Trading Blunders Of The Best Traders And What They Learned From Them
No matter how long you’ve
been involved in the market, the potential is always there for a big trading
mistake — that big blunder which, at a minimum will keep you awake at night,
or worse, psychologically sabotage your trading, or even destroy you
financially.
Fortunately, the chances of
making this type of disastrous trading error tends to become more unlikely as
you gain experience. This is not to say, however, that you’ll never experience
some hairy moments in the market.
Even the best of us have been
through it. The key is can you recover from it?
I
asked our Tradingmarkets contributors about trading blunders they’ve witnessed
and been involved in over the years. Some mistakes you’ll relate to, some
you’ve made yourself, and others almost completely unfathomable.
Lewis Borsellino
“The Thursday after Black
Monday, 1987, the Shearson broker was giving an order to sell 2500 S&P
contracts and pre-market he opened the market 50.00 points lower. What happened
was that the phone clerk put the order in twice, so instead of selling 2500
contracts, they sold 5000. They had to get out of 2500 of them, and by the time
they got out, it was a $60 million error. Guess who’s order it was? George
Soros’.
”
(For a more detailed account of
this trade, and many more, read Lewis Borsellino’s “The
Day Trader: From the Pit to the PC.â€
Carolyn Boroden
“When I first started
about 10 years ago, I was scalping E-mini Treasury bonds on the Mid-Am. I
scalped good money out of it using four-tick stops, and gave it all back, and
then some, in one trade because I didn’t use a stop. I just remember it so
well, because I was so blown away by it that I walked home from work that day
severely depressed. I had my first-ever margin call. I was emotionally destroyed.
I just remember how awful I felt. This is when I didn’t have a clue as to
methodology. I’ve never entered a trade without using a stop since!
“
Jeff Cooper
“The summer of 1987,
takeover deals were prevalent. I remember I owned calls on Foster-Wheeler. There
were takeover rumors on the stock, and I thought there was a takeout. The Friday
before the crash was an expiration, and the calls were going out worthless. I
exercised at the close so I could own the stock; I owned the stock over the
weekend. Nobody thought the market was going to crash on Monday; I actually
thought there was a chance that it could be bought out over the weekend. The
stock, like every stock, collapsed Monday morning. I held onto the stock until
it rallied on Tuesday, but I still lost money. On top of the options, I lost
more by exercising and getting involved in the stock because I didn’t want to
miss out on the coming takeover deal.
“I also had Dayton-Hudson
options. The options ran up to a point where I was interested in selling them.
It had gotten close to $10 and I was long at 1 – 1 1/2, and I was long quite a
few. The position was worth close to $74,000 at the time —