After making millions, then losing a million and then once again making millions again and managing tens of millions and also working with thousands of other investors and traders around the world, I’ve realized that there are really three major reasons why people continuously lose when they’re trading. So, in this video, I want to share these three things with you because when I realized these three things, first of all, earlier in my trading career about four years ago, it helped me a lot in making progress towards actually being profitable both investing and trading. And then also, I’ve noticed that when people come to these realizations, they tend to lose less money and actually start to become profitable a lot sooner.
Because typically, it takes years for people to become profitable and over that, you know, one, two, three-year time period they’re consistently losing. All right, so I want to help you if you have any idea that or any sense that you want to start trading more and more and managing your own money. Maybe you’re running a fund, maybe you’re, you know, building some type of trading business. I think these three things will help you a lot because they’ve helped me and helped a lot of other people. So, if you get value from this video, let me know in the comments section below and share this with someone that would also get value. The first and number one reason why I think people lose money and I have previously lost a lot of money as well is because they’re shooting for the home run of every trade that they’re making because they’re trying to have a quantum increase in their trading account.
That is the number one reason why I think people lose money, because they are always shooting for this type of a trade where they’re trying to do 60 percent on every trade and then, you know, they’re using 10x leverage, they’re trying to do 600 percent on a given trade. In reality, what you need to be doing instead of trying to shoot for a home run or a grand slam on every trade, you need to just be asking yourself, number one, how can I not lose money on this trade?
And the reason why you want to ask yourself that is because if you flip the script from you trying to have a massive home run where you make 600 percent on a trade, to flipping that to how can I actually not lose money, because if you cannot lose money on this trade then, what else would happen? You would make money on this trade. So, when you start to think about that and realize that, hey, let’s again go back to the grand slam home run type of scenario, instead of shooting for that, how do I just get to first base? So, instead of looking for that 600 percent gain, how can I just make a 12 percent gain on this given trade? When you start to switch your mind from you know trying to make these massive moves and instead of realizing be like okay, let’s wait for a clearly identified chart pattern that’s also verified by XYZ indicator.
For example, you’ve got a really strong uptrend, you’re going to trade with the trend here, all right? Then you see this bull flag right here, where you see a really nice move, you probably see high volume on this move, then you see consolidation, then you see price break up on high volume once again above this previous swing high. Let’s go ahead and enter along here, we’ll trail the stop up, and then you probably stop somewhere up here, and that that type of a move.
Right, there is only a 4.5 percent gain, okay? But if you use a little bit of leverage, obviously that can be, you know, double digit type percentage gain, even potentially triple digit. But you waited for the correct opportunity and you didn’t shoot for 600 percent, you shot for four, four percent or forty percent, right? So that’s the number one thing is, ask yourself, am I trying to double, triple, quadruple my account this month or am I shooting for more of a consistent 5, 10, maybe even 20 percent in a month? And if you start to flip that switch from being the home run type of guy, to just trying to get on first base and focusing on winning that next trade, I think it’s going to help you a hell of a lot with your trading career. The second thing is, waiting for the right entry. A lot of people that get home from work, they get home from the gym, they get off a zoom call and the first thing they’re like, “all right, I want to trade now,” so like, “hey, let me go ahead and enter a trade.” The problem is, the market has not presented you with an opportunity for a great trade and a great setup, so you’re forcing the trade. And I’ve done this a lot because I’m the type of guy that’s like, “hey, I want to get things done right and I want to push things over the finish line,” and when I’m ready, it’s going to be ready, right? But that’s not how trading in the markets work, you have to wait for the opportunity to present itself.
So, for example, let’s say that you believe that you know this type of a pattern is going to break down to the downside, okay? Number one, you’re not shooting for a massive move all the way down to this swing low right here, okay? So, once again checking off the first list, how do I not shoot for that massive move and be asking yourself, “how do I not lose money in this trade?”
