Want To Win In The Markets? First Learn How To Lose
Jesse Felder | Mar 03, 2022 12:50AM ET
"The only thing to do when a person is wrong is to be right, by ceasing to be wrong. Cut your losses quickly, without hesitation. Don’t waste time." -Jesse Livermore, "Reminiscences of a Stock Operator"
When the Russian stock market crashed last week, I was intrigued. Panic in the markets never fails to grab my attention. At less than three-times earnings, there also appeared to be an adequate margin of safety in many Russian commodity-producers so I took at stab at it. However, after putting the trade on, I was never able to get comfortable with it as an actual holding and so I got right out.
Of course, buying into panic is never comfortable, but at least you can have faith in the idea that there is some level of intrinsic value that provides a floor for potential losses. all-out short assault was uncomfortable, but that faith in an intrinsic floor for prices was there. I just didn’t have that same sort of faith in buying Russian stocks the other day.
The point I’m trying to make is that we all make mistakes. I have made many over the course of my career. But I’ve learned, through difficult experience , to take the loss and move on. Study any of the greatest investors and traders in the world and, while they all have very different ways of making money in the markets, they all have one thing in common: they are very good at taking losses.
With all of the newbie traders that have come into the markets in the past couple of years, drawn to the idea of reaping huge profits in meme stonks, YOLO call options, NFTs and cryptos, this is a lesson that will likely be learned the hard way. But if you’re serious about becoming a real trader or investor, make it your mission to become great at taking losses and the profits will take care of themselves.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.