What does it take for a man to learn a lesson?
Sir Richard Branson in his book "Business Stripped Bare", getting down to the core essentials and business basics of his Virgin Group, thus explained one of the most important lessons of his business life in his Introduction - "People in business who succeed have swallowed their fear and have set out to create something special."
The book is worthwhile reading and becomes an exciting story of growth based upon remarkably simple concepts of risk containment. Sir Richard Branson goes on to explain how he could never suffer massive losses from a rogue trader in his group because each and every one of his business entities are so designed as small limited companies in each relative market segment. But 
lumped all together these multiple small companies go on to form the mighty Virgin Group. Essentially Sir Richard Branson goes on to explain how all his eggs are placed neatly in different baskets with minimal risk of downside contagion. in swallowing fears of the unknown, the darkness becomes illuminated, and to the rational mind the concept of pain and loss becomes a factor of probability set amongst other factors that may determine success in the long run. Fear of the unknown breeds ignorance; but exploration into the unfamiliar can reap success. To make a quantum leap from one set of primitive experiences to an elevated level becomes the story of mankind in the struggle to push
aside all fears. A man will fear the fire but then he will put his hand into that very fire drawn by its allure and he will feel the pain and come to terms with new known. from experiences of pain comes the story of growth in successive steps as the lessons of fear and failure become the stepping stones for stronger attempts to grow forwards in leaps and bounds. Too err is human; to forgive Divine; so the saying goes. Thus must a trader come to terms with his own fears; foremost of which is the fear of himself. Much of this book written by Sir Richard Branson becomes an illuminating illustration of implementing ideas through the unknown and grappling with all kinds of risks to increase the probability of eventual success. In short -lumped all together these multiple small companies go on to form the mighty Virgin Group. Essentially Sir Richard Branson goes on to explain how all his eggs are placed neatly in different baskets with minimal risk of downside contagion. in swallowing fears of the unknown, the darkness becomes illuminated, and to the rational mind the concept of pain and loss becomes a factor of probability set amongst other factors that may determine success in the long run. Fear of the unknown breeds ignorance; but exploration into the unfamiliar can reap success. To make a quantum leap from one set of primitive experiences to an elevated level becomes the story of mankind in the struggle to push - Swallow your fears
- Diversify your assets
Losses are part and parcel of a trading career. We fear losses; we obsess losses. It is human nature to fear the unknown. Yet it is how we overcome those losses that
defines us and shapes our lives for a better tomorrow. In making mistakes we must recover and dig down deep to find the mental strength to ask ourselves why? We must sift through the debris of our mistakes. There is no point in beating ourselves into a self-Crucifixion. We help ourselves by
forgiving our own selves to become better at what we do.
Systems come and systems go. Markets twist and turn. Traders appear and perish.
Fear is a debilitating power; it restricts the rational mind and clouds the best of judgements. Unless you are a trader can overcome your fears of losses then you will not be in this profession for long. Moreover, do not think that traders who work in large banks are completely devoid of these shortcomings as well. Everyone has fears; its how we deal with those fears that distinguishes us into good and bad traders.
How many times we read about prolific traders rising through the heavens like meteorites with 100% returns or more, and then they vanish just like that! They come and they go. 100% gains are soon followed by 100% losses. Show me a trader that can make a modest 15-20% per year for 5 years and yes I would call that man or woman a star. That is because the key to successful trading is consistency; not one day millionaire next day kaput. So don't beat yourself up over losses. Swallow your fear and confront your challenges head on.
Fear is a debilitating power; it restricts the rational mind and clouds the best of judgements. Unless you are a trader can overcome your fears of losses then you will not be in this profession for long. Moreover, do not think that traders who work in large banks are completely devoid of these shortcomings as well. Everyone has fears; its how we deal with those fears that distinguishes us into good and bad traders.
How many times we read about prolific traders rising through the heavens like meteorites with 100% returns or more, and then they vanish just like that! They come and they go. 100% gains are soon followed by 100% losses. Show me a trader that can make a modest 15-20% per year for 5 years and yes I would call that man or woman a star. That is because the key to successful trading is consistency; not one day millionaire next day kaput. So don't beat yourself up over losses. Swallow your fear and confront your challenges head on.
There is no gain without pain that is true and no learning without the
rite of fire. If we have chose to become
traders for life then we must make our five year plans to see where we will be
at the end of the next 5 years and possibly even 10 years ahead. could you be that trader who can make 15-20% per year, year in year out, through all the seasons come high come low? What does it take to understand that this is not a sprint but a marathon?
Should a trader be fortunate to be able to survive the
losses he may face in his career, then how enriched his life would become
through his eventually success, and if he is inclined to share such wisdom,
then how much better he may be to
society to help others through the learning curve of trial and error through
the lessons learned through his own eyes. it is hard to teach another man to rid himself of his fears; but give a man a ground to stand upon, a sturdy foundation, then at least he may have a chance to anchor himself and root himself to the ground like a tree to grow a body of knowledge based upon strict principles of analysis and trading.
