Whitney Tilson, founder and manager of the hedge fund T2 Partners, went on CNBC to talk to the Fast Money crew last week, to talk about his fund’s struggles in May. There’s a rather striking moment in the conversation that comes right at the beginning, when Tilson is asked when he cuts his losses on a trade that has gone downhill. He replies, “We don’t.”

Really?

We get that a discretionary trader has to have confidence in their predictions (otherwise they wouldn’t be discretionary traders), but saying that he never cuts his losses so long as he’s convinced he’s right sounds to us like a recipe for disaster. Like flying a plane without any parachutes or sailing without a life preserver – it doesn’t matter how right you are if you lose your head before the bet pays off. The market can remain irrational longer than you can remain solvent…

We find it hard to believe that a hedge fund heavyweight like Tilson has no threshold beyond which he will cut his losses. But that’s the danger of a discretionary trader – something we covered last year when the discretionary CTA Dighton Capital got demolished by the Swiss Franc. Those who double up again and again on losing bets may be in for a sweet payoff, but they may also be hammering the nails for their own coffin.

As far as our money is concerned, we think we’ll stick with a manager who has concrete risk-management practices in place. Tilson may want to go down with his ship, but we’d rather have the option of life preservers if (when) disaster strikes.