Want to get huge in the market? Then prepare to risk EVERYTHING!
I think this blog post will upset a lot of traders, or at least freak them out. Because that’s what this info did to me when I first discovered it.
If you want to get rich in the market then you are going to have to risk EVERYTHING. Your time. Your patience. Your friends. And most definitely your trading capital.
Why? Because the market thrives on risk.
You know that trading advice about diversification — about how you’re supposed to risk no more than 2% of your trading capital at one time and buy a bunch of safe stocks that you hold forever?
It’s a lie!
How do I know?
Because, for the last 5 years, I have been researching how the biggest retail traders of all time made their riches — and this research has proven to me just how damaging that advice is.
Not only that, but when I have backtested this info along with profitable trading methods, the growth is out of this world crazy. I’m talking about specialization, the opposite of diversification.
I’m talking about what Andrew Carnegie meant when he said:
The way to become rich is to put all of your eggs into one basket, and then watch that basket.
With that said, let’s take a look at 4 traders who I consider to be huge retail traders, and let’s see how they did it.
Nicolas Darvas was a professional ballroom dancer in the 50’s and 60’s who based his trading decisions on week old telegrams and copies of Barrons while he was traveling the world.
His box method would go on to become famous after his book “How I made $2,000,000.00 in the Stock Market” became a worldwide best seller.
Here’s a chart of one of his famous trades.
Darvas would frequently put all of his account into 1 or 2 positions that were trading at all time highs and add to those positions on margin.
His CANSLIM method of trading became famous after he published his findings in the well known trading book How To Make Money in Stocks.
Dan Zanger turned 12k into 42 million trading low-float highly volatile stocks using regular old chart patterns and putting his entire account (plus margin) into 1-2 positions. He blew up his account a few times along the way, but I’m sure we’d all agree that it was worth it.
Here’s one of Dan’s biggest trades:
Timothy Sykes’ claim to fame is penny stocks and how did he trade those penny stocks? All you have to do is read his own account in An American Hedge Fund where he talks about putting all of his capital into 1-2 stocks at a time — sometimes holding overnight and selling for huge gains the next day.
Think you’d be able to sleep with over $600k on the line? Yeah, me either.
Do you see the pattern here? All of these traders are/were mavericks. They all traded a few (1-3) stocks at a time. They all took HUGE positions (sometimes on margin). And they all got rich.
Just so you understand, the above formula can be a recipe for disaster, that’s for sure. In the hands of a newbie, putting all of your capital into 1-2 stocks at a time will be enough to make you go nuts.
But in the hands of a seasoned pro, or someone who has spent years studying the market — it’s also a roadmap to the type of untold riches you’re surely dreaming about — just as those four huge retail traders have shown.
And here’s a final thought. Trading is a job. And in every job you are getting paid for something. it is my belief that in the market you are getting paid directly in proportion to the amount of risk you assume.
Until next time — good luck out there.