Why do most people lose money in the markets?

This has got to be one of the most asked questions by beginners before they start. To answer it, we must examine the approach these so-called “losers” have, and how it may even resemble how you think. Stick with me because I am not calling you a loser.

Let’s just call a spade a spade and call out the elephant in the room. If you are looking at this writeup, it’s likely because you’re not financially free; at least not yet. And let me guess, you’re considering stock trading to gain financial freedom, right? Wrong – read here about how to generate wealth.

Most people lose money in the markets for two reasons. (1), They’re not psychologically conscious concerning their financial literacy and expectations. (2), They’re not educated about how the stock market works as a business unit. 

1. PSYCHOLOGICAL UNCONCIOUSNESS 

Psychologically unconscious people usually get drawn to the idea of getting rich quick, or in other words, getting lucky. You know, they’ve always heard of people making a fortune in the markets, so they think that it probably can’t be that hard. So, they give it a go. What do these naïve participants usually do? They follow the next fad. The key word? Follow. They fall in love with the story of a sector; usually found from a Facebook/Twitter news feed or what’s being talked about on popular TV channels, their friend, neighbor, et al. “Bitcoin is going to $100k! Let me get some bitcoin. Or “Electric Vehicles are the future; I will get myself some Tesla stock right now!” “Bezos is selling billions in stock, but he’s putting all his fortune into this one stock, register here to sign up for our newsletter so you can find out which stock we are talking about” “Cannabis is being federally approved, this sector will go insane” “Price target for this $20 EV stock is $500” etc. – you get the point.  If this sounds like you or someone you may partially be and behave like, it’s nothing to be ashamed of, it’s something to simply own up and admit to, because this is where most sheeple are, and it has a lot more to do with why they will never see 7 figures in their bank statements.

What’s the reality? While all these “fads” and “exciting” headlines gives the masses something to talk about, the stock market simply doesn’t work like that. At least not if your purpose is to sustainably make money out of it. If your goal is to throw a few dollars at it, and hold and hope because you know – yolo, then you may actually have a higher chance of scoring the jackpot by going to Las Vegas. Plus, you’ll have more fun too.

The stock market has a few approaches to it. Trading, Investing, and Gambling. Where do you think psychologically unconscious people fall on the totem pole? You guessed it – Gambling. They follow based on “what everyone else” is saying about a sector, and they throw their hard-earned money at a stock or a few stocks because you know – “let’s feel cool and have a portfolio.” What normally follows? They lose their money. At least more often than they become millionaires, that’s for sure. 

90-days they say. It takes on average, 90 days between when you deposit your money in a brokerage account for the purposes of trading, and when that account is back to 0 because you lost it all. Or in the case of “value investors” it takes between 90-120 trading days (4-6 months) between an entry, and either being up by a ridiculous percentage gain, or being significantly down. You know who I am talking about here? The people who buy a penny stock and hold and hope because “it has to come up.” No, it does not actually. That company behind the stock can just go bankrupt and you can also say sayonara to your money with equal, if not higher chance.

So how do we step out of psychological unconsciousness, and firm up the perception required for success in this game? You have got to harden up. You read that right. You cannot be a “Karen” or a “Snowflake” if you intend to find consistency in this game. What does that entail?

Self-awareness, situational awareness, and 100% honesty with oneself. 

First is first – you have got to stop being entitled. You read that right. If you think you are special, I guarantee that you’re not. I don’t care that your parents said you have what it takes to be an Olympian. To truly be an Olympian, it won’t be as a result of your parents saying so. It’s as a result of hard work, usually fueled by an innate passion to be the best. If you want to be good at anything, it requires hard work. Getting rich quick? Lol – that’s the worst outcome anyone could ever ask for. Why? If you’re not rich yet, you likely also don’t have the skillset, education, psychological hardening, and literacy, to hold on to that wealth. We’ve all heard of the story of the individual who won the lottery and found themselves either broke, dead, or homeless a few years later. Morbid stuff. Right? Well, it makes sense. The individual seemingly didn’t have the ability to turn 50k into 100k. How can they expect to handle 50 million dollars? They won’t. So no, you need to understand that you are not financially deserving to start off. Yes, even if you followed the “narrative” of “going to school” and getting a “bachelors or masters” in whatever. Instead of deserving, what are you more likely about? You have been spinning in a financial circle and have turned insecure about yourself and about your unrealized dreams, and it has led to a massive level of greed and appetite for financial freedom. Because life has been hard on you. Your greed, which likely is why you’re even reading this blog (because you need more money right?) is the culprit behind why you will never succeed in the stock market. Okay, so if I haven’t offended you thus far, you may actually have what it takes embark upon a successful journey.

1. PSYCHOLOGICAL UNCONCIOUSNESS 

You need education. Up until now, you’ve likely heard the narrative that “successful” people save their money, they look at wealth as a long-term play, and you likely think that buying a piece of real estate with a 25-year mortgage is a good idea, especially if you can unload tax-free RRSP’s towards it for 15 years. Because, you know, your friends all did it and you feel like you’ve missed out. Wrong. Successful people don’t save their money. Successful people overcome the fear of working with money, by becoming educated on the powers that money has on any scale. How is this good news for you? You don’t need much money to start to realize the power that money actually has. Look at this one trade I made; it was 23 seconds long.

