is sized too large, a wide stop creates anxiety. Fix the sizing first.
Exits and Managing Winners – The Real Challenge
Listener questions submitted before this episode skewed heavily toward exits. Larry’s experience confirms the pattern: most traders know how to find entries. Almost nobody has a predetermined plan for exits.
He credits Tom Basso (who he connected with through Michael Covel’s network) for helping him resolve the exit question. The core insight: manage winners the same way you manage the rest of the portfolio. For Larry, that means moving averages. If moving averages get him in, moving averages get him out. He does not use different indicators or different rules for exits versus entries.
The other common exit mistake he describes is selling winners too early. He started keeping records of what happened to stocks he sold. Going back six months or a year later, he consistently saw how much he had cost himself by exiting before the trend completed. That exercise, more than any theory, convinced him to extend his holding periods and trust the trend.
Why There Is No Perfect Entry Signal
Larry makes a point that runs counter to how most traders spend their time. He is direct: there is no perfect entry signal, and searching for one is a waste of time.
The reason he can say this with confidence is that his framework is designed to make the entry signal largely irrelevant. If position sizing is correct, the market environment is right, the sector is strong, and the stock is trending, then the quality of the specific entry matters far less than people think. A slightly late or slightly early entry within a strong trend is still profitable.
What kills trades is not a bad entry signal. It is wrong position sizing, wrong market environment, stops that are too tight, or no plan for managing the trade once it is on. Those are the four legs. Fix those, and the entry is almost incidental.
Keeping It Simple Over Time
Larry’s ten-step trading program predetermines every aspect of a trade before entry: entry signal, stop level, position size, risk in the trade, risk in the account, and exit rules. Nothing is left to in-the-moment judgment.
This systematic approach is the output of two decades of evolution – from confused beginner reading everything, through ten years of losing, to a period of simplification that produced consistent results. The lesson is not that simplicity is easy to achieve. It takes time to figure out what you actually need and what is noise.
His style is now extremely simple by design. He follows a trend-following and momentum-based approach. He does not overcomplicate it. The key question he asks about any addition to the framework: does this additional complexity improve my actual results, or does it just make me feel like I am doing more?
Get the show notes & transcript
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- The Magic of Momentum Trading with Alan Clement
- How to Improve Trend Following Performance with David Lundgren
- Nick Radge on the Best Trading Systems and What Makes Successful Traders
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