A few years ago, I was scheduled to play a round of golf with some of my friends. I was quite nervous about it, as I only golf about once every five years and did not want to embarrass myself. I hired a golf pro to provide me with a one lesson crash course on golfing. He was extremely attentive, and when he discovered that I wasn’t planning on winning the Masters, and only planned to play once every five years, this is what he told me. “I could provide you with hundreds of suggestions and tips related to weight transfer, your grip, your swing but they would all go in one ear and out the other. So, my suggestion to you, is threefold:
- Keep your head down
- Relax your swing, and
- Follow Through.”
Then he proceeded to have me hit 100 shots as he coached me on those three criteria. The most fascinating thing he told me was most weekend golfers are trying to prove something on every swing. He reiterated that if I would just relax, keep my head down and follow through, I would hit the ball straight and be consistent. Once I mastered that skill, I could work on other things.
As I proceeded to hit a couple of buckets of golf balls, he would provide commentary on those three criteria and remind me that golf is not necessarily about competing with others but executing on your own strengths and limiting your weaknesses.
He would say things to me like:
- “You’re still swinging too hard, swing 30% less!”
- “Relax your grip and you keep your head down!”
- “Follow all the way through on your swing.”
I’ve thought about that golf lesson a lot over the years. I went out had a nice round of golf with my friends and played more consistently than I ever had. Throughout that game I kept reminding myself that I was not there to try and prove anything to anyone.
I have noticed a similar problem with trading and traders. Most traders are trying to prove something on every trade they make. This obsession forces them to get involved with trades and markets they should never be in. Until they stop needing to prove something in their trading, they will always be engaged in an unnecessary battle that prevents them from reaching their goals.
Over the years I have talked with thousands and thousands of traders about markets, opportunities, risks, and potential rewards. What always happens in these discussions is the conversation steers towards the worst trade that you have ever made. While this may sound like a painful thing to do, it is probably the most therapeutic activity you can ever be engaged in as long as the follow-up question is asked. That being, “what did you learn from that experience?”
Trading is a continuous process of understanding how we define risk, reward, and value. Whenever you have a bad trade, it is imperative that you do a post trade autopsy and ask yourself, “what did you learn from that experience?”
Never repeating what caused you great pain is priceless in terms of education.
Over the years, I have critically analyzed thousands and thousands of trades to better understand my strengths and weaknesses. It is a very valuable exercise because the losing side of the ledger is where all the wisdom resides. When you learn and understand that principle you will take a very active role in analyzing your losers.
In this vein, I want to challenge you to do a very simple trading exercise. If you do it, I will assure you that it will change the way you define success in your trading endeavors.
The exercise is called “WIPEOUT.”
While this may sound silly and counter intuitive it is something that I ask all new traders to do.
However, if you do this exercise, you will understand what you need to do, to be successful trading the markets.
Here is the drill. Open a demo account for $1,000,000 with your favorite broker. Now try to lose every penny in that account as quickly as possible.
Why in the world would I ask you lose money as quickly as possible?
First off, it is a lot harder to do than you would imagine.
I could sit here and preach to you on all of the things you need to do to be successful. In my experience, that kind of teaching goes in one ear and out the other immediately.
Instead, I want to make you conscious of losing behavior.
If you were visiting a casino and we were playing wipeout, probably the fastest way to lose $1,000,000 would be to go to the roulette wheel and place all $1,000,000 on one number. The odds of winning are 37 to 1 so chances are very high that after one roll of the roulette wheel you would have lost the $1,000,000.
When you master, and completely understand losing behavior and are conscious of what destructive behaviors are, you are well on your way to wealth creation.
So, the question is – how can you lose money as quickly as possible?
Let’s look at this analytically.
Whenever traders trade, if they are going to be successful, they need to surrender to what the market is doing. The ego prevents traders from seeing this simplicity as long as it is trying to prove something to someone. Traders like to think that their brilliance is what creates success. It is a very ego-driven profession.
If the trader does what the market does, they make money.
If the trader does not do what the market does, they lose money.
If you are trying to lose money as fast as possible you need to find the strongest trends and then do the exact opposite of what the market is doing.
Losing all your money quickly requires that this certain and specific behavior be engaged in regularly and repeatedly. Once you master losing behavior you have overcome 95% of the obstacles on the path to wealth creation.
Being conscious of this is the first step to making sure that you don’t do unproductive things.
This is a simple means of eliminating trading compulsions.
So, here’s a quick list of how money is lost:
- Overtrading – Getting in and out of the markets repeatedly. Trading for the action. Trading for the thrill of going “all in.” Using the markets as your adrenalin/dopamine hit.
- Overleveraging. How much margin are you trading on? You want to lose money quickly? Overleverage your account as much as possible. Open a crypto account with 100 to 1 leverage my forecast is you will lose all of your funds in a month.
