I want to tell you a story of one of my students that made and lost about 5 million twice…
And give you a few really key lessons that can be really valuable to you if you're a:
- Trader
- Investor
- Entrepreneur
- Anyone trying to build wealth
Jake came to one of our trading events in Austin around 2016…
And he told me how he traded his account from a few thousand dollars to over $5 million.
And I said, “Congratulations, great job being disciplined!”
He responded, “Well, there's a big problem. I gave it all back.”
We talked a little bit and I asked what he thought caused him to do that.
He explained that he took on bigger and bigger position sizes.
He thought if he went from a few thousand bucks to about 5 million…
He could just as easily go from $5 million to $50 million relatively quickly.
Fast forward a couple years later, we had an event in the Cayman Islands…
And after the event, he said, “I did it again. I built the account back up to over 5 million, got aggressive and blew it up, and now I have less than I did the first time.”
You might be thinking…
How could he do this MULTIPLE times?
How could he work so hard and build up from nothing to $5 million bucks, blow up, and then do it all over again and make the same mistakes?
Since I’ve coached so many people in this space, I can say it's a lot more common than you think…
People will make life changing amounts of money and then give it all back…
Over and over again.
So I wanna give you some tips that can help you hang on to your profits.
How do you invest it wisely and not lose?
The first thing I would say is to not buy into the narrative.
For example, in Bitcoin we have this narrative of exponential gain…
And what that does is it causes people to take on exponential risk.
They don't take profits.
They let their position sizes get outta control.
They can't handle the drawdowns and end up selling at the lows…
Or they end up using too much leverage and then getting margin called.
The first thing I would recommend to anybody that has life changing gains, is to pull am amount out into liquid cash that would support you for a minimum of three years.
That way, if the shit hits the fan and everything goes to zero…
You have the ability to not care for at least a few years.
The flip side of that is if you have too much cash and you're underinvested, inflation will erode at your net worth.
How do you determine how much to pull out?
Ask, “If this crashed by 90%, how much would I have wanted to pull out?”
And “If it 10X's from here, how much would I have wanted to have left on the table?”
By looking at those two scenarios, you can follow the “no regrets risk management strategy.”
Look, trading and investing is all about making decisions today with high stakes…
Based on an uncertain future with no guarantees.
And the only way to guard the most important thing (your mindset), is to manage your positions in a way that you would have no regrets no matter what the markets did.