Stock Trading Lesson | The Right Way to Lose Money

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The Right Way to Lose Money

This trading advice can literally…overnight… turn your trading from positive to negative, from frustrated to calm

During a recent coaching call, I heard the line that changes everything.

“I finally get it.

You have been saying this for months and I finally get it. The more I recognize and stay away from poor trading ideas, the steadier my P&L grows. Doing absolutely nothing else, learning to spot perfect trades, and only trade perfect trades, made me a winner.”

I stopped taking trades because I felt like I needed to trade, or I wanted to trade, or any other reason we all convince ourselves of. My biggest problem now is holding good trades longer.

Of course I am ecstatic but I want to drive the point home so you can apply the lesson immediately.

Always strive to lose money on your best ideas. You are definitely going to lose money. We all will. Losing trades are included with “probabilities.” But how you lose is what matters.

Understanding the Difference Between Order Flow, Stock Price Momentum and Great Trading Ideas


I love making money. I’m sure you do too.

The current momentum gives us a reason to believe in the stock market again. The previous four months made us work hard. We didn’t become traders to work hard! We want the lifestyle, the glamour and the income.

July through early November was blue collar trading. The recent two weeks showed the return of white collar trading. The visualized image of “trading is easy.” Just buy, even stocks pointing lower will go higher!

Let’s be careful here…

Momentum is nice, but order flow is what we want. Order flow is sustained buying or selling pressure. Buyers or sellers are committing money, a lot of money, over time.

Order flow makes your bias easy, you clearly should be long or short. Momentum is tricky. You need flawless timing. Best case scenario is momentum in the direction of order flow. Golden. Order flow plus momentum is a great trading idea.

Today we see hundreds of stocks tearing into their sixth or seventh day higher. Many with zero bullish order flow.

A buy? Yes? High probability for follow through. No.

This trade idea frustrated me for a long time. Learn from my losses (2000-2001). If you trade pure momentum without order flow, be prepared to make decisive decisions. Hesitate and you are done.

Trades with order flow give you more leeway. More big money committed to the idea, They are not changing sides in one day.

Great ideas, ideas that you can build a long-term career on are built on order flow. Look to the left and ask; “How much have the institutions committed to this stock?”

Momentum is fun, but order flow is the girl you bring home to meet your mom.

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