If you can't afford to lose x $$$$ you shouldnt be trading

Beginner Questions
1

How much $$$ should I start with, if you can’t afford to lose x amount you shouldn’t be trading etc etc etc. Let me start off by saying with all due to respect to all the traders who post this. . . “Absolute nonsense. “ Statements like this rank the same as “all indicators are junk” the only way to trade is price action, short term traders never make money, long term traders always make money, almost all statements that start off with Always or Never, you have to have a live account to learn mindset, and the rest of the bad advice out there.

The facts are: It doesn’t matter what you start with if you don’t have a solid foundation and learn how to crawl first, then walk, then run you will lose your money. Traders don’t lose money because they started with $100.00 or $100,000,000.00 and smart money management has nothing to do with how much you money you have to manage. Smart or good money management is protecting and growing whatever money you start with over the long term. The reason traders lose their bankroll is because they don’t follow basic trade principles, such as applying a trading method that more times than not will put the balance of probabilities in their corner; use a money management that over the long term will not blow up their account, but allow it to grow and exercise the patience and discipline that will allow your trading method and money management to work over the long term.

If you open up your trading platform and bet the maximum $$$ your account balance will allow you to use per trade whether it’s a $100 or $100,000 and with no rhyme or reason no stop loss no take profit nothing, just keep pressing press buy or sell and keep doing that you will lose all your money sooner or later. On the other hand if one of the ways you trade is trade the trend, with momentum on your side, don’t try to pick tops and bottoms just pick in between the two, use a stop loss and take profit target based on previous support and resistance and only bet when this happens, there is still no guarantee you won’t lose all your money, but the probabilities are on your side more times than they’re not.

When trading you can only go long or short and, buy or sell and that has nothing to do with how much money your start with. Where you lose all your money is when you don’t take the time to learn how to put the balance of probabilities on your side before you push buy or sell or long or short… Risk/Reward, 2% -10% of account balance has nothing to do with how much of a balance you have, it has to do with % of the balane you have.

My advice is to trade with whatever balance you have and can afford to lose without going to the poor house or the traders graveyard, select a broker that specializes in small account balances, worry more about value than costs. But whatever you start with practice practice practice your trading method , money management and patience and discipline skills first before you risk $100 or a $100,000,000. There is no rush to start trading, retail trading is not going anywhere soon. If anything each day brings more information on how you can put the probabilities on your side. Learn to measure risk not how much you have to start with. As always just my 2 cents and opinion

2

Very interesting… This is a statement made by some of the greatest traders dating back to the late 19th century. So saying it is non-sense I am not so sure.

Jesse Livermore recalls the crash of 1929 where he reportedly made close to $100m, this crash not only wiped out heavy experienced investors (forget speculators), it was a systemic problem that destroyed everyone (except for Jesse of course).

Point in case, this could happen at anytime to anyone exposed to any kind of financial asset. This is common in even in the property sector with people strumming up every penny for an over leveraged deposit and pick up a 400k home with a 40k down payment (the good old days), then a crash happens and they are wiped out. So the idea is quite simple don’t trade or buy a house unless you are can afford to loose all of it. It is a risk you must first accept or else don’t get involved with financial instruments (You will be sorry and not even the charms of N Farage can save you) .

After all these assets were created to benefit the creators and you are just the monkey holding the wrench.

3

Hello gp00053, you are absolutely, 100%, hand-on-the-money, crowd-applaudingly right about this!!

Of course, everyone is entitled to differ… but I think that you are absolutely right! It would be like saying that you
could not be in debt if only you earned 100,000 dollars/euros/pounds (etc.) a year… We all live up to our means, so the more you earn, the more, naturally, you will spend (as your lifestyle will pick up a notch along the way)… So having a 100,000 units of currency in your account does not make you invulnerable to wiping it out, any less than if you had only 100 units, if you have no sense of risk management…

Great post, gp00053,… thank you!

4

Great post and thank you for it. Another nonsense statement is when traders try and compare apples and oranges, or if you’re standing under someone with their pants open with a yellow liquid coming out of one of their organs and they’re telling don’t worry about it. . .afterall it’s only rain.:27:

Seriously you have to compare apples to apples. In your example of 1929 would you agree that if you invested the same way Jesse did regardless of the amount you would have made the same % ROI he did? For Jesse and you to make money if you know how the retail trading works, somebody had to loose money don’t they.

In your example again you have to compare apples to apples. Not every home owner in North America lost their home because of the real estate crash. As a matter of fact most of them had a loss for the same reasons most traders lose their bankroll. They lost money because they leveraged to much, didn’t research properly made their analysis fit the results they wanted instead of making analysis based on their present circumstances. Same as traders who blame brokers, teachers, mentors, indicators, past results, for losing their money, not their bad trading. If you make your stop loss at 2%, it’s still 2% it doesn’t matter the amount of money in your bank account. If you don’t use a stop loss at 50% it’s the same 50% doesn’t matter the amount.