In the face of fears and obstacles and defeats a successful trader often develops a safety valve to help
his mind recover over his losses. We are not mechanical by nature. Wear and
tear can wreak havoc on the mind. We need our safe havens periodically for
isolation and recuperation. The game of golf could be a healing past time, or a
sojourn by some lonely fishing spots, a hobby like sailing, or painting model
planes, or long country walks in solitude are the necessary retreats that mind
needs periodically to heal and recover when things have gone wrong.
Obsessed with time, pressurized to make read our own conclusions
into a market, we are always going to
become brittle and fallible if we do not set aside a periodic time to regain
our breath and revitalize our minds. But when we do fail why should we beat ourselves up in our
minds when our compounding of errors fades into insignificance compared to some
of the most incredible tales of trading losses? Why would we fret and frown
over our own shortcomings if we have learned to survive and fight another day
whilst the great giants amongst us have stumbled and fallen and yet we persist?
Let us have a cursory glance at an infamous roll call and
then fade our own losses in comparison. All of these giants collapsed for simple reasons that again boil down to severe stresses on the principles of fear and lack of asset diversification. If these so called stars can become egg heads and implode just as easily as a simple trader could then why do you need to fret over your mistakes? Swallow your fears because the giants have a history for making stupid gaffes as well.
Few traders will ever make it beyond 5 years. Even with the giants the stars rise and dramatically fall. The funds that do survive longer than 5 years like Berkshire Hathaway and Quantum are the exception. Most of the large Funds that eventually close do so for a variety reasons but usually in a nutshell it usually boils down to over-trading and insufficient margin. Just like in the case of the the small trader with 100k capital not grasping the mechanics of risk management and diversification and then easily getting caught up in a tsunami event like last January SNB plunge of currencies vs the CHF. Over-trading and insufficient margin ruin the very best of traders small or large. In the grander scheme of things here are some very poignant examples of what can go wrong even with the larger funds:
Few traders will ever make it beyond 5 years. Even with the giants the stars rise and dramatically fall. The funds that do survive longer than 5 years like Berkshire Hathaway and Quantum are the exception. Most of the large Funds that eventually close do so for a variety reasons but usually in a nutshell it usually boils down to over-trading and insufficient margin. Just like in the case of the the small trader with 100k capital not grasping the mechanics of risk management and diversification and then easily getting caught up in a tsunami event like last January SNB plunge of currencies vs the CHF. Over-trading and insufficient margin ruin the very best of traders small or large. In the grander scheme of things here are some very poignant examples of what can go wrong even with the larger funds:
• Michael Steinhardt in the 1990's ran a very successful macro hedge
fund called Steinhardt
Partners. This was a large macro fund that made above all things - unhedged investments!!! You name it - equities, currencies, and debt securities the fund carried the trades and carved a good reputation averaging nearly twice the return of the Standard & Poor’s
(S&P) 500 Index. But, what goes up comes crashing back down and in the first
quarter of 1994, the fund lost nearly 30 percent and eventually closed.
• In 1995, Fenchurch Capital Management
ran a well known fixed-income arbitrage fund but ran into trouble with losses that wiped the firm out.
• In 1998, one of the most famous cases of stellar rise and collapse occurred and resulted in such huge losses
that the US Federal Reserve had to arrange a bailout for star-studded Long Term Capital
Management (LTCM). Their debt trading became so immense that their impending collapse threatened the entire US treasury and commercial paper market with a liquidity crisis
Then most recently, in the noughties, 00s, Bear Stearns, Merril Lynch, Lehman Brothers, AIG,Country-wide, Washington Mutual amongst many others all ran into trouble because of over-exposure to property securities with improper asset diversification at the very heart of their troubles. Did someone not tell us that these companies hire the best brains available at the time? PHD's ad infinitum and still they cannot spread their risk and contain market losses?
As the great Greek playwright Aeschylus once wrote - "we suffer into truth"
The small and the mighty equally share a common trait of fear, dread and conversely the blinding sin of utter hubris. Rid yourself of fears of failure and at once you have set out for yourself a new map to delineate the story of your own trading success. As Sir Richard Branson points out in his book -
- Swallow your fears
- Diversify your assets
Then you have a sturdy structure to compete in the markets and build your trades and contain the dangerous reversals when they do occur.
Pieter Bergli - DeLoren Trust Holdings
Forex education for all
Disclaimer - U.S. Government Required Disclaimer - Commodity Futures Trading Commission
Futures and Options trading involves risks of losses. No representation is being made that any reader and account will or is likely to achieve profits or losses similar to those that are being discussed on this blog http://forexeducationperspective.blogspot.com/. The past performance of any trading system or methodology discussed is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
All trades, patterns, charts, systems, etc., discussed in this blog http://forexeducationperspective.blogspot.com/ are for educative and illustrative purposes only and not to be construed as specific advisory recommendations for actual trades. Disclaimer - http://forexeducationperspective.blogspot.com/
