A friend introduced me to stock market and intraday trading. After dabbling with it for sometime I took a backseat and became a mere audience. According to me the stocks did not follow any rule in their appreciation and depreciation and I could see that the advice of another friend was on dart, “It is sheer gamble.”
Unfortunately a few others who were there in the same sea along with me didn’t think so. Particularly, there was another girl who invested about twenty five thousand of her hard earned money. In one shot she lost about fifteen thousand. A small series of tiny profits followed and then there came a day when she lost all her margin and then some in one single day. Now, instead of getting alarmed, she only thought the problem was her trading methodologies and she made a decision to trade wisely. She replenished her margin. But then once again inevitable losses! Now she thought lower margins were the problem and that if she invested more money then she will have holding power for a couple of days and she need not book losses. Surprise, Surprise!! She lost all her money in a week’s time. Now she thinks the stringy and stingy measures of the brokers with whom she traded was the problem. She began fresh with another institution. All money is lost once again.
That’s not even the sad part. The sad part is that she still hasn’t given up hope. You see, Archana does not accept failure. She still thinks she can make it big in stock market. She refuses to lose hope.
I wonder if you have heard about the spectacular failure of Long Term Capital Management started by the nobel prize winning economists Merton and Scholes. It was a roaring success the first three years. But then the market conditions changed and the principles that worked earlier simply didn’t work anymore. But LTCM wouldn’t lose hope. Addicted to 40% or more annual returns they kept on and on. They borrowed more and more to exploit tinier and tinier margins. Finally there came a day when they had a equity of 4.75 billion, leverge of 125 billion and a derivative position of 1.25 trillion. What a mess to be in?!?
Now one might pooh pooh the whole thing saying “It only happens in stock markets, not in anything else!” Sure enough, every profession is different and it needs different skillsets to be mastered for a super success. Yet it seems to me that how to not be stupid has a great deal in common across all professions!
Either in romance or in trading business, if you do not want to be in a boiling soup, if you do not want to turn your little mistakes into great blunders, then have this key – Be ready to admit you lost.