What I Learned Losing A Million Dollars

It is important to understand that they held on not because they wanted to look good, look smart, or be right. They held on because the position remained within previously defined and acceptable loss parameters.

Speculating is the application of intellectual examination and systematic analysis to the problem of the uncertain future.

There are also as many possible plans as there are participants, yet only one valid recipe for formulating a plan. Regardless of the methodology used, before you decide to get into the market you have to decide where (price) or when (time) or why (new information) you will no longer want the position.

One of the oldest rules of trading is: If a market is hit with very bullish news and instead of going up, the market goes down, get out if you’re long. An unexpected and opposite reaction means there is something seriously wrong with the position.

A preoccupation with wanting to be right or wanting to be perceived as being right, explains people’s tendency to focus on why the market is doing what it is doing instead of what it is doing.

A salesperson’s goal is to make the sale; to be right by countering objections and negative feedback from the prospect. But the Speculator’s goal is to make money, not to be right or counter the negative feedback from the market. A salesman’s ego gratification from being right is precisely what the entrepreneur, Speculator, and manager must avoid.

This means entry and exit points are derived after you have done your analysis.

It was always going to turn “tomorrow.” But it never did.

Alan “Ace” Greenburg, CEO of Bear Stearns says, “The definition of a trader is a guy who takes losses.”18 This is exactly the point made earlier about losses being a normal part of business and that trying to avoid losses altogether by not taking them is a loser’s curse.

people make purchases for only one of two reasons: to feel better (satisfying a want) or to solve a problem (satisfying a need).