200 Shares of $BNGO bought at $3.10 at 7:32:12AM and sold those 200 shares at $3.41 at 7:32:35AM. Total dollars used? $620USD. What was it after 23 seconds? $682USD. Less $10USD in round trip commissions? $52USD Profit in 23 seconds. That’s $70CAD for the mathematically challenged.

Okay, so if from this simple screenshot, we can gather that we can use money, to make money, then why on earth has the narrative engulfed the masses to trade their valuable time for money in a lousy job or corporate structure they actually despise? 

Fear. 

Fear that “investing” is dangerous, or “the stock market is unpredictable” or “the stock market is only profitable for the 1%” and this simply couldn’t be further from the truth. Let me tell you something; wherever you find mass agreement amongst the participants, those participants are normally broke, or will end up broke. This is the supply and demand basics which no body truly understands. If everyone is doing something similar at the same time (chasing price up), they will do the opposite at the same time as well (chasing price down). For example, if everyone is buying real estate because they’re afraid of missing out, what will everyone do when there’s a massive raid in a market crash? The majority will sell. Stop following the masses! No victory was ever won by following the masses. At least not in a calculated way. By luck? Sure. Victories were won, by having strategy, having a good thesis, and overcoming “temptations” due to the lack of patience and inability most have to stick through a difficult journey. So, my friend, the issue is that you either don’t know enough about what you don’t know about (how money works), or you’ve been burned by the wrong side of the market because of your lack of consciousness and education, and you’ve fallen victim to the narrative that the stock market is a dangerous game. 

It’s not. You just need the education on how it works so that you can position yourself for these types of trades. Finding your edge, I call it. You need an edge if you want to be financially successful. Copying other’s and you’ll be relying on luck to make it. And let me let you in on a little secret, most people aren’t lucky. So, you either decide to take the financial literacy and psychological wakeup as a matter you want to take into your own hands or continue doing what you’ve been doing so far. Both are outcomes that you’re in control of, and for many, it’s simply the thought of being rich that excites them, not the work required to actually get there. And that’s okay. That’s the same as the people who know how much money one can make in the markets, but they’re not thinking about how much they can lose at the same time.

There’s nothing against those types of people because they serve an important purpose in the world. At the end of the day, I need the security guard at the airport to show up to his job, so I can go on my 10th vacation that year. We all rely on each other. You just have to choose if you want to be the security guard, or the vacationer. Okay, that last part was a bit tacky, I don’t vacation 10 times a year. It’s more like 15 or 20 times, because I’ve worked extremely hard to get to this point in my life so now, I get to reap the benefits and rewards. And I want this for you as well. But only if you want it equally as bad. Otherwise, we’d be wasting each other’s time. I say to every client, the mix between your work ethic, and our resources, will guarantee success. If you don’t show up, you won’t succeed. It doesn’t get simpler than that.

In our mentorship program, I purposely trade with small dollar figures, to show you what’s possible. Why? Likely, you’re a regular joe and don’t currently have a lot of money. I mean, repeat the above process on 10 out of 20 trading days, and you’ve found yourself with a 500-dollar extra side-hustle for the month. What’s beautiful too? As you grow your account, the number of 0’s in your position size increases as well. Instead of 200 shares, you take 2000 shares, or 20000 shares. That $60 dollar profit just turned to $600, $6000, etc.

But what about losses?

Yes, those exist as well. But the better you get at understanding how the stock market works as a business unit, and the more you understand about your competitive advantage against psychologically unconscious sheeple - the better and more consistent your results will be as well; including how you take losses. Add to that the financial literacy of understanding how the taxation side works, especially when these activities are routed through the backing of a holding company and an incorporation, and it gets pretty damn near impossible to not be profitable in this game. Look at it as the reward for your education, literacy, and psychological awakening and hardening. 

But!

It requires hard work, a lot of hard work. I won’t be giving you false promises that you’ll be an Olympian at this. If you want financial freedom, it best not be because of the lambos’ and the true void you feel inside because of either everyone else whose made it, or because of your own lack of dreams being realized. Because money will simply multiply that void. I promise you this. You’ll realize that the girl you thought would give you attention still won’t, the car you thought would fulfill your false sense of importance still leaves you feeling empty, and the worst? Your arrogance will have multiplied, and nobody will want to hangout with you, or do business with you, and you get to sit there with all the heaps of cash, and all the hard work feeling like it never paid off. It’s easy to see why so many “rich people” get into drugs, suicide, and escapades that simply don’t make sense to the middle class. It’s because what makes us human, is being human and kind to one and another. Not the other fluff.

So, you will still have a moral obligation to be a good person, and even more so when you make lots of money.

My recommendation is to desire wealth on the accounts of making it about leaving a legacy behind, taking care of your needs – sure, but if you’re good at making lots of money, get really good at spending it as well. Donate it, teach other’s how to get wealthy, open up foundations for financial literacy, and if you have the buying power to make a change, then make the change in the world you want to see. I implore you to do this because if money is not spent, it has no value. What you spend it on? Well, that’s the education you need, to ensure that it’s a fine balance between IPA’s, WPA’s, and IDL’s. Those are code for Income producing assets, Wealth preserving assets, and Income depreciating liabilities. 

Do you feel up for the challenge of actually mastering this? Get Started Today.