How To (NOT) Fail As A Trader? (Part 1)

2 нояб. 2022 г.

Hello traders,

All the below are based on my preferences, I don't give any financial recommendations and I have nothing to sell you with this article.
I'm sharing content because I see a lot of traders being/becoming broke and I don't want you to be one of them.

Today, I want to share some thinking frameworks I’ve used across the past 10 years.

I’ve learned them from the legend himself Charlie Munger, cofounder of Berkshire Hathaway, what NOT TO DO to stay far away from being unsuccessful and poor.

I) Don’t ingest chemicals


Don’t ingest chemicals to alert your state
If I wanted to be really poor or unsuccessful in life, what would I do?
Well, I’d definitively get addicted to chemicals.


Sounds so logical and obvious right?

Though, many of us use them on regular basis to alter their mood because they can’t cope with how hard trading can be sometimes.

I can’t think of anyone who ever told me “oh man, now my life is so much better since I’m on drugs and I drink”

It’s not a judgment in any way; that’s what Charlie Munger says about successful people - they don’t ingest chemicals.

II) Envy


Every single year, I outperform my previous year YoY% PnL return and have grown my net worth.

Though, I always find many guys over performing me in trading every single year.


And for me, that hit me because I’m so innately competitive… that I suffer from comparison all the time.

I even got to the weirdest point thinking “I feel the more money I make, the poorer I feel”

Yes you read that right… and I know many of extremely successful traders feel that way.

And it’s totally true because what ends up happening is our measuring stick changes.

III) Measuring Stick

I remember when I was very young, my measuring stick was a MacDonald’s meal.
It was just, how many McDonald’s meals this amount of money equates to.

When I got to a 6 figures net worth, that was probably the wealthiest I have ever felt because I had proportional to what my measuring stick was at that time…100K euros was so many McDonald’s meals, so many of those units.

Now, my measuring stick or unit is bigger is monetary value (and significance).


That stick changes....



Someone is always doing better.

I think it’s so much more about not thinking about them because the way they roll the dice and play the game has no effects on us - it’s only an imaginary way to make ourselves suffer.


If you want to suffer, be envious of people.

IV) Resent people



Another way to feel miserable is to resent people.


- Do you resent some guys for your trading failures?
- Do you blame the FED? Do you blame Blackrock?
- Do you blame the whales for YOU to not performing with trading the way you should?

Charlie Munger wrote that every time he feels the need to resent people, he’d write their name on a piece of paper and put that paper in a drawer, and periodically open it up and realise how life had dealt with those people without him having to do anything.



It’s one of those long-term mindedness that like most people live in karmic balance.

Simply, people who do bad things, eventually that catches up to them and life is becoming worse for them.


And someone doing bad things is already dealing with the suffering of being who they are.



Why am I saying this?



All your corrupt politicians, bankers, hedge funds, market makers, brokers… at some point, the karma (or the SEC :p) will make their life miserable or at least very problematic.

Again, repeating myself, don’t resent other people for your losses because this will make you feel really miserable.



V) Be unreliable

To feel miserable, say you’re going to do something and don’t do it.

Say you’re going to be somewhere and be late.

Be flaky, make tons of mistakes and don’t learn from them.


That’s why I’m a big believer of having a trading buddy because it forces me to be reliable towards myself and him.


For me, that’s my father.

We both show up on time, trading from the same room, we both trades and discuss in real-time of setups we identified.

If you’re reliable, it’s very difficult to be unsuccessful.

Even if the previous days, you lost money, keep showing up.

If you don’t feel like trading because your emotions are not in check… trade with your demo account or with smaller position sizes until you’ll bring your self-confidence back up.

My win-rate is maybe around 50/60% - which means half of the trades I take…. fail…



Though it was a tough pill to swallow, I worked on making at least 3 times more on average with my winners compared to my losers.


Meaning for every 1 dollar per trade with a negative PnL, I earn 3 dollars per trade with a positive PnL.



I’ll post the Part II of this article tomorrow.

Thank you for reading

I'll keep bringing a few articles like this every week because it helps me clarifying my thoughts AND giving back to the community makes me feel good about myself somehow :)

Dave