5 ways to lose all your money trading that nobody talks about 🧵

You must've clicked in here wondering what this is all about. This is what's up: Charlie Munger used to give many talks about "How To Live A Miserable Life" He had a theory called Inversion Thinking which was a genius idea. Here's how it could save your trading career. -->

The gist of inversion thinking was: If you wanted a happy marriage... Instead of asking "How can I have a happy marriage?" You ask: "How can I destroy my marriage?" Then you list out every single way to do so. Then do the exact opposite of that. Here's what's interesting:

Turns out our brains are much better at finding problems than it is at finding solutions. So we simply harness this innate ability to find every possible problem... To flip that into finding our solutions. So let's dive into all 5 ways we lose our money trading:

1. Buying low, selling high. Let's start off with something controversial. Most people have the idea that the price of an asset has a value associated to it. If the price is high, it's expensive. If the price is low, it's cheap. So... Buy low, sell high... Right? Wrong.

The markets do not function like a supermarket. Just because it's cheap does not mean it's a good buy. Similarly, just because something is "expensive"... Doesn't mean it can't go much higher. We all know what $BTC can do... But let's look at a couple traditional markets. [img:Zod-lshuf] [img:P9bWfTuWx]

Now imagine how much money you would've made if you... Simply let go of your false notions of "cheap" and "expensive" You would've simply shorted $XAU/$EUR down to zero. And if it started going up? You would've bought it to the moon. Buy high, sell higher. Sell low, buy lower.

2. Trying to catch tops/bottoms This goes along with the previous point... but this is more severe. We humans tend to want to be right. It feels good to tell others: "I shorted the exact top bro, what color is your Buggati?" But think about it this way...

In every market... There is only 1 person out of millions that will "catch the top/bottom" If even the top traders in the world from Wall Street... And the traders who work at billion-dollar hedge funds cannot do it. What makes you think you can?

When you listen to interviews with the top traders... Those who are managing billions of dollars... They all caution against trying to catch tops/bottoms. There's a saying: "Top pickers and bottom pickers will eventually become cotton pickers." Don't become a cotton picker.

3. "Nobody ever went broke taking profits" While it's true that taking profits is essential in trading... This mentality is detrimental to 90% of you reading this. In fact... You do go broke taking profits. Let me explain.

The only way to have a sustainable trading career in the long-run is to have big profits. Groundbreaking discovery! I know. But on a serious note... Here's the problem with "taking profits"... You are cutting your winners short. Here's the thing...

You will run into bad times when trading. Times where you lose so much... It makes you doubt your ability as a trader. What do you think is gonna happen when you go on a losing streak? I'll tell you exactly what will go through your mind...

"I spent these last 3 weeks trading every single day to get these profits... I won't lose it now!!" Then you start DCA-ing to your losing position. But then price keeps going against you. Eventually you lose everything in a single trade.

When you take profits too often too soon... It's cause you're afraid price will come back to entry... That's fear-based behaviour. You're afraid of losing the profits you have on paper. Not a good mindset to trade from. But there is another factor that no one talks about...

That is the fact that if your profits are significantly larger than your losers... You build up a cushion to soften the blow of losing streaks. Lost 10 trades in a row? Down 15% on your account? No worries. Cause you made 50% last month off 2 winning trades.

Here's the thing... As traders... We do not get paid for spending more time in front of the charts... Or taking more trades. We get paid based on the quality of decisions we make. Most of the time... 1 big winner > 100 small breakevens/winners Understand this... and you win.

4. Not adding to winners To continue the previous point... There is a saying: "The moment you know you have matured as a trader is when you're able to add to your winning positions for the first time." Here's how not adding to your winners are costing you tens of thousands:

Think about it this way... When your positions are winning... It's also another way of saying that the markets agree with your trade ideas. And here's the funny part. The markets are agreeing with you... And here you are taking "partial profits" because you

5. Trading based on intuition/gut feeling. “Good traders apply every ounce of intelligence they have into the creation of their systems, but then they’re dumbbells in following them. Work like hell to make it good, and then ignore it like you’re a brick wall." - Richard Dennis

Some of you might think systems are inflexible. Systems don't take into account the uniqueness of current market conditions. That's where you're wrong. Does you brain know at all times what's happening: • On other charts • Around the world • Fundamentally The answer is no.

Trading based on discretion is also a type of system. Just a really shit one. One that is based on zero: • Backtesting • Optimisation • Forward testing Find or create a system that is profitable. Then stick to it like a brick wall.

Before I continue... I'm creating a free course for trading. It'll change the way you view trading. And I don't say that to bullshit you. Most free trading "courses" are absolute shit. This won't be one of them. Click this link to join waiting list: theartofcrypto.co/join-skool-aoc

There are actually 5 more reasons why we end up losing all our money. But while I'd like to discuss it in this thread... It's going to end up being too long. So drop @_theartofcrypto a follow and like + RT the first tweet if this was valuable to you