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I think I wasn’t patient enough to wait for a clearly defined situation.
At the moment I covered my short November position leaving myself net long July, I was up about $45,000. By the end of the day, I had $22,000 in my account. I went into emotional shock. I could not believe how stupid I had been—how badly I had failed to understand the market, in spite of having studied the markets for years. I was sick to my stomach, and
$400 for trading. Incredible as it may seem, he eventually transformed that tiny stake into a fortune, which has been estimated by some to approach $200 million. As his father is reported to have said, in what must be one of the grand understatements of all time, “Let’s just say Richie ran that four hundred bucks up pretty good.”
One day, I made a particularly bad trade and lost about $300. Since I only had about $3,000, that was a very big loss and it was destabilizing. I then compounded the error by reversing my original position and losing again. To top things off, I then reversed back to my original position and lost a third time. By the end of the day, I had lost $1,000, or one-third of my entire capitalization. Since then, I have learned that when you have a destabilizing loss, get out, go home, take a nap, do something, but put a little time between that and your next decision. When
The great thing about being a trader is that you can always do a much better job. No matter how successful you are, you know how many times you screw up. Most people, in most careers, are busy trying to cover up their mistakes. As a trader, you are forced to confront your mistakes because the numbers don’t lie.
One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do.
