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Hi Mr. Alvin Lim,

I know it’s fun and great to become a successful full-time trader. I am currently trading part-time. Trading at about $100 per trade, I usually do well when I trade with 1 or 2 contracts at a time. I will start accumulating profits and grow it to $150 or $200 within 2-3 weeks. Then I will start getting greedy and trade 10 contracts or more. In my mind I want to make more profit and make it as fast as possible so that I can pay off my debt and not fall into bankruptcy. You could say that I am a very greedy man and impatient as well.

I attended a course in Kuala Lumpur that taught us to grow our investment by 100% each time and consistently make it 10 times and so that you can turn 2k to 1 million. But I lost all my profit and initial deposit. I became very sad and frustrated and wondered whether trading is suitable for me. Imagine working so hard to make the profit little bit by little and then lose it all at the end within few minutes. Please advise me. Thanks.

Victor

All too often, students from other workshops run to me with such problems and other Risk and Money Management problems as a result of not being taught enough about such an important factor in our business. In most cases, the student is left to their own devices (and demise) with a poor excuse that these are lessons one must make in order to learn about this business. Some teachers even advocate “paying the market some learning fees” in order to get the real experience.

If this is true, then we should all get this experience by “paying the market” for it and then after we’ve “learnt”, we’ll have no money left to trade with and the lessons were for naught.

This is my reply;

Get a copy of my book, “Secret Psychology of Millionaire Traders” and read Chapter 4, pages 91 to 95. It will teach you what you are doing wrong and why your teacher is an idiot to teach you to trade that way. Risk and Financial management are key to being successful in trading. Upping your risk without consideration for managing that increasing level of risk is NOT the way to manage your trading psychology.

The theory behind doubling your positions to grow exponentially is a nice concept but everyone forgets to consider the downside risk which is also exponential. Have you traded yourself into a situation that is unfamiliar to your psyche?

Read my book and then get yourself a REAL mentor who is a REAL trader … not some hype-master who kills his students in order to make a quick buck.

The idea of exponential growth is always an easy concept to sell; you buy 100 shares and the stock moves by $1, you make $100. You buy 100,000 shares and the stock moves by $1, you make $100,000. But is the psychology the same? Can you apply the same risk management technique on the 100 share trade and put it to use on 100,000 shares? Are the risk factors the same?

Every novice trader I meet almost always has the same mindset when it comes to “making money”; they always hope for the best but are never prepared for the worst. Just before they click “Buy”, they are considering all the possibilities if the stock goes up and how much it can possibly make and what they’ll do if they make that money. Very few, especially those who come to me from other workshops, actually consider a few simple queries that would save them a lot of grief before buying;

• “What’s the worst that can happen?”
• “Can I take the loss if it happens?”
• “What am I prepared to do if it happens?”
• “How can I protect myself from it happening?”

It’s quite well documented that I am a huge proponent of Trading Psychology. What most don’t know is that I love teaching Risk Management and Financial Management more than anything else. There is so much to consider when taking a trade – TA, FA, macro-economics, market conditions, politics, etc, etc, etc ….  what you have are so many reason why you should not trade. Most of the time, conditions are always going to be unfavorable to trade as one thing or another is going to pose some sort of risk factor – timing, news, self fulfilling prophecies, seasons, etc, etc, etc ….

This is where RMFM becomes so important and so integral in knowing what you are in for as soon as you click that “Buy” button.

It amazes me that many traders have so much confidence in whatever systems they use or their style of trading or software they subscribe to. This confidence is normally the result of being hyped-up. As you read this, you may disagree but tell that to Victor.

Confidence is the one thing that is easy to sell. Risk is the one thing that never sells well.

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