Facing Your Trading Mistakes

09/28/2009 10:23 am EST

Focus: STRATEGIES

Many of you know I have several pet peeves about this industry, including lack of transparency, poorly designed or excessively hyped trader training by non-traders, and lack of accountability by the likes of Cramer et. al.

Well, one pet peeve that stacks right up there on my list is never being able to understand why many traders or educators never speak about that "other" side of this business—or putting it bluntly, their mistakes.

Well I make them. And sometimes they're doozies. In fact, I make them every day. And as I was telling a few other traders the other day, there has never been a day in my trading career where I haven't made one. Think about it. Never. And some days, or portions of days, I flat out suck.

And while I've thus far passed on the many recommendations to pursue a book, if I did write one, it would probably be titled something like, "How to make $2 Million by Making Millions of Mistakes."  And by "mistakes," I mean everything from taking a tangible loss to the opportunity loss that comes from missed opportunities, lack of focus, and burnout.

Rifle through the virtual pages of my blog and you'll see plenty of them. Who could forget that infamous day in October 2008 where I, along with the rest of the world, got the wake-up call of all wake-up calls as the VIX shot through 60. -$94K was the "tuition" I paid to learn how to trade the VIX in the stratosphere, if I recall. And yes, the tuition was worth it as that week ended +$40K and the month +$315K.

So that incredible month was the result of a beginning mistake. And not just your "trip on a banana peel" variety. Rather, it was figuratively a full-blown drop from the fourth floor of a building onto a concrete walkway.

Today, I made smaller mistakes in that I traded the Europe session poorly and began the US session with a drawdown. Yet I was able to use the information gained and "tuition" investment (failure for the market to break down even in the stratosphere and a less than 100% focused mind) to anticipate the US session rhythm, tighten up the focus, and fully negate the early draw.

So why then do most traders, columnists, educators, vendors, chat rooms (I could go on, but might run out of virtual ink) never want to discuss their mistakes?  Well here's a news flash: We're human and we make them.  And top traders make plenty of them—perhaps even more than novices at times—as we take the necessary risks required to profit over the long run.

And since mistakes are often the very seeds needed for success, whether it be invention of the light bulb or million dollar trading, shouldn't we not only talk more about them, but shout them from the rooftops?

My recent years of success are the direct result of mistakes, whether earlier in my career or of the current day variety.

Focus on your mistakes and learn what made them occur, and you’ll be in a much better position to profit from them down the road.

This has been an excerpt from the blog of full-time S&P E-Mini trader Don Miller. 

By Don Miller of www.donmillerblog.com.

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