The Loss That Doesn't Stop At Zero

Think about the worst trade you ever took.

You probably still remember the ticker. You probably still think you were wrong about the stock.

Most of the time that isn't what happened.

Last month in Korea, 1.2 million retail accounts got margin calls in a single week. Goldman put the number force-liquidated near 350,000. Those traders weren't stupid, and most of them weren't even wrong. Samsung and SK Hynix had been the best trades on earth for 5 months running.

What finished them was the shape of the position.

When the selling started, the broker closed them at whatever price was on the screen. There was no bottom in the trade. Some of them ended the week owing the firm money on top of losing every dollar they had put in.

I spent 15 years inside the brokerage industry watching retail order flow. In all that time I never saw anyone made to answer one question before they clicked buy.

If I'm dead wrong, exactly what does this cost me?

Not roughly. Not "I'll use a stop." To the penny, before you enter.

The industry never taught that question. It teaches you how to place the trade. It doesn't teach you how to survive it.

There are 4 more questions like it. Together they take about 60 seconds, and they'll stop you from entering the trade you'd spend the next 3 months trying to earn back.

Run them before the next one you place.

See the 5 questions

To your success,
Don Kaufman