What I Learned Losing a Million Dollars By Jim Paul ,Brendan Moynihan

Someone did it for you ~

whatilearnmillion

The author is a professional commodity trader since a young age, what he believe, in terms of trading , successful or unsuccessful, is more about psychology than tactics. In order to perform a successful trading, one must learn how to lose, as losing is part of the game. Success can be built upon failures where failures aren’t take personally, likewise, failure can be built upon repeated success take personally.

We must distinguish a good “salesman” from trader, as if you make money in a good place in the right time, doesn’t make you a good trader.

When people lose money, they look for new approach to make money, as its easy to think the “method” is defective , but not the traders fault. Trying to avoid taking losses is the loser’s curse. People lose money mainly because 1. Fault in analysis 2. Fault in application.

Purely memorize and repeat a work is easy, grasp the underlying principle is more difficult.

One of the sentence we have to be careful of ” i cant get out here, i am losing too much.”. Losses doesn’t bother people, unexpected losses / losing on balance does.

There are 2 type of losses : External losses and internal losses. Therefore the pain for loss is subjective from person to person. Loss / wrong /bad / failure as shameful thing by the society, however its part of the business. We must distinguish fact ( objectively verified) vs opinions ( personal assessment). There is only good / bad decision but not right / wrong.

5 stages of internal loss

1. Denial : If you are underwater but don’t know how much under, you are proposal in a stage of denial.

2. Anger : Explore in all direction, and it projected into environment randomly.

3. Bargaining

4. Depression : sadness, distance yourself from love one, and change in appetite/ sleep

5. Acceptance

Internalize an external loss is easier as a continuous process, as there is no ending point.

When dealing with uncertainty : people tend to engineering, gamble it or speculating, instead of a proper decision process :

1. Decide which type of participant you going to be

2. Select a method of analysis

3. Develop rules

4. Establish control

5. Formulate a plan

Analysis doesn’t tell you when/ what to do. There should be Rule / tool that determine when you should act. “Accept the fact the profitable situation will occurs when you notice, don’t worry the miss, your rule will make you in some of millions of them.

We should also establish control, like exit criteria, price order / time stop / condition stop. All you can do is manage your losses, not predict profits.

Don’t fixture on the secret ingredient ! go for the full receipt, what order / quantities to mix the ingredient/ The plan must decide when to stop / enter / what price, we must make the “stop” price before enter the market. People tendency is to ask “why the market going up”, which reinforce his view that he is right.

Knowing ” why” alone doesn’t make you money, whats the point of being right and not making money ? The per-occupation of being right, we will personalize the market, that’s the root of losses. The more the market treated as a games, less like to loss as games has rules and ending points. Follow the plan, discipline over emotion. Discipline is not doing what your emotions would want to do. The weak is who he follow his action follow the emotion, and strong is who force his action to control emotion.

Failure to have or follow a plan is the main cause of losing money. refrain from answering before you through of a subject. However, we should distinguish the different from “take responsibility” and “take things personally”.  Accept responsibility for outcome without internalization the swing.

If self-worth = rise / success / failure, win/loss, that our self-concept will be in constant crisis. Self image should not be what you have accomplished, but how you have gone about doing it.

Check out the book >>>> whatilearnmillion

 

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