The Three Leaks That Quietly Destroy Most Trading Accounts
Three leaks behind most losing accounts — and none of the fixes require talent. Momentum Investing 101 · Lesson 1
Chasing, and buying stocks during periods when breakouts aren't working, are two of the fastest ways to lower your equity curve.
💸 Leak #1: Chasing
A stock has an avg. daily trading range of 6% and you buy it up 4–5% on the day. The next day it’s down its typical 6%, and you’re down 4% right out of the gate. The stock did nothing unusual — it just moved its normal range. You paid for it.
If you know how this feels all too well, just know I was in your shoes — until I got serious and put together a system.
🗺️ Leak #2: No plan
Having no plan is the second biggest leak.
I don’t believe in soft stops. I always trade with a stop, because when I don’t, I start making excuses for why this time is different. So I eliminate that temptation completely; always a stop. Which then forces you to have a plan.
The plan covers what you buy, too. I make sure I’m always in the leaders within the leading industry groups — not the third-best name in a group. Why waste time hoping for a stock to catch up to the leader? I’d rather find a low-risk entry point into THE leading stock in its respective industry group.
🌊 Leak #3: Fighting the market
You need situational awareness — knowing when conditions just aren’t right to be trading stocks.
I try to trade by the Dan Zanger motto: the only good stock is one going up.
Be highly mindful of distribution days versus follow-through days. Always watch what the indexes are doing, and be quick to go to cash — and stay in cash.
Most of the strongest parts of the market happen in just a few days. It’s knowing when to be in cash that makes the difference between a mediocre trader and an excellent trader.
🎯 Try this
Pull up your last five losing trades. For each one ask yourself if you were chasing. Did I have my stop written down before entry? Was the general market in an uptrend that week? Most people find one leak explains the majority of their losses. That’s your homework.
Educational content, not investment advice. Ride The Leaders™ is an impersonal research publication.