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OPENING POSITION

April 2001 

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The last year or so have been tough for fund managers, particularly commodity fund managers. Many have left the business or are looking for new stakes to begin again. The easy money of the endlessly rising stock market has gone away, too, and funds and advisors are having a tougher time picking their way through the debris and creating a sustained advance in equity.
 
Speculators are a tad different. We bust out now and then, just as gamblers do. And the cure may be just like a gambler's: step away from the table, get your balance back, and come around again when you've committed to your basics. (You read STOCKS & COMMODITIES at that point, right?)
 
Coming back means stepping up to the plate personally. After busting out, you're in despair. You're alone and no one wants to take your call. No ideas come your way and your own brain has rotted as well. Plus you don't trust what it comes up with, anyway. You're explosively angry, frustrated, and depressed. You've got a thousand names for yourself, all abusive. The market gods are hearing from you and not on friendly terms.

About then, it's time to take an objective look at what actually happened. If you haven't traded correctly, then you have failed. But if you traded correctly and lost money, you haven't failed. YouÔre just suffering from a bad run of circumstance.
 
Trading "correctly" means you performed according to your plan. You pulled the trigger correctly, you cut losses appropriately, you did everything humanly possible to manage the situation. If you didn't, the question is, can you perform better in the future?
 
The other situation should be easier to take. You did everything according to plan but fortune did not favor you. Having enough capital to absorb the inevitable losses, trading the right size, and taking the correct losses help you handle a bad set of circumstances.  Those parameters were all part of the plan. Still, you could do everything correctly and you could still take 50 straight losses! Don't write yourself off as a loser. That would be crippling.
 
When I bomb a trade or a series of trades, I don't consider that I have failed unless I've gone against my plan. I do go against the plan on occasion because I get ideas, intuitions, and guesses that suggest going early or late, adding more than I should, trading something I don't know. In theory, a computer could and should play the game for me but I can't pull myself out of the equation. I have to admit I've failed when this happens and, truthfully, it still happens after 18 years of experience.
 
People fail; I know I do. I compare trading to weight loss in the difficulty rankings; it's that tough to accomplish personally. However, I don't add abuse to failure as I once did. I revisit my plan to see if it's still performing, as it should. I add the mistake I made to a Post-It note in front of me on my desk to remind me. The next morning, I try again to make money and lose 25 pounds.
 
So don't count yourself out if you hit a string of bad trades. Distinguish between yourself and the plan. If the plan's still solid, then you still have the same simple problem every human has: getting up in the morning and trying again.

Good Fortune!