Market loss over 700,000 in nine hours

This is the story about how a good friend of mine lost over 700,000 in nine hours. A market loss of this magnitude, can seriously shake the psyche. Did he handle it?

Some time ago, a fellow trader called me. Let’s name him Tom. He traded occasionally and was the president of a small company by day. We arranged to meet. It seemed like a friendly conversation. But, unfortunately, there was no indication of what I was about to hear.

– You know, I actually have one more thing on my mind – Tom said haltingly. – Last week I lost over half a million on the market.

I’ll admit I was surprised. I knew he made money in the market, but I didn’t think he traded that much. But, of course, losing such an amount for an occasional trader is no small thing.

Therefore, before talking with him, I repeated 23 ways of dealing with losses (collected from various sources, including a group of the best traders in the world whom I had interviewed in the past).

I was anxiously awaiting the meeting. I met traders with significant losses before, but I have not encountered such a situation yet.

A loss of this magnitude, more so in about 9 hours, can seriously shake the psyche. I have seen situations where people were on the verge of suicide; others were unable to sit down to the market for months. Still, others are haunted by remorse for years. So the issue is as serious as it gets.

At the meeting, Tom told me what happened.

For several months he had been observing a prominent trader who was able to grow his account ten times in one month. At some point, he decided it wasn’t hard, deposited about 30k and traded for a month. He took over 670K out of the market by placing 19 positions. Last night he decided he was going to try to make it two million. He was hoping that there would be a move that would allow that to happen.

He sat down around 2 am and put up three positions. Each was over 40 lots.

A few minutes before eleven the next day, they were all automatically closed at a loss. The account was wiped clean to zero. As he told me later, these entries were outside the system.

To my surprise, Tom did not seem at all concerned about the loss!

I questioned him at length about the incident, looking for any signs of trauma or any remnants of a demanding experience. I found nothing. There wasn’t even a dip in his mood! On the contrary, he was in his usual, good mood. It was bizarre.

Intrigued, I began to inquire as to why he was unconcerned about such a loss! I was sure it mattered to him. It must have! True, he was the company’s president, but he didn’t make that much money in it to blow through 700,000 in one evening.

Tom answered something that gave me food for thought for a long time and that I want to share with you:

– This is virtual money. As long as you don’t withdraw it, anything can happen to it. It’s a virtual entity. It can disappear as quickly as it appeared. It’s only when you have it in your bank account that it becomes real, but until you do, it’s just a row of numbers. That’s how I’ve always approached the markets. It’s just numbers, nothing concrete.

Here he surprised me again. I encountered this approach for the first time. For all the traders I had worked with so far, money mattered. Always.

The depth of what Tom told me then didn’t come to me until a few months later.

In a nutshell, I can describe it in the following way:

Each of us has some image of the importance of money in our lives. We bring that image to the marketplace. A significant loss (as well as a big gain, I’ve had that happen) can throw a person off-balance for days, years or permanently.

The essence of the problem is that the loss causes pain. This pain can be almost physical and can last for weeks or even months.

Some traders go through months of hell because of losses. On top of that, there are additional severe and unpleasant issues, such as judgment from the environment and family.

I knew that the best traders are very tough and mentally resilient. It is one of the secrets to longevity in the market and the huge fortunes they build. Mental toughness is something I have studied for many years. In the case of top traders, it is outstanding.
Here I have come to understand that mental toughness has many forms. For example, the lack of response to challenging experiences may be due to a different perception of the situation, a different value system, or a different value scale.

Tom is undoubtedly very mentally challenging, I must admit.

The story described is an example of how different traders approach markets and money differently.

How you think about money determines how your psyche reacts to profits and losses and thus the mental strain. As long as Tom treats trading as a numbers game, he will be confident of the outcome. Neither profit nor loss will shake him.

I will certainly talk more about this in other articles because mental toughness is a little known topic. Yet, it is one of the pillars of success not only in trading but everywhere!

In the following article, I will tell you about a particular system (actually, it is not so much a system as a way of trading). It was popularized by a trader who systematically made results similar to the one described in Tom’s story. For example, last year, this trader paid 97k to a broker and, in 8 days, made over a million. Subscribe for updates below.

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