Hey everyone, Nils Koster Blaston here again bringing you another value-packed episode of our best of top traders series, sharing small segments from the best episodes we've recorded over the years.

Now today's segment was from another conversation with trend following legend Bill Dreis, who explains how he defines

risk, which I think you'll find very interesting and valuable. There were many other great parts

of the conversation that you can listen to if you go to top traders on plot.com forward slash 94.

With this short intro, let's jump right into the conversation with bill dress

let's shift gear to a very important topic, namely risk management.

How do you define risk?

I know that you are not a big fan of standard deviation.

So how do you define risk in your own methodology?

Well, I think, you know, again, from my sort of philosophical position, I'm very suspicious

of any kind of things like VAR or any kind of the standard risk metrics.

I just think that, you know, risk is out there and your worst drawdowns always in the future.

And I find, I think, if you look back over time, you find, again, some pretty standard

risk profiles. You look at anybody who's been around for, say, 20 years or so, or maybe even 10.

Almost every one of those managers has had a major drawdown by which I characterize as 50% or more.

And usually just one, right?

You know, the people who've survived in this business are people who've been able to weather those, you know,

weather drawdowns without, you know, making, yeah, losing their nerve, that's

exactly it. And so that's where the risk comes in. The risk comes in as your manager going to

lose it. That's for the ultimate risk. And if you believe that your guy's going to stay the course,

then you should probably stay the course too. I'm going to quote someone that you may be familiar with and who wrote a few years ago.

It's David Drews and he wrote a few years ago that here's an amazing thing about robust systems.

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