I recall my first major “blow up” trading back in 1999.  All I had was $2000 to my name and I put it all in the stock market.

There was an internet company called “Internet Commerce” something or other.  I think the stock symbol was ICCSA.

The stock was trading at $4 having run up from $1 in a short period of time.  I had just learned about shorting stocks, so I thought I’d short this bloated stock with no revenues back to the $3’s.  I took my $2000 and shorted it on full margin, doubling my position to 1000 shares short at $4.

Sure enough, as my luck would have it, it quickly climbed to $5.  Then $6.  Then $7.  Then $8.

Then I received a margin call from my broker.  And that same day,  before I could act on it, they automatically closed out my position.  I was so upset that they closed me out at the high of the day $8.50 without giving me a chance.  Especially since the stock was getting ready to drift back down.

I checked my account balance and it actually said “-$2,000”.  Yes, negative two thousand dollars.  I was confused at first, but then realized this meant that not only did I lose my $2k, but that I needed to mail them a check for an additional $2k, which I didn’t have…  I was numb with shock.

I used my next couple paychecks to pay this back, but the whole time I was upset with them, as I watched the stock drift down to the $7’s, obviously heading lower.

Months later, I checked this stock to see where it had fallen to.  It turns out, it went on a dot com bubble rage and climbed all the way to $90…  (Before eventually falling back to $1.)

—–

So as I reflect now on my trading “career”, all I remember all these blow up and huge mistakes I’ve made.  I’ve had some wins here and there but I’ve never had a good year.  I’ve missed all the bull markets, sitting out.  Or found myself on the wrong side of them.

And now this year happened, suffering a catastrophic loss.  I can’t believe the misfortune I’ve endured as possibly the worst trader ever, with horrible timing and intuition.  Complete lack of discipline.  I take bets that are too big and go all-in, looking for the big score.  More times than not, I am in a hole, trying simply to climb back to even.

So much time and stress just trying to make it back.  I don’t know what it feels like to have a good year, to be up.

—–

The stock market is the world’s largest online game with millions of other players.  All we’re trying to do is choose UP or DOWN – and be correct in our timing.  A lot of us are not actually “investing”, we’re really just “playing”.  On the surface, such a simple game.  Up or down.  But once you add the thrill of real money and let emotions get involved, the game becomes amazingly complex.  And I don’t think I have the patience and emotional discipline to be successful at this…

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9 thoughts on “

  1. Sam Dogen says:

    I’d love to share your story on Financial Samurai if you can because I know EXACTLY how you are feeling. I have a similar gambling tendency with stocks where I frequently go ALL-IN with my entire portfolio. It is considered my “punt portfolio,” but still.. it’s about $400,000 in size and real money that I will swing $50,000 here and there a week all the time. I think if I get back to even this month I’m just going to have a financial advisor manage it so I can just focus on building out my online business instead of wasting time.

    Financial Samurai gets about 550,000 page views a month if you’d like to share your story. Reach out to me on my About page where you’ll find an e-mail address.

    I really wonder how we can better fight this addiction. I’m frugal too, drive a 14 year old car, don’t buy much of anything.

    • Hey Sam, sure feel free to share my story. I’m not sure how much there is to learn from it, but I’m sure there’s some “entertainment” value in watching someone blow up their account step by step.

      But sounds like you can relate to my problem of going all-in with my entire portfolio into a single position. I don’t know why I do it, it’s almost just compulsive. I’ll be reading about a stock on a blog or forum, I check out the chart, then next thing you know 15 minutes later, I’m all-in. Not much in the way of research or patience waiting for an good entry.

      I think sometimes I have a trading idea that I don’t act on, then I watch the stock take off. And then I sit there all day, calculating all the missed profits, if I had just acted on my gut feeling… Of course, I remember these missed opportunities and dwell on them — but I have a selective memory and totally forget the trades that I’m glad I didn’t take…

      Definitely the mindset of a gambler, not a trader. A real trader has discipline and rules and waits for an entry. I just dive in head first and hope.

      It’s worked out a few times in the short term, but in the long run, I’ve always gotten crushed. I just never thought I’d get crushed this badly in such a short period of time. I thought I’d at least get one big win and make some back. But it never came…

      This is an addiction for sure. I don’t visit casinos anymore for this reason, gave it up 15 years ago and haven’t gambled since. But sitting at a computer has always felt different…

      I guess I published this blog to see how many others were out there that have these same problems and can relate to the emotional undisciplined side of trading…

    • SomeGuy says:

      $400k to play around with? Christ… Im all for living a modest life and within your means, but if you’ve got 400k that you’re willing to lose, at least use some of that for a vacaction or something.

      Then again, Im sure this isnt the first time you heard this, so good luck with your speculation!

      • john says:

        Yeah really… Go to THailand and retire there. 1k expense max per month.. with 400k, you can spend approximately 33 years there without problem. It is much better by sitting at the beach, enjoying the best possible life with great food and women, rather than sitting in front of your computer grinding greedily for more money.

  2. kguy77 says:

    Dude,
    You need to learn things. All your mistakes are captured in Anne Marie’s book (The Trading Book : A Complete Solution to Mastering Technical Systems and Trading Psychology by Anne-Marie Baiynd (2011, Hardcover)).

