What losing teaches us, if we are willing to learn.

Do you have a plan? Are you disciplined with your execution? Or are you stubborn? 

I have been out of town, well specifically I’ve been in Maui for a few weeks. Kitesurfing . . .  

The question everyone asks me back here in the ATX is did I see the eruption on Kilauea? Is there a lot of ash? 

To be honest, if you didn’t watch the news or check the internet, you wouldn’t have known anything was happening the next island over. Maybe it’s different now that Pele has blown her top so to speak, but as long as the trade winds are out of the north east, I bet it’s the same.  

During my writing absence I read a great book, Jim Paul’s “What I Learned Losing a Million Dollars”. To inappropriately sum it up the worst that can happen to a trader/investor is to have a run of success. Enough success to start to think you are smart and your shit doesn’t stink. That’s called personalizing your success. Instead of having a disciplined plan, you wing it thinking that your intuition will get you through lean times. You believe you are “right” and will be dogged to stay the course even if the evidence mounts that you should change direction.  

Then a loss starts to come along and you double down, thinking that you know better. A small loss turns into a big loss. Then you personalize the loss and start going through the stages of grief. Now your impaired and future decisions get even harder. You second guess your decisions. You think the market is going against you. You start to think there are those manipulating the market just to screw with you. 

Paul says to avoid this is to have a plan and stick to it. Don’t buy a stock until you have an exit plan, both up and down. Then execute the plan. Realize you’re not that smart, that sometimes you’re lucky. 

I think he’s right and I actually came to the same conclusions over time, but it took Mr Market reminding me over and over that he doesn’t care if I make money or not. Hell, he doesn’t even care if Warren Buffett makes money or not. 

I’d love to tell you I research my entries to a name and have the exit plan laid out. But options are a different beast. Within the same name you can bet on it going up, down or sideways and you can place a bet for several different time frames. So my plan seems pretty haphazard. But over the years I do end up with a way of doing things that suits me well. And keeps it fun. 

It took me a while, but now I don’t have to be right. I just want to play the game and make some money!