The hardest part of investing, in my opinion, is knowing when to let go of a loser. It’s easy to sell a winner. After all, there are gains to realize and victories to lock in. But locking in a loser is admitting loss, a pox of shame upon your household. Such shame may live forever, in infamy, as a tale passed on through the generations of how you lost the family fortune.
Or it might be some piker trade where you lost 3 grand. Either way, losses are hard to close out.
Often times, trades become investments when the trade goes bad. After the trade goes bad, we look for reasons to hold onto the stock. Sometimes we convince ourselves that merely trading the name in the first place would’ve been a ridiculous proposition. After doing all of that hard work and research, we unveil true value in places that no one ever thought of looking.
This is called desperation. More often than not, when we grab for straws, based upon a losing trade, we start over-fitting. In other words, we look for excuses to hold the stock, even buy more, in order to preserve our delicate egos.
After all, we are all genius, a gift to the earth and the stars. How could we be wrong when we are so smart?
If you think about it, this sort of rationale transcends every aspect of living, from marriage, friendships to dead end jobs. People always tell me “the best thing I ever did was divorce so and so.” Or “thank God I quit that job.” But we all fear making that commitment because it means we’ve failed.
Isn’t it better to realize a small loss than a gigantic one? This is common wisdom, not exactly trade secrets. But we keep reading about famous fund managers committing fraud, blowing up billion dollar funds, risking their freedom by trading on insider knowledge. Why? The answer is quite obvious. No one wants to fail, ever.
This mentality has climbed to the top of the capstone. The controlling elite now accept failing as part of the business cycle and allow poor stewards to continue to run good companies into the ground.
I own one stock that is underwater: FRO. Had it went up to $3 after my initial purchases, I would’ve sold it. But since it’s down 17%, I am a long term investor, very prim and proper–interested in the ongoings of the shipping business. I care for shipping in the same way I care for a banana less gorilla jungle. Sometimes I feel like smacking myself in the head with my tea mug for being so stubborn. All of my money losing ventures are the result of pride.
I’ve been blogging on the internets since 2002, one way or another. In the world of finance, I’ve been blogging since 2006. I’ve written more blogs than you could imagine. The pinnacle of iBC was back in the frantic days of 2008-2009. This isn’t exactly a growth industry, as there isn’t anything very innovative about reading the missives from a group of traders. Twitter is to blogs what the internet is to newspapers.
All of my time and energy have gone into making iBankCoin successful. But my opinion of success might differ greatly from yours. Some are happy with a little recognition and influence. Others only want to make money. My opinion of success is fairly straight forward: is the endeavor creating value? If so, is the time spent to create this value worthwhile?
Mrs.Fly often queries “how long will you blog?”
Ideally, I’d like to pass on the torch at some point, crowning the next “Fly” in the same manner as the catholic church selects a new pope, black smoke and all. Perhaps in 500 years, your great, great, great, great grandchildren will be reading the insane missives of King Fly the XIII. Or, maybe I’m just over-fitting again.
http://www.youtube.com/watch?v=eCre5lvlEcY
If you enjoy the content at iBankCoin, please follow us on Twitter
This post reminded me of Yani. That guy was awesome.
I was never quite sure if Yani was a guy.
Dear Fly, I’ll gladly purchase your identity.
Does a Cardinal purchase the title of Pope?
Probably.. who really knows what goes on behind closed doors.
The Dread Pirate Roberts.
Good points, but had you held every losing trade you sold in the last year would you be up more?
Not all losses.
Plenty went way lower, like MCP.
The curious thing about twitter is that nobody ever wants to be wrong for it may tarnish their social legacy.
Admitting failure is tolerable when the ship can weather the storm and the mistakes are realized, noted for future endeavors.
Losses should always be admitted regardless of the condition of the ship.
Yes, I agree. It was poorly worded.
you only learn from your losses
Oddly enough, my biggest mistakes have actually been not selling huge winners. Of course I don’t have any now.
I’ve learned much here at iBC. Hopefully, I’ve learned enough to have some more huge winners and cash out near the top for a change. e.g. Years ago, I threw everything I had into h-shares. Few knew what they were at the time. My plan was to hold them for 5 yrs. Within 3 months I was up over 12x. Much later I sold for much less. Did that several times. Lets ‘s see if I can get it right next time.
Just to clarify, “Much later I sold for much less.” means I lost over 1200%. Unbelievable, unreal but true.
nice song.
worst trade ever: FAZ, after nailing it in ’11 and making an absolute killing, lost it all and more on a re-entry.
you know a position isn’t for you when you cut it and are instantly relieved
Whatever fool
Thank you for sharing your intellect, wit, and wisdom,
and doing so in such a well written, clever, and often humorous way.
Your posts are a treat to look forward to… always.
Thanks Fabian.
But the blogging endeavor is mostly charitable work. The only question is, whom am I giving to, you or me?
both of course. if there’s no benefit to you, you’d need to stop immediately. if we didn’t feel we benefit, we’d read something else.
A crazed Cardinal can replace the Pope when he pulls a caper as in The Illuminati, what a plot.
Fly,
I am nothing but a piker, “the dumb money”, buying high and selling low more then I care to admit. I’m new to investing and I have learned more from you and this site then anywhere else on the web. I’ve traded stocks on your posts and won some and lost some but I think I’m getting better. I look forward to your informative and hilarious posts here and on Twitter, I value your insights and will continue to be a follower of yours as long as you grace us with your wisdom here at IBC.
Long Live the Fly!
Thx
Join the PPT Jersey. If you already have disregard what comes next. What you just stated is fucking fact. Ibankcoin will give you street smarts. The Fly is a fucking prophet of the game. For newbies there is nothing like it, a fast paced learning curve on how it all works. Try the premium. This site is the future. Seriously.
The main point is simple. There is a giant casino that is confusing. Fucking insanity to the pleb that works for wages. IBC makes it make as much sense as is possible.
Love this post and the comment “since it’s down 17%, I am a long term investor, very prim and proper–interested in the ongoings of the shipping business.” Classic Fly and captures the exact mistake I have made too many times to count. I have been in uranium (CCJ) since 2 months before Fukashima!
I have been reading your blog for over 5 years now. You never seem to have an issue getting out of a position very quickly. Why did you decide to hang on to the positions too long in the other cases? Was being right more important to you in these specific cases or was it lack of a plan?
Usually, I sell fast. But over the past two years, the bulk of my losses have come from being stubborn.
It’s white smoke.
And I hope many years pass before it rises above the gargoyle-flanked chimneys of The House of Fly.
So true.. I’ve had more trades turn into investments than I care to state.
My favorite excuse for making this mistake is telling myself “it’s house money.” No, it’s still real money, or at least, it would have been real money if I’d sold more on the way up.
/points at his long-term holdings in $AMRN and $DVAX and laughs at at the silly face in the mirror.
That damn $DVAX fucked me up something fierce. When I first got into trading I bought into $DVAX and 5 days later it was up 150% or something stupid like that.
I was smart enough to cash in. I was also dumb enough to buy back in when it retreated to my original purchase price. Then it dropped some more, and more, and more, until I had given back most of the big gain. Of course I sold there in a panic only to watch it run to all-time highs a few months later.
I rule.
great post. Fly’s a nice reliable stop on the internets and you would be missed. Hopefully, you are taking some time to write a book beyond the blog.
At minimum, with all the posts you did, you could probably do a greatest hits book, put it into e format, upload to Amazon, and sell some copies. If you price it at 2.99 you’d get 70% of the list price from Amazon.
25% of all of Amazon’s ebooks are now self published according to a column I read last week