Well, let’s not enter right in the middle of this and let’s also not shoot for a home run. So, what I would be doing is I’d be looking for this type of a move here. Okay, and we could use plenty of other types of indicators. Let’s just say that we want to look for this, you know, recent swing low right here. Alright, so instead of entering at the trade, let’s say we’re going short right, so we’re betting on the price going down. And let’s say we’re taking this type of entry where we’ve got the stop above the previous swing high. And you can use an ATR or whatever you wanted to actually uh, you know place your stop in the correct position. But then, you think we’re just going down to here, so again, not shooting for a home run. Let’s just get a trade-in and let’s try to you know, bring it down to this previous swing low and profit on this percentage right here. Well, this risk reward is only a 0.87 which is not a great risk reward whatsoever. And the reason why you have this .87 is because you’re too impatient to actually wait for a really great setup or at least set yourself up and set limit orders that will put you in a really really good spot. You’re forcing the trade, the market hasn’t actually given you an excellent opportunity, and that’s why you have a terrible risk reward. And if you keep entering like this on setups that aren’t ultra high probability, you are likely very, very likely to lose money over time.
Alright, so how do I manage this? How can I change this? Well, let’s say that we then say “hey, we’re going to be patient with this, and we will actually wait for the right entry. And maybe we’ll layer some shorts in here.” So maybe the first one will start right here, okay? And then we have another one up at this previous pivot high, right here. So, you know, probably our average entry would be right in here if we do see Bitcoin bounce up, okay? And then let’s bring this down to this pivot low, which is exactly where, and I’m not trying to grab it to the very, very bottom of the wick. I’m trying to grab it actually where I’ve seen a lot of volume in which multiple candles have touched it. So now, I just changed my risk reward from under a one to a 3.77 by being patient and waiting for a correct setup. And again, you can just set limit orders here, you don’t have to be staring at this the entire time and then you can set your stop loss to automatically trigger as well.
All right, so that’s just one example where that dramatically will change the profitability of your trading by having a less than and one risk reward where you’re pretty much guaranteeing yourself that you’re going to lose money over time to then flipping the switch and saying, actually we’re closer to a 4.0 risk reward on these types of setups, okay? So that simple switch of being patient and actually waiting for the best entry. And here’s one piece of advice too that you could do is on wherever you’re trading, put a sticky note here, you should have some rules that are written down, and one of the rules potentially could be, or just really honestly affirmations, is I only wait for the best setups, because when you have the best entries, that is going to have the biggest impact on you turning into a profitable trader. So, have patience, wait for the market to present opportunities, and make sure that you’re getting really great entries.
And the third thing that I often see and I did this once again myself and I see this in the vast majority of people that are trading and especially the people trying to trade full-time at early age or an early stage in their financial journey is they trade too large of a portion of their net worth and the reason why that is a really, really difficult thing to do is because if you trade a really large portion of your net worth, guess what happens? You get very, very emotional when you are trading, because then you’re like, “holy crap if I’m trading and I lose this trade, I just lost three percent of my net worth,” and then you have, you know, three losing trades in a row, next thing you know you’re down you know nine percent of your net worth and you’re like “holy crap what do I do now?” And then you’re like “I need to risk it for the biscuit, I need to try to earn back that money,” then you start FOMO trading and then next thing you know you lost 50 percent of your net worth trading and now you’re back to square one. And I see that time and time again, and I used to do this actually in 2017, I’d start, you know, leverage trading 50x 100x on Bitmex – if you guys remember Bitmex – and I was doing that with a negative net worth first of all and I had tens of thousands of dollars and I was leverage trading 500 at a time trying to hit it big and swing for the fences like I mentioned and the reason why that’s never going to work is because again you get emotional when you’re trading because it’s too large of a portion of how much you are worth.
So if you have a really low net worth and this is honestly probably a in in unpopular opinion in the trading community is yes you can learn how to trade on a small amount of money okay, absolutely but the thing is if you’re trying to make it a much for watching and I’ll see you here on this next video!
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