What I Learned From Losing a Million Dollars Summary (8/10)

The central message of What I Learned From Losing a Million Dollars by Jim Paul is: don’t take success personally.

Entrepreneurs and traders are sure to fail if they do take success or failure personally. Why a Book on Losing**? **A lot of people have made money, but everyone has lost money, so it’s clear that everyone can benefit from learning about how not to lose money. When people lose, they usually think it’s the method that is defective. They often buy books with “rags to riches” stories, as if they had the secrets of success by telling people about the habits of the wealthy.

Spreading Up

“When you’re not sure what is going to happen in the market it iswise to protect yourself by going short in something you think isovervalued.” – Roy Neuberger“Whether I am bullish or bearish, I always try to have both long andshort positions- just in case I’m wrong. ” – Jim Rogers“I have tried being long a stock and short a stock in the same industrybut generally found it to be unsuccessful. ” – Michael Steinhardt“Many traders have the idea that when they are in a commodity (or stock), and it starts to decline, they can hedge and protect themselves, that is, short some other commodity (or stock) and make up the loss. There is no greater mistake than this. ”   – W.D.Gann

As you can see, the pros don’t agree on anything. Paul concludes that since they are successful, it’s not the making-money that mattered, but avoiding loss that did.

Losses

My basic advice is don’t lose money. – Jim Rogers”I’m more concerned about controlling the downside. Learn to take the losses.The most important thingin making money is not letting your losses get out of hand. – Marty Schwartz”I’m always thinking about losing money as opposed to making money. Don’t focus on making money; focus on protecting what you have. – Paul Tudor JonesOne investor’s two rules of investing:1. Never lose money.2. Never forget rule #1.”  – Warren Buffett“The majority of unskilled investors stubbornly hold onto their losses when the losses are small and reasonable. They could get out cheaply, but being emotionally involved and human, they keep waiting and hoping until their loss gets much bigger and costs them dearly.” – William O’Neil“Learn how to take losses quickly and cleanly. Don’t expect to be right all the time. If you have a mistake, cut your loss as quickly as possible. “

It’s important to learn how not to lose, because if you don’t, you may spend your whole life looking for new ways to make money without mastering a single one, and never learn the most important thing.

If you do learn why people lose and cut losses, then profits will follow. There will always be losses, of course, but the point is to think about avoiding the losses that sneak up on you, because those are the ones that wipe you out.

More Unthinking Proverbs

Finally, there’s the oldie but goldie: “Don’t trade on hope or fear or make emotional decisions.” Sounds simple but emotions of hope and fear that are intrinsic to the brain make that kind of hard to do.

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