What I tell people who lost a lot of money in the markets

Today I received a heartbreaking e-mail from one of my YouTube subscribers:

I just watched your YouTube video about losing money in the stock market. To be honest with you, I’m going through quite a hard time right now. This is probably my second or third attempt at trading after failing before and I’m currently in the middle of a big losing trade. I’m a university student, so it’s hard for me to financially support this loss, which is why I’m so scared if it gets worse. Do you have any advice for what I can do? I’m worried about gaining back the money I have lost from trading, as I cannot work much because of my university studies.

 

Thanks for your help,

 

R.

My response was typical of the consolation/motivation that I try to provide to folks who have sustained substantial losses (both financial and emotional) in the markets:

Hello, R., and thank you for the e-mail message and for watching my video.  I am very sorry to hear about your financial loss.  Unfortunately, there is no easy way to regain those losses.  If you cannot afford to lose more money in your current trade, you might consider exiting the trade, as it is always possible for the trade to go against you even more.  Hopefully next time you will only trade money that you won’t need anytime soon and can afford to lose.  Also, hopefully next time you will only trade small position sizes and will have an exit strategy in case the trade goes against you.  If you follow those guidelines in the future, you will never need to experience fear in any of your trades.

 

Fortunately, you are investing in your education, which is an excellent investment that usually pays off in one or more ways.  Depending on your major and how you apply what you have learned, having a good education can enable you to get a job that will allow you to save money for your trading account.

 

Typically, when people tell me that they have lost a large portion of their capital from trading or investing, I inform them of the harsh truth that they will most likely need to rebuild their account by working at one or more jobs and saving money to add to their trading accounts.  If you have lost, say, 50% of your trading account, then you will need to double your current account size just to get back to break-even; no trading or investing advice can change that fact.  It’s just going to take time, hard work, and discipline to rebuild your account; there’s no way around that.

 

Hopefully the next time around, if you choose to re-enter the markets, you’ll do it the right way and won’t ever have to face this type of situation again.  I certainly wish you the best of success, financial and otherwise, in your future endeavors.

 

Sincerely,

 

David Moadel

I hope that this message can provide some food for thought — call it “comfort food,” if you will — for anyone reading this who is going through a situation similar to this.  To you I say:  Take heart, learn from the experience, and start the rebuilding process.