Traders would benefit from our own self-help organization- I’d call it Losers Anonymous. Why not Traders Anonymous? Because a harsh name helps to focus attention on our self-destructive tendencies. After all, Alcoholics Anonymous do not call themselves Drinkers Anonymous. As long as you call yourself a loser, you focus on avoiding losses (Elder, 37).

Good day divi enthusiasts! I had a great surprise coming home from work this morning. My copy of Trading for a Living was obediently awaiting my arrival home. I doubt you can get this kind of loyalty from a dog (no mess as well).  I managed to snag a used copy for a little over $2.00 and shipping (as always) was on point. I love you Amazon prime!

I made a mistake (guess it’s a choice by now) that I commonly make of starting another book before finishing the one I am already reading. My eyes drifted from a A Random Walk Down Wall Street to the newer Trading for a Living. I still have some work to do on my discipline!

Trading for a Living

 

Alexander Elder, MD, was born in Leningrad and grew up in Estonia where he entered medical school at the age of 16. At 23, while working as a ship’s doctor, he escaped from a Soviet ship in Africa and received political asylum in the U.S.A. He continued to work as a psychiatrist in New York City, served as book editor of The Psychiatric Times, and taught at Columbia University. After becoming involved in financial trading, Dr. Elder published over 50 articles, software, and book reviews, and spoke at many conferences. In 1988 he founded Financial Trading Seminars, Inc., an educational firm for traders (Elder, back-cover).

I have come to a great stopping point in the book so I can finish up A Random Walk first. However, due to this being a hardcover and not a kindle edition, I would like to share what I read before I forget and do not have the luxury of finding underlined text quickly. It is clear from the author’s bio that he has a pretty unique background. I think he made a great comparison when he said the ‘Little Stalins’ depended on Stalin just like traders depend on the ‘gurus’ for help. That is not what I am here to share from the book though (could be an interesting topic though).

One of the sections that I have enjoyed so far is the chapter “Trading Lessons From AA.” I did just this chapter by its name and I was not disappointed! The main point that caused me to buy this book was for the section on psychology. I think that psychology plays a key role no matter how or what you invest in.

Coincidentally, I read this section right after reading a post from Dividend Hustler on gambling called You Owe It To Yourself. It was a great primer for what I read but enough tangents for now. Alright, back to AA…I mean trading.

Denial:

There is a stark parallel between an alcoholic and a trader whose account is being demolished by losses. He keeps changing trading tactics, acting like an alcoholic who tries to solve his problem by switching from hard liquor to beer. A loser denies that he has lost control over his course in the market (Elder, 31).

I always think of the common phrases I hear and see:

  • If only I would have held my position longer I wouldn’t have lost money.
  • If only I went short
  • If only I went long
  • If only my account was larger I could have survived the downturn
  • I knew I should have gotten out of the market

The stock market makes me think of all the solo competitions: boxing, chess, wresting, tennis, running, etc . If you lose, you only have yourself to blame. It’s always sobering to swallow that pill but it has to happen so growth can happen. It is very easy to start the excuse train and once that train gets going it is hard to stop! I found the excuse train crew neglects their brake maintenance often.

Rock Bottom:

The pain of hitting rock bottom feels intolerable. It makes an alcoholic see how deeply he has sunk. This pain penetrates his denial. He sees a stark and simple choice- either turn his life around or die. Only then is an alcoholic ready to begin his journey to recovery (Elder, 31).

This is when people blow up their accounts with money that they can not afford to lose. Then they get turned off of the market forever. The other option is that they will raise more cash to only repeat the vicious cycle. At some point, the conclusion has to be made that something is wrong and corrective action is needed. “When you admit that you have a personal problem that causes you to lose, you can begin building a new trading life. You can start developing the discipline of a winner (Elder, 35).”

The First Step:

The first step an alcoholic has to take is to admit that he is powerless over alcohol. He must admit that his life has become unmanageable, that alcohol is stronger than he is. Most alcoholics cannot take that step, drop out, and go on to destroy their lives (Elder, 32).

A trader must first come to grips with the fact that losses are stronger than his or herself. Calling yourself a loser will keep you focused on avoid losses much in the same way that labeling yourself an alcoholic will give you no leeway to drink. Period.  A great morning routine would be, “Good morning, my name is [JT], and I am a loser. I have it in me to do serious financial damage to my account (Elder, 37).” This will help keep you sober in the market.

In Charge of Your Life:

Finally, the author gives 7 rules that helped him on his journey from a “wild amateur” to a “professional trader.” I will shorten the points for brevity’s sake.

  1. Decide that you are in the market for the long haul
  2. Learn as much as you can.
  3. Do not get greedy and rush to trade.
  4. Develop a method for analyzing the market.
  5. Develop a money management plan.
  6. Be aware that a trader is the weakest link in any trading system.
  7. Winners think, feel, and act differently than losers.

Now, all that is left is for action to be taken. It is just like weight. There are more diet books and exercise regimens than ever and yet more people are obese than ever. I cannot make progress if I do not practice these rules.

I am looking forward to finishing this book but will have to use some discipline to finish A Random Walk Down Wall Street first. Trading for a Living, from what I can tell so far, has useful information that can be applied to many different trades (sorry couldn’t resist!).

 

 

Take Care,

 

JT

 

P.S. Writing this to The Gambler by Kenny Rogers is the only way to go.

 

 

 

 

4 thoughts on ““Losers Anonymous”

  1. I agree – the long haul gives you a much better chance of making money over the short haul investors.

    Traders suck. I want to create long term passive income, not gambling income.

    Tristan

    Reply
    • I think the big problem is people mix the two. They turn losing trades into “long term investments” because they cannot bring themselves to cut their losses. That is a recipe for disaster.

      I think you can be a successful investor or trader.

      More traders fail, in my opinion, because the person doesn’t realize that it ACTUALLY takes a lot of work to find an idea to trade. Then you have to have the discipline and humility to admit you are wrong (quickly). Of note, I have zero experience day trading haha…just my thoughts on it. I find it very interesting though.

      Reply
      • Think one needs to distinguish (which is not easy) the difference between holding on to a loser, because you KNOW it is a great company and just isn’t popular. Look at some of BRK’s value plays he went through some rough times, and whenever the individual companies do, there are headlines that Buffett is an idiot…but he comes out on top when the company bounces back. Just something is down doesn’t mean you should bail if you bought it with conviction.

        Reply
        • Yep, I think you have to be emotionally and financially able to handle a downturn.

          I am starting to journal my buy/sell orders. That way I can know if it was a long or short term play and so I can readily review it. I do not want my long term purchases to become short term and short term to become long term.

          Reply

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