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The Top 10 Lessons from the book “What I Learned Losing a Million Dollars”

I just finished reading “What I learned losing a million dollars” by Jim Paul and Brendan Moynihan.

This book is the excellent story of a young man who was a successful commodities trader who was entirely wiped out in a period of 6 weeks or so.

Per our usual format, we have pulled out a few interesting snip-its from the book in summary or quote form.  We would highly recommend picking up your own copy of this book.

The Top 10 Ideas 

  1. “Personalizing successes sets people up for disastrous failure.  They begin to treat the successes totally as a personal reflection of their abilities rather than the result of capitalizing on a good opportunity, being at the right place at the right time, or even being just plain lucky”
  2. Some portion of clueless beginners will get it right simply by chance – for a while.
  3. Trading, as far as I know, is the only endeavor in which the rank amateur has a 50/50 chance of being right
  4. “If you start from scratch and have a run of successes, you are setting yourself up for the coming failure because the successes lead to a variety of psychological distortions.  This is particularly true if you have unknowingly broken the rules of the game and won anyway”
  5. “The successes in my life had given me a false sense of omniscience and infallibility.  The vast majority of the successes in my life were because I got lucky, not because I was particularly smart or better or different.  I didn’t know it at this point in the story, but I was sure as hell about to find out.”
  6. “The pros could all make money in contradictory ways because they all knew how to control their losses.”
  7. “Participating in markets is not about being right or wrong, nor is it about defeat, it’s about making decisions”
  8. “Internalizing an external loss is a lot easier to do with the other type of loss-producing activity: a continuous process [vs. a discrete one like a basketball game]  – an activity that has no clearly defined end.  Losses from continuous processes are much more prone to become internalized because like all internal losses, there is no predetermined ending point”
  9. “Regardless of you [profit] methodology, 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”
  10. “Participating in the markets is about making money; it’s about decision making implemented by a plan. And if implemented properly, it’s actually quite boring waiting for your buy/sell criteria to materialize.  The minute it starts getting exciting, you are gambling”

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