Wednesday, September 16, 2009

Wednesday Notes - Necessary Mistakes

Many of you know I have several pet peeves about this industry, including lack of transparency, poorly designed trader training by non-traders, and lack of accountability by the likes of Cramer et al. (Lest we forget that memorable "Miller vs. Barrons & Cramer" Post from February.)

Well one pet peeve that stacks right up there on my list is never being able to understand why many traders or educators never speak about that "other" side of this business -- or putting it bluntly, their MISTAKES.

Well I make 'em. And sometimes they're doozies. In fact I make 'em every day. And as I was telling the the team the other day, there has never been a day in my trading career where I haven't made one. Think about it. Never. And some days or portions of days, I flat out suck.

And while I've thus far passed on the many recommendations to pursue a book (btw, isn't the blog enough?? Plus, it's live and ever-evolving!), if I did, it would probably be titled something like, "How to make $2 Million by making Millions of Mistakes". And by "mistakes", I mean everything from tangible loss to the opportunity loss that comes from missed opportunities, lack of focus, burn-out, etc.

Rifle through the virtual pages of this diary and you'll see plenty of them. Who could forget that infamous day in October 2008 where I -- along with the rest of the world -- got the wake-up call of all wake-up calls as the VIX shot through 60. -$94K was the "tuition" I paid to learn how to trade the VIX in the stratosphere if I recall. And yes, the tuition was worth it as that week ended +$40K and month +$315K.

So that incredible month was the result of a beginning mistake. And not just your "trip on a banana peel" variety ... rather it was figuratively a full blown drop from the 4th floor of a building onto a concrete walk.

Today, I made smaller mistakes in that I traded the Europe session poorly and began the U.S. session with a drawdown. Yet I was able to use the information gained and "tuition" investment (failure for the market to break down even in the stratosphere and a less than 100% focused mind) to anticipate the U.S. session rhythm, tighten up the focus, and fully negate the early draw.

So why then do most traders, columnists, educators, vendors, chatrooms (I could go on, but might run out of virtual ink) never want to discuss their mistakes??? Well here's a news flash: We're human and we make 'em. And top traders make plenty of them ... perhaps even more than novices at times as we take the necessary risks required to profit over the long run.

And since mistakes are often the very seeds needed for success ... whether it be invention of the light bulb or million dollar trading, shouldn't we not only talk more about them, but shout them from the rooftops???

My recent years of success are the direct result of mistakes -- whether earlier in my career or of the current day variety. Come to think about it, even the current Jellie effort which is currently transforming traders is the direct result of a mistake in the form of my own personal early-summer burnout which led me to the concept of "Well, if I'm going to focus on restarting my own engine, why not do it with a team of traders so we can all benefit over the long run?"

Mistakes. I hate 'em. You can ask the Jellies about my self-inflicted lash marks.

But I love overcoming them.

Every hour of every day.

I have to.

I'm human.