    It is just 8 bucks at half.com at http://product.half.ebay.com/The-Trading-Book-A-Complete-Solution-to-Mastering-Technical-Systems-and-Trading-Psychology-by-Anne-Marie-Baiynd-2011-Hardcover/99705650&tg=info

    So please buy this book, read thoroughly and she captures your mistakes as early before 10 pages!!

  3. J says:

    Lots of people commenting on these posts telling you to “learn” from mistakes and somewhat encouraging you to come back to trading. I for one think that if you look back in 25 or 50 years you’ll have lived a happier and less stressful life putting your future income in an index fund. Do what you do best and enjoy your life.

  4. Penny says:

    There are three varieties of idiots in the market you’re likely to encounter during your trading career.
    1) Idiot #1: The True Believer – You’ve probably encountered at least one of these dolts during your market sojourns. They are the ones who have figured out the answer to the market. Not an answer, mind you. *The* answer. It usually is some kind of numerological or astrological scheme, and it is always a hidden secret. Unfortunately, True Believers don’t seem content with keeping their knowledge hidden. They’re always after you to “unlock the mysteries” of the market by sharing in their discoveries. A surprising number of True Believers are also True Bears, which means that they’re forever predicting the end of the financial universe as we know it. They predicted it in 1980, 1990, 2000, and they’re still predicting it. And when the market rallies and proves them wrong? Well, that just means the bubble is getting even bigger and the implosion of the universe will be even more profound. My take on True Believers? This is not investing or trading; it’s cultism. And true believers are at the point where they *have* to believe, or they’d come face to face with the awful realization of the utter waste of time and money their beliefs have brought, as the Dow has risen from 775 to over 12,000 within a 25-year period.

    2) Idiot #2: The Gambler – This is the “I’m-giving-up-my-job-to-become-a-trader-because-I-don’t-like-working-9-to-5” idiot. Observe that this bottom-dwelling resident of the phylogenetic scale is not giving up his job because he’s had success at trading. He’s also not giving up his career because he so loves trading that he researches it day or night and has found a winning edge. No, The Gambler doesn’t do anything beyond 9-to-5, because what he’s after are easy riches, not effort and earned success. He hears that others have been successful (usually from Idiot #3), and he figures, “That means I can do it too”. Invariably, the Gambler is attracted to daytrading. Why? It gives him a sense of action, and it justifies his decision to abandon all efforts at productive work. Besides, you can’t really explain to your wife and kids why you’re not out there with working humanity supporting your household when you’re sitting around doing nothing, holding positions for weeks at a time. So the Gambler actively trades in and out of markets, pretends like he’s got a job, and every so often berates his spouse when she wonders when the family will be able to pay its bills. My take on Gamblers? They’re not interested in trading; they’re interested in their fantasy. So interested that they’ll take their bank accounts and families down with them.

    3) Idiot #3: The Self Promoter – It’s easy to find the Self-Promoters. By their very nature, they’re in your face hawking their wares, lauding their recent market calls, and promising easy trading success. Open any trading magazine and you’ll see their well-coiffed, grinning idiot faces leering at you, usually as part of a trading “event” that just happens to be selling all their products. The key to recognizing Self-Promoters is that they promote themselves, not ideas or methods. Indeed, a substantial number of them don’t trade. Those include the “Trading Coaches” who promise to improve your confidence, but offer no concrete trading guidance that you could ever feel confident in. They also include the “Gurus” who tout simple chart patterns and indicators, carefully avoiding any possible objective testing of their wonderful setups. Self-Promoters never talk about how hard it is to achieve trading success; that would not sell well, especially among The Gamblers. Instead, they borrow their pitches from the “no money down” real estate guys and tell you how easy it will be to succeed with no capital. My take on Self Promoters? I don’t mind people who deceive others; they’re merely dishonest. It’s the ones that deceive themselves that frighten me. That’s when dishonesty becomes delusion.

    So there you have it: a rogue’s gallery of trading idiots. Once you tune your mind to this threefold taxonomy, you’ll have no problems at all recognizing them within moments of their opening their mouths. And, if you want to be happy, you’ll follow the advice of literary critic Dorothy Parker and not toss these idiots aside lightly. Rather, you’ll hurl them with great force.

    Brett Steenbarger, Ph.D.

    Location: New Canaan : CT : United States
    Interests: Performance coaching, the use of algorithmic trading systems as decision support for discretionary traders, using high frequency data for the short-term trading of stock index futures and index ETFs, brief and solution-focused approaches to psychological change, our children, grandchildren, and four rescue cats

  5. dee says:

    Your blog name is apt. Can you tell us why oh why were you buying and selling so quickly? Why not hold? Unless you’re in the financial industry, which it appears you’re not, why pretend you’re a day trader?

  6. john says:

    Stock trading isn’t exactly a friendly world. People put money in the same pool in hopes of getting a higher return. By doing that, advanced traders use strategies and tactics trying to beat or putting themselves one step above average traders. To trade, you need a sound strategy or otherwise don’t trade. 80-90% of traders lose money in long run so your hopes of making money is not high. Imagine if you go against your conventional ideas and play the opposite, you would have been 200k richer right now.. Every thing in the trading world doesn’t make much sense at all. The more you think this stock is going to go up, just play the opposite of that.

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