What Was Learned Losing A Million Dollars Flashcards
Importance or a trading plan
Edison’s Menlow park lab burned to the ground, when asked what he’d do…
He replied “start rebuilding tomorrow” - he didn’t take failures or losses personally
Henry Ford has nothing, and 15 years later had the largest company in the world
15 years after that it was in shambles, did he take success too personally and become arrogant? Personalising success weakens people and makes them vulnerable without them realising it. Makes them think they alone and not the process or methods cause success. Hubris, overconfidence arrogance etc are debilitating
Jim make 240k in a single day - He had a desk that looked like it levitated, then, 75 days later he was broke, losing 20-25k a day for a few months. He was an exec on the Chicago stock exchange
. His ego pushed him down that hole, he borrowed to keep trading, until finally he was fired
What’s a sure fire path to massive failure
Personalising success, they treat success as an honest reflection of themselves as opposed to sound judgement, intuition / programming
There are two types of people, smart and wise people, what’s the difference
Smart learn from their mistakes, wise learn from other’s mistakes. I learned trading from others mistakes. My counter party lesson I had to learn
There are people for places and places for people
Don’t get too upset about things that don’t come naturally, probably eventually someone else can do it for you I
Jim had multiple Midas touches then a crash
Dated multiple girls, then they’re split from him. Trading loads, then fired for overconfidence and Black balled from industry: MTS - Midas Touch Syndrome causes massive loss.
Jim simply walked up to the smartest person in the room and asked them to lunch and asked them how they did it.
I basically did that with Nils.
I made $400k in a week (XRP pump), then I lost $400k in a week a year later (FTX). I didn’t take profits and store them safety, I got casual and thought I was smart so I didn’t keep thinking and using intuition
stay humble
Oldest rule - if the market is hit with mega bullish news, and instead of going up it goes down, get out of longs
The high from being right and rich is so intoxicating it can catch anyone off guard, you just need to spot it when it comes. He lost everything from a board of an exchange to broke in 6 months, and his mum then killed herself and dad got terminal cancer.
He was on top of the world the trades turned against him, he started fighting with his wife, lost loads of weight, wasn’t sleeping etc
Risk management protects the rest of your life. He sat at his desk crying as they ripped out his levitating desk - he had borrowed to trade. The guy started thinking about killing himself to get his family some life insurance and when driving drunk got bust by the police for bad driving when trying to find something to crash into.
All the great traders have gone bust once in their careers
He tried other markets, failed and EUR/USD trading,
The best investors in the world give loads of contradictory advice on to make money…but what do they all agree on????
How not to lose money, and how to protect what you have?
Cut your losses, let your winner run
Protect what you have.
Unskilled investors stubbornly hold onto what they have.
There are innumerable ways to make money in markets …..
There are innumerable ways to make money in markets ————————————————————–But, there are very few ways to lose money. Most of them are psychological factors, and some of them technically analysis flaws
People often don’t want to accept loses because they’re admitting they’re wrong, that and losing money is what we need to get used to accepting very easily
We must be able to accept we are wrong and accept we lose money with ease, this will allow us a clear mind to see the innumerable opportunities the market presents
Many traders and even entrepreneurs are simply gamblers
Gambling when done continuously fails, having a system and process to place bets will bring consistent results.
Risk and probability fallacy
People overvalue the benefits of betting big on a low probability high pay off bet (like finding ETH at the ICO price), and people undervalue the benefits of limited gain trades that are likely to pay off
Risk and probability fallacy
People think the probability of more than one event occurring is additive, not multiplicative. This means not understand the AND , OR, throwing 1 and then 1 out of 6 on a dice isn’t 1/6, or 2/6 or 1/12, it’s 1/36. 1 in 6 x 6
Risk and probability fallacy
People believe a number of successful trades in a row mean the next trade is now more likely to be unsuccessful and vice versa. Each is independentz
Risk and probability fallacy
We psychologically enhance the likelihood of an event occurring behind the maths. Example, being struck by lightening and winning a lottery ticket, both 1 in 10,000. But most consider it more likely we’ll win the lottery.
Risk and probability fallacy
People overestimate how frequently something will occur when it’s infrequent (a BTC pump for example). The things that occur very frequently are often thought to be infrequent (black swans in crypto and massive price crashes)
Risk and probability fallacy
People equate conflate and mix unusual events and low probability events. Example, missing the lottery by one number, is it’s almost winning the lottery, you still just missed, it’s just unusual. It can’t be looked through the lens of “I was so close” mathematically it simple is unusual, it’s not a low probability event or almost one, it’s just unusual.
Probability fallacies
Some confuse upside and downside with probability of it occurring. Example - 1:3 ratio, win 3 dollars or lose one. These are different.
