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A lot of people are scared of trading the market.
They think of it like gambling or sports betting - once you lose your luck, you lose your money.
And the truth is that many people aren't successful as traders. In fact, today, I'm going to tell you about two traders that lost their life savings on a single trade.
But that's not because of bad luck.
It's because they didn't follow two simple rules.
See, trading is easy. But those that simply follow their gut and trade like they're "betting on the black" will end up losing it all sooner or later.
That's not going to be you. You can trade your way to millions of dollars, financial security, the life of your dreams...
You just need to follow these two rules. They can turn any novice trader into a successful one...
These Two Rules Will Save You from Losing All of Your Money
If you've been with me for a while, then you might remember F.S. Comeau, the Canadian trader that lost $2.25 million of his $2.5 million inheritance trading.
Confident that he could make it all back on a single trade, he took it to YouTube and broadcast his million-dollar trade live. Wearing a wolf-mask, he celebrated what to him was an imminent windfall.
The man in the wolf mask was so confident that Apple Inc. (NASDAQ: AAPL) was about to announce poor earnings that he invested his last $250,000 on bearish option positions. Then, he waited for the announcement and his million-dollar payday.
What happened? The picture below says it all![mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
AAPL gapped up on the news, wiping out his bearish option positions. He lost his last $250,000 in a heartbeat. His reaction was painful to watch - he screamed like a mortally wounded wolf.
But "wolf man" isn't the only trader who met this fate.
Three years later, it appears history is repeating itself. A 28-year-old Italian trader just lost his own life savings on a single position.
Back in January of this year, he backed up the truck and purchased $235,000 EUD worth of Luckin Coffee Inc. (NASDAQ: LK). The stock hit an all-time high on Jan. 17, 2020, and this trader believed it would keep on going.
But that's not what happened.
Plagued with coronavirus-inspired lockdowns and an investigation into financial misconduct that halted trading for a month and a half, LK today sits at $3.94.
How much did the Italian trader lose? Well, he generously published his account statement, shown below:
Now, over the two months preceding this purchase, LK had risen from $17 to an all-time high of $51.38, and this young trader "believed" that the stock would "keep on keepin' on." The key word here is "believed."
Just like the "wolf man," he went with his gut - which is one trading mistake you should never make. Trading with instinct or gut feel is gambling, plain and simple. It isn't repeatable, and gut feel traders will get burned in the end, just like these men did.
But that's not the only mistake they made. They also broke the cardinal rule of trading: "Never put all your eggs in one basket."
They put all of their money into a single trade.
Even the best trade setups can end up as losers. Putting all your money into a single trade is like betting on the black in roulette. It's great if you're right, but if you're wrong you may be flipping burgers at McDonald's come Monday.
Now, I've been trading successfully for decades. And it's not because I have better luck than these two men - it's because I follow two very important trading rules...
- I'm a Rules-Based Trader
I use objective entry and exit rules in my trades, leaving no room for gut feel. These rules are so objective that I can test them historically and prove that they actually generate reliable and consistent income. If they work historically, I run them live, following the rules exactly.
- I Practice Money Management
I always keep my eye on a single question before entering a trade:
What if I'm wrong?
Losses are inevitable in trading. It's part of the game. Even successful traders will have losing positions.
I only invest a small percentage of my portfolio in a single trade. My general rule of thumb is to invest 2% to 3% of my portfolio in a given trade. That way, even if I take a 100% loss, it is an insignificant loss.
Had these two guys practiced these two simple rules of trading, they'd have survived to trade another day.
And in the meantime, don't forget to check out my latest presentation for a potential instant cash opportunity...
You see, why should you choose one strategy when you could have both? In this unbelievable Zoom call, I'll be showing readers exactly how I hit one button and collected $14,288 in instant cash...
... And how the five stocks I've identified can hand you the same kind of fortune - depending on the size of your stake. See it right here...
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About the Author
Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.