Keep things in perspective... $400,000 Loss and Still Profitable Even the best of us take big losses from time to time. Itâs part of trading. The tweet Iâm about to show you might seem negative. But I assure you, it contains one of the MOST IMPORTANT lessons you will ever learn. [See all the trades my students and I take here on profit.ly]( These are some eye-popping losses, no question. I couldnât be prouder of these guys. You see, they enter trades fully understanding that they might not always work out. Thatâs why both Jack and Kyle are still well into the green for the year. While itâs rare for my students or myself to take losses of this magnitude, even when they hit, they donât make a huge dent in our overall performance. Iâm going to show you why that is and offer several techniques to keep any one loss from obliterating your account. Unexplored Risk A lot of folks will tell you to use the 5% rule, where no trade risks more than 5% of your total account. Thatâs decent high level advice, but lacks nuance. Some trades carry a higher risk than others. Thatâs why I teach students [my sliding scale methodology.]( The scale is meant to help someone determine a given trade's relative risk and profitability. That information determines what size position I want to take. Now, I want to take this to another level. Itâs fairly easy to think of most trades along a bell curve. In the middle, most trades carry the same amount of risk. At the ends, there are a few trades that carry high risk and low risk. The reality of trading is slightly different. You see, stocks movements have whatâs known as âfat tailâ risk. Most of the time they move as expected. However, a few huge outlier moves are more common than they should be. This isnât something most people know. And itâs why my students can capture massive wins and typically avoid large losses. [My Supernova pattern]( is a great example of where a stock makes an atypical move. Most stocks that pop donât become Supernovas. Yet, Supernovas happen far more often than they should. Knowing this, Iâm aware of and plan for possible huge moves. Cutting Out Big Losers The way I trade these days, I cut and run quickly if a stock doesnât do what I want immediately. Itâs a bedrock principle I teach my students for one simple reason⦠Most folks canât handle big losses both mentally and financially. Jackâs $400,000 loss is large. Yet, heâs made enough in the first half of this year to still be up hundreds of thousands of dollars. He knows these types of losses are rare. But heâs also completely aware they could happen again. Just because something is rare doesnât mean it wonât happen twice in rapid succession. It just means itâs very unlikely. However, even if Jack took another loss of that same magnitude, he would still be up for the year. In fact, he could take a dozen of these and still be up millions of dollars over his career. Jack and Kyle both knew when they took the trade it carried high risk and high reward. Sometimes, like with Lytus Technologies Holdings PTV. Ltd. (NASDAQ: LYT) it works out stupendously. The profits from this one trade alone almost cancel out the $400,000 loss. [If you look through Jackâs trade history,]( youâll notice something very similar to mine. The majority of the trades are small wins and losses. Yet, he wins around 61% of the time, and tends to win more than he loses per trade. Every student knows my #1 rule is to cut losses quickly because guess whatâ¦we all make mistakes. So itâs best not to compound them. Jack noted he shouldnât have been in this illiquid stock with massive borrowing costs and slippage. Rather than push himself harder, Jack stepped back from trading for a few days to collect himself. He knows, as many of us do, that being in the right mindset is critical to trading effectively. Managing Loss Tips Before I let you go, let me offer a few methods to help you keep those big losses at bay. - Cut losses quickly. In case I donât say it enough.
- Set a daily or weekly loss limit
- Only put money in your trading account that you intend to trade and can afford to lose
- If you double your account, take a chunk out and set it aside. Donât leave it in there and tempt yourself with larger and larger positions.
- Grow your position size slowly, deliberately, and ONLY when youâre ready (IE profitable). I want you to stay safe out there. Thereâs a lot of money to be made, thatâs for certain. But in order to cash in on those profits, you need to survive. âTim Sponsored [You donât need to stay glued to your computer all day in order to generate an income from trading stocks.]( Millionaire trader Matt Monaco recently made $5k with just a few trades and heâs going to show you exactly how he did it⦠[Join Matt for a live demo TOMORROW (Tuesday, Aug.9) at 1:00 PM EST.]( Sponsored [Watch this BEFORE 9:30am!]( Have you seen what Tim Bohen has been up to EVERY morning between 9:29 and 9:30am? [If not, click here now because heâs getting ready to do it again.]( Do NOT wait to see this. [Check out all the details here]( [Image] 66 West Flagler Street STE 900 Miami, Florida 33130 United States [.]( [Facebook]( [Twitter]( [Instagram]( [YouTube]( [Unsubscribe Tim Sykes Daily]( | [Unsubscribe From All]( *Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. [See Terms of Service here.]( This is for information purposes only as Millionaire Media, LLC is not registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. We are not a licensed investment professional, and we do not give investment advice. Always consult a licensed investment professional when seeking investment advice. Millionaire Media, LLC cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media, LLC in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media, LLC accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.