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
- “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”
- Some portion of clueless beginners will get it right simply by chance – for a while.
- Trading, as far as I know, is the only endeavor in which the rank amateur has a 50/50 chance of being right
- “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”
- “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.”
- “The pros could all make money in contradictory ways because they all knew how to control their losses.”
- “Participating in markets is not about being right or wrong, nor is it about defeat, it’s about making decisions”
- “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”
- “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”
- “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”