Best Loser Wins

Book Review of "Best Loser Wins" by Tom Hougaard

Author

Mo Wright
April 13, 2025

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Introduction

Welcome back. In this issue we’ll do a brief review of Tom Hougaard’s book, “Best Loser Wins”. I can’t say that I’m sold on his approach, but he offers a very powerful evidence-based perspective on why 90% of traders fail. We’ll also be reviewing $SPY craziness … again.

I am not an expert, and you should not treat any of what is said in this newsletter as financial advice. It’s just my opinion. The opinion of an average trader that has had some success, and many failures.

What makes my opinion different, though, is that I’ve spent the last two years coding trading indicators and strategies full-time to supplement my own trading. And, I’ve been building apps and websites since the browser was invented.

You can access all of the tools that I’ve built at https://mwright.com. Indicators. Calculators. Strategies. Browser extensions. Etc.

Stock of the Week: $JNVR ( ▼ 4.83% )  

$JNVR is turning into $MSTR. It was a 1 Day Rocket that I personally tried to take a short position on using my regular method of waiting for a rejection from a bullish order block in conjunction with a down cycle beginning on stochastic volume (see previous 2 newsletters). I added nearly $30K to a $100K paper account in the past few weeks without using any leveraged tools relying on this strategy. However, $JNVR wouldn’t go down, and I lost about $5K.

But, what I noticed is that a 1 Day Rocket that goes up, and stays up, is not typical. When it happens, it can actually keep going … for a while. After doing a little digging, it turns out that a team of “former executives from the Kraken exchange” bought Janover, a software company that provides business and commercial property financing, but has now added $4.5M in the crypto solana to their books. It sounds very meme-coin, but keep your eyes out for it.

Best Loser Wins

Someone on Reddit recommended, “Best Loser Wins”, by Tom Hougaard. (NOTE: use this link. For some reason a search on Amazon only brings up the German version). When I buy books on stock market trading, I usually skim them, or maybe read one or two chapters, then my eyes roll back because they’re usually regurgitating something I’ve heard on Youtube, Reddit, StockTwits, Twitter, Etc., a thousand times already. Or, the story is about someone whose life I just don’t identify with. This book was different.

I don’t agree whole-heartedly with the premise, but there are a lot of important, and unique, takeaways. The author makes a point of illustrating the fact that people who trade are usually highly intelligent and highly motivated people, who, nevertheless have a failure rate of 90% as a group. In other words, 90 out of 100 people trade at a loss during any given year.

Hougaard, points out that a large part of it is because people have their hopes and fears reversed. He argues that we typically are hopeful while a trade is losing, and fearful while a trade is winning. When a trade is losing,some people choose to increase their position at a lower price - because it lowers their entry point. Or else they just hold on, hoping that their initial analysis was correct. Usually, it isn’t.

When a trade is winning, we generally want to take profits as soon as possible even though the market is saying that we picked the right direction. From Hougaard’s perspective, this is when we should be adding to a position. But, a typical trader is fearful of losing their gains, and wants to “size out” of their trade. 

Put simply, the market disagrees with us, but we have faith that the market is wrong, and we add to a losing position; or the market agrees with us by showing a profit, but we doubt the market is right, so we don't add to our winning position.It doesn't quite make sense, does it? And yet, this is what the majority of traders are doing all the time.

Tom Hougaard

It’s a fascinating perspective. I tried that mental model during a trade in a paper account and actually did well with it. It also gave me more conviction behind exiting trades that have been at a loss for too long.

It’s a great book. If you get chance to read it, let me know what you think.

Last week was one of the most volatile we’ve had in the markets for years. On Monday, April 7th, 2025, we had a 5.7% move (nearly $30) on $SPY in a one hour candle. Most of that took place over 10 minutes. And on Wednesday, April 9th, 2025, there was a 7.2% move (nearly $40) in a one hour candle. And, again, most of that took place over 10 minutes. 

If you’re trading leveraged instruments like options or futures, this was potentially a life-changing event. Many Redditors were posting about how they lost half of their balance in the period, while others shared portfolios that were up by 10x. Although President Trump’s tariffs may have been a catalyst, if you had been following the newsletter, you would have seen these moves coming.

In a post on TradingView  (https://www.tradingview.com/chart/SPY/un2YSwUH-SPY-575-By-End-of-Month/) on March 14th, we posted a chart showing the lag between $DJT, $XHB, and $SPY. If you view that historical chart and click the forward arrow on each of the charts you will see how $SPY has been following the other two.

So, what’s next? Currently, exports leaving China are starting to get hit as hard as they were since Covid, with claims of orders being canceled across the board. Of course, if shipments grind to a halt, negatively impacting the supply chain, we should see some very ominous movements in $DJT, which is exactly what’s happening now.

Because of this, we should expect to see some continued, if not accelerated, weakness in $SPY, barring more extra-ordinary tariff announcements. Last week we had a potential technical analysis price target of $420, then $400 by end of the month of April. We also called for some consolidation across the $500 price level as discussed in the last newsletter, before seeing the dead cat bounce that we ended with on Friday that occurred at the baseline of the 10 year $SPY channel.

On the other hand, we are at the baseline of the 10 year $SPY channel. It could potentially act as a strong technical support zone at around $500. We are cautiously pessimistic.

More Resources

Free TradingView indicators you can use right now in your account. Don’t have a TradingView account. Click this link to get one.

The End

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