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The Three Lessons I Learned From My Biggest Loss Ever

Posted July 14, 2021

Jonathan Rodriguez

By Jonathan Rodriguez

The Three Lessons I Learned From My Biggest Loss Ever

Alright, alright...

It's J-Rod and welcome to Stocks That Rock

Today, I'm going to do something different.

Instead of highlighting a breakout stock like I normally would...

I'm going to share the three lessons I learned from the biggest trading loss of my career.

And I hope you can avoid learning these lessons the hard way yourself!

Click Here to WatchOne Trade to Risk Them All

I'm going to get into the lessons in a moment, but first... I have to tell you about this awful trade...

Two years ago, I got a trade idea from a buddy of mine.

To me, the idea was so juicy...

I broke many of my own trading rules to get into the action.

(Spoiler: That's always a big mistake.)

It was a short trade, which as an optimist, I almost never put on.

And while I agreed with my buddy that the stock was wildly overvalued and ripe for a fall...

This just wasn't my kind of trade.

To boot, I was already up big on the year.

So there wasn't a need for me to swing for the fences.

But the potential upside was huge.

So I got greedy and went in headfirst.

Within a month or so of being in the trade, it tanked and I lost all my investment.

So instead of ending the year up big on the backs of good, well-thought-out trades...

I wiped out all my gains with one trade and closed out 2019 in the red.

(I call this trade my BFL, short for "big freakin' loser.")

But after I really broke down what I did wrong with the BFL and did some serious soul-searching...

2020 was my best year ever as a trader — even at peak pandemic.

And 2021 is shaping up even better than last year.

Here are three simple, yet powerful lessons I learned from that loss that led to my success...

Lesson #1: Plan Your Trade and Trade Your Plan

If you want to be a successful trader and be in the markets for a long time...

You need to plan your trades.

I've been trading for a long time...

And I know what type of stocks I like...

What kind of chart patterns and trade setups I like.

And above all, I know how much money I want to make on my trades... and how much I'm willing to lose.

So my typical trade plan looks like this...

I put x number of dollars into a trade.

Once I double my money, I take half of my profits off the table and let the rest of the trade ride.

So at that point, I'm playing with "house money" because I've already made my investment back.

On the downside, I'll close out of a trade if it loses 50% of its value.

Pretty simple trade plan, right?

Did I put this plan in place on my big fat loser trade?


I had a profit target, but it was WAY higher than it should have been... and I didn't use a sell stop.

If I had planned out my trade appropriately and stuck to it...

I would have slept better at night and saved myself thousands of dollars.

Don't make that mistake!

Lesson #2: In Trading, (Position) Size Matters

You've got to size your trades up so that no one trade can break you...

And your best trades can actually move the needle for you.

One big reason I went wrong with the BFL is that I put too much money into the trade.

So after learning this the hard way...

Here's my new and improved strategy of sizing:

I keep a small portfolio, usually 7-10 positions...

So I can focus on and keep track of each position closely.

And I size my trades so that the majority of my risk capital goes into my highest conviction bets.

These are the trades I do the most amount of research and due diligence on.

So each one of these trades might be worth 10 or 20 percent of my overall account...

Depending on how confident I am that the trade will be profitable.

Conversely, I put the fewest dollars into my lowest conviction trades.

We're talking 3-5 percent of my total capital.

That way, most of my money is working on trades that I believe in.

But I've still got space in my portfolio to trade speculative opportunities... without putting too much risk on.

And, of course, if a low conviction bet starts to pay off, I can always add to the position.

With my BFL trade...

I took an unusually large position in a low conviction bet.

And in hindsight, if I really just had to put that trade on... I should have put on a smaller position which would have minimized my risk.

Last but not least, here's lesson number three…

Lesson #3: Don't Dwell on Your Mistakes

This is the most important lesson.

When you mess up, figure out what you did wrong... take a good mental note... and move the hell on.

Otherwise, you risk knocking yourself off the horse and not getting back on again.

With my BFL, yes... I made mistakes and I ended up losing money.

But I let the loss consume me for months.

Dwelling on the trade shook my confidence.

And made me question myself as a steely-eyed trader altogether.

But in reality, my trading strategy works just fine.

And most of my trades had been winners up until that loss -- and they have been since then.

Above all, if I knew I'd never bet the farm on a speculative bet like that...

There was really no reason to keep beating myself up over my BFL.

Once I realized that, I was back to rockin' and rollin' in the markets again.

OK, so to recap:

  1. Plan Your Trade, and Trade Your Plan
  2. Position Size Matters
  3. Don’t Dwell On Your Mistakes

And here's the bottom line...

As long as you learn from your trading mistakes, you'll always emerge from losses stronger.

And by watching my videos and reading my articles...

I hope you won't have to learn as many trading lessons the hard way like I did.

Thanks for watching today.

If this video helps you out, please hit the like button and leave me a comment.

I'd love to hear from you.

And of course, make sure you subscribe to the Rich Retirement Letter YouTube channel so you never miss one of these videos.

Thanks again.

And for Rich Retirement TV, I'm J-Rod and I'll see you next time!

On the hunt,

Jonathan Rodriguez
Senior Analyst, Rich Retirement Letter

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