- Ignore Trends. Do the exact opposite of what a trending market is doing.
- If the market is up trending, short it.
- If the market is down trending, buy it.
- If the market is trading sideways BET BIG on a breakout.
- Find the strongest trends and do the opposite of what they are doing.
- Poor Money Management. Instead of diversifying your portfolio amongst numerous trend asset classes commit all of it to any one trade.
- Trade on tips, rumors, and stories.
Most traders DO NOT WANT TO WIN.
They will tell you differently and they can be super convincing, but their behavior will tell you otherwise. And in my book, you can always tell the truth by following the money and analyzing the results.
I am convinced that most traders are in the markets because they want ACTION.
They want the adrenaline/dopamine rush that accompanies adventure.
They want the excitement than comes with a big score.
Or they want the thrill of being on the wrong side of a roadkill but living to tell about it.
Many traders are in the markets because they love to play the victim, which earns them the role of storyteller.
In other words, most traders love the thrill of gambling, and their results are predictable.
Everybody is looking for a shortcut to fame and fortune. If you head to your local bookstore, you can easily find hundreds of books on how to make more money.
Yet in this WIPEOUT exercise what I am asking you to do is the exact opposite.
You need to become conscious and aware of losing behaviors.
I could fill an encyclopedia with millions of do’s, don’ts, and how to’s. They are meaningless as long as you remain unaware of the things that destroy a trading account. If you succeed in destroying your demo trading account, you will be well on your way to consistent wealth creation.
In essence I am challenging you to go out find the strongest trends, disrespect them, overleverage your trading and let your losses run. This is the exact opposite behavior of what all the great traders preach.
Let’s look at the legendary advice from Top Trading Titans. Warren Buffett has two rules when it comes to investing.
The first? Never lose money.
The second: Never forget rule number one.
Wall Street legend Bernard Baruch’s best advice was to “learn how to take losses quickly and cleanly.”
Jim Rogers of Quantum Fund fame built his fortune of $300 million on the following nugget: Don’t lose money.
These investors followed their own paths to the top. What they all had in common was that they knew how to minimize their losses. In other words, they preached that great trading/investing is defensive in nature. Instead of trying to make money, learn how to “not lose money.”
I invite you to do the WIPEOUT exercise and consciously try to completely WIPEOUT your demo trading account. What you will discover from this very practical exercise is that it will be very easy to become conscious of unproductive trading behaviors.
In the world of trading, it is NEVER about how much money you make when you are right. It is always about how little you lose when you are wrong.
Nobody likes losing money. But your long-term success will completely depend on keeping your losses manageable.
Here’s the secret to trading success in ONE simple sentence.
“Manage your risk, or it will manage you!
Traders are bombarded with tons of information every day.
They need to discern what is important and what is not. Every moment there appears to be an infinite amount of new data entering the marketplace.
- How will government reports affect price action?
- What are the earnings expectations and how will that influence your stocks value?
- How Will the Fed’s Interest Rate policy benefit or hurt your portfolio?
The questions and concerns can be endless, and the amount of time required to get answers can be overwhelming. In other words, every trader needs to be focused on where is the risk and where is the reward?
But just doing that alone is never going to make you proactive.
The ultimate question that has eluded traders until now, is how do you find the most profitable opportunities?
Here is your link to register for the Artificial Intelligence LIVE online training that can change your financial future. During this online webinar we will show you how artificial intelligence with neural networks focuses on finding the strongest trends and then finds the best move forward by keeping you on the right side of the trend at the right time.
Successful traders are obsessed at finding solid trends.
How good are you at making decisions?
What has your performance been this year?
What’s Your Best Chance to Make Money in The Financial Markets Today?
The Answer A.I. Offers Will Surprise You. Intrigued?
You too can start finding the best trend at the right time regardless of your experience.
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Discover why Vantagepoint’s artificial intelligence is the solution professional traders go-to for less risk, more rewards, and guaranteed peace of mind.
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DISCLAIMER: STOCKS, FUTURES, OPTIONS, ETFs AND CURRENCY TRADING ALL HAVE LARGE POTENTIAL REWARDS, BUT THEY ALSO HAVE LARGE POTENTIAL RISK. YOU MUST BE AWARE OF THE RISKS AND BE WILLING TO ACCEPT THEM IN ORDER TO INVEST IN THESE MARKETS. DON’T TRADE WITH MONEY YOU CAN’T AFFORD TO LOSE. THIS ARTICLE AND WEBSITE IS NEITHER A SOLICITATION NOR AN OFFER TO BUY/SELL FUTURES, OPTIONS, STOCKS, OR CURRENCIES. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED ON THIS ARTICLE OR WEBSITE. THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR METHODOLOGY IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.