Measure risk when trading and if you learn to do that you can trade and make money with any balance.

5

Okay, so how about this… Why then we have to put our hard earn money on the line if you know you are going to lose?

If you know you are going to lose that money, why even bother trading it? Might as well, put that money into a good use. I understand that there is no gaurantee that we will make money in trading but why we are already thinking about losing it before we even start trading.

What if you set your mind up that you will survive…you will do whatever you can to survived. If your account survived in 6 months, 1 year, etc. then you know how to win it…

6

gp00053 is absolutely right… When it comes to banks repossessing homes on defaulted payments, it often comes to pass that attention will be paid to whether the bank had approached the issue of risk management with the borrower, or whether they had got him/her to sign on the dotted line by mis-selling them a financial product (a mortgage on a home, in this case) without properly explaining the risks of defaulting on payments.

Of course, and this is where I agree with gp00053, it is, in the end, the responsibility of the person signing on the dotted line to make the necessary checks on their finances and not ask for a mortgage many times their annual income… although, it has to be said, so-called ‘unscrupulous lending’ is still very much a practice that should be condemned… Just because there are people desperate enough to give into unscrupulous lenders (legitimate or less so), it does not mean that they should be continuing with avoiding due diligence when selling financial products…

Cheers.

7

Hello PipNRoll!

So, what you are saying is:

[B]a positive mindset does not equate to lack of risk awareness[/B] :slight_smile:

In other words: just because you prepare for the worst, it does not mean that you should talk yourself into losses…

Am I getting your thoughts right?

8

I guess I have to be clear for what I have said: what gp00053 is correct about risk management, discipline, fund your trading account without going broke… However, your mindset should also align into what you have in plan. If you are prepared to lose that’s fine but how long are going to keep losing and keep blowing your account? We always hear and said, only put money that you can afford to lose… But how much loses and how many times you need to fund your account because you keep losing it and when are you going to “unplug the cord” and said… "Trading is not for me "…not everyone can be a trader… Everyone are welcome to try but not everyone can be a trader and make consistent profit…

Learn how to survived and if you can’t do that and you still losing after losing… Then maybe start to re think everything again before wasting anymore time and admit that it is not meant to be so then you can focus on other things that maybe it is worth pursuing which is align into your values, skills, talents, etc… Reality is tough and it sucks sometimes…

9

PipNRoll, thank you…

It is hard… I once put a post in where I said that one aspect that we are rarely able to quantify to a newbie (or generally) is:

how LONG is deemed an appropriate amount of time before a potential trader can consider him/herself able to trade?

Somebody may take ten years before they realise that they can continue with it… Somebody else may come to that conclusion, only five months into their learning… Who is right? Nobody can tell… Also, a twenty-year old has a different perception, biologically, of their future, than, say, a seventy-year old, in terms of their life, spanning before them: this means that a trader starting in his/her twenties may be more impatient but unconcerned about how long it may take them, as the future ahead is a long one; the trader in his/her seventies, on the other hand, will have more self-control but will be concerned about how long it will take them (before they can become profitable traders), as the future ahead may be a much shorter one.

In these matters, as always, it is crucial to understand context, without which it is impossible to say when, for example, the ‘right’ time for one particular trader may be in terms of deciding whether to ‘unplug the cord’, as you say… it is not an absolute number… everyone must have their own limit and say: if I have not made progress by (x) months, then…

Cheers.

10

That’s the whole point. Think and do your planning before you trade and even though there’s no guarantees, you will have a better chance at success of you learn, think, plan and protect before you trade risking your bankroll.

To your last point, I watched this show the other night about how millionaires made their millions. They all made it differently and came from different circumstances, but one thing that they all had in common was they never gave up. They kept coming back trying to make it.

11

Couldn’t agree more. To quote our friend " the last bear," it’s a tough business out there and we need to take advantage of everything we can.

12

Nice post, there is no good or bad way to trade as long as you make money, but I think why traders are loosing money can be many different reasons, it can be choise of broker, a bad one, the lack of dicipline and more, and to small amount of money required to open a account, $50 just isn’t enough to being able to apply money management in a prooper way, in my case it was the lack of dicipline, I was constantly researching new ideas and testing it out, I went from system to another, I did never settle down to use just one and abide with it’s rules rigorously as I should have, no, I constantly got new ideas needed to be tested out, it was “fun” to see if they where any good, trading with just one system I suppose was too booring, but not consciously, it was sub conscious. the funny thing is that the most of the ideas actually where profitable, I just never used them for any longer time so their probability had no chance of playing out. when I finally rejected everything I previously knew and starting to look at the market in a different way I came up with a new system and finally stayed with it, it’s a shame I couldn’t do that 3 blown accounts ago :slight_smile: this journey did take about 5 years to come to sense with.