Let me put this as bluntly as possible…
This is what I think about going all in…
NO!
The same goes for using leverage without proper risk management.
What happened last week with Leopold Aschenbrenner’s hedge fund, Situational Awareness, is sad.
The fund was up 450% YTD in early July.
Then the AI selloff blew up its 4X-levered book, triggered margin calls and forced him to sell his entire public stock portfolio to Ken Griffin’s Citadel at a MASSIVE discount.
But there’s also a great lesson in it about mindset and perspective.
Check it out…
Rudyard Kipling Got THIS Wrong
Rudyard Kipling’s famous poem “If” is great. (It has nothing to do with trading, but bear with me.)
There’s no denying that you can learn a lot by reading it and applying its wisdom.
But there’s one stanza that drives me crazy when people quote it out of context.
It goes like this…
If you can make one heap of all your winnings,
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings,
And never breathe a word about your loss.
When it comes to trading?
NEVER Make One Heap and Risk It All
Sorry, that’s just dumb. That kind of thinking is dangerous.
It’s a sick, sick financial world right now that encourages people to risk everything.
Sadly, there will be more Leopold’s unless people learn proper risk management.
One of the most important things we can all do is … stop celebrating going all in!
Look, I get it. Everyone wants to win
But going all in is careless (and encouraging it is sick).
The whole WallStreetBets “You Only Live Once” (YOLO) culture is for morons.
Encouraging people to use leverage when they don’t know what they’re doing is also disgusting.
I’m not trying to discourage anyone from following your dreams.
Be obsessed with trading and studying the markets (or whatever you want to do).
But NEVER think that means you have to risk everything on one trade.
Don’t get caught up in the all-in culture (or think that you have to use leverage).
It won’t end well (it never does).
You CAN achieve your dreams and reach your trading goals WITHOUT taking unnecessary risks.
5 Simple Rules to Protect Your Capital
None of my most successful students got where they are by going all in or using leverage.
Instead, they learned the 7-Step Framework and focused on being more selective.
The market is proving once again that you don’t need leverage to find life-changing moves.
• $DFNS ran from the $3s to nearly $100 in a week.
• $NUWE jumped from around $2 to $6.
• $CYCU exploded from $0.28 to $3 in a single day.
• $FCUV is up more than 750%.
You don’t have to go all in. You don’t need massive leverage.
Take profits into strength, manage your risk and let the market come to you.
Leopold Aschenbrenner blew up a nearly $50 billion hedge fund because of leverage.
Let that be a reminder: protecting your capital is just as important as growing it.
It really boils down to a few simple concepts.
1. Be selective about the stocks you trade.
2. Cut losses quickly.
3. Take gains into strength.
4. Manage your risk (by having a trading plan and sticking to it).
5. NEVER force trades.
Also, open your mind to the possibilities in this market…
Learn From Leo’s Mistake
There is so much opportunity in this market. But it drives me CRAZY when I see otherwise smart people take huge risks for no reason.
What happened with Leopold Aschenbrenner didn’t have to happen.
I can only guess, but the fact that he was so leveraged (rumors of up to 400% on some positions) means people who DO know the risks were willing to fund it.
He got married over the weekend.
If you have a bad day this week, just remember it could always be worse.
You could be Leo, who was on top of the world a month ago.
Now he’s lost billions and had to put on a happy face for his wedding.
Aye, aye, aye…
If you have any questions, email me at [email protected].
Cheers,
Tim SykesEditor, Tim Sykes Daily
