Sep. 3 at 2:49 PM
$HOOD For those new to trading there is an important lesson in this guy's post.
Buying with margin is a dumb strategy. And risking more than you can afford to lose is even worse. I bought on margin a few times in my career such as the covid low and it paid off, but it wouldn't have destroyed my portfolio as this guy did. Better to own the shares with funds you have and not risk everything in 2 names as this guy did. This stock is over 8% today. He lost everything.
Leopold Aschenbrenner, who is known as the "Nostradamus of AI" of the fund Situational Awareness just made the very same mistake. Used too much borrowed money and the funds losses forced him to sell most of his assets to Ken Griffins Citadel of all people.
This is why I have studied the great traders and have beaten the market for more than 15 years. This is what they say.
Jesse Livermore: Regarded as one of the greatest stock traders in history, Livermore made and lost several multi-million dollar fortunes. In his trading rules, he heavily warned against trying to save a levered position, famously stating: "When a margin call reaches you, close your account. Never meet a margin call".
Warren Buffett: The Oracle of Omaha has frequently warned retail investors about the dangers of debt. He famously noted that if you are smart, you don't need leverage, and if you are dumb, you shouldn't be using it. He often cites that leverage is one of the only ways a smart person can go truly broke in the stock market.
Ray Dalio: The billionaire founder of Bridgewater Associates famously compared using leverage to playing Russian roulette, noting that "it means that you are inevitably going to get a bullet in the head".
