The billionaire hedge fund manager George Soros is one of the most successful traders in the history. In fact, Soros is in the top 50 Rich people in the world.
But there’s some good news. Even the fantastically successful Soros messes up. And when he does – he goes big!
In 2016, Soros made a major trading loss when he placed a large short bet on the stock market following Donald Trump’s election victory in November & lost nearly US$ 1 billion!
How’s that for a big mistake. Now, we all know, that the bigger the mistake, the bigger the lesson learned. Since you and I probably won’t be making billion dollar mistakes, But We can learn lesson from his mistake
George Soros was wrong about the market’s reaction to the US election and paid a price of US$ 1 billion for it. However, he recognized his mistake and moved on from the trade instead of being stubborn or sniffy about it. He booked his losses before it gets worse. It’s better to be wrong then Getting out of the market.
After losing 1 Bn $ still, his fund is positive +5% in 2016. Let’s learn from George Soros his risk management and money management that how after this much huge loss he positive +5% and most important his survival. After all, he is also human who is driven by emotions, greed. So let’s understand,
Do you know why stop loss is very much important, as early success will make you think that you have skill & knowledge about the market? But in reality, it is majority your luck.
Due to their several success that is based on their luck, they get overconfident and then market make them learn a lesson and teach them how success in the market is not that much easy. They lose most of the amount from their capital.
And at this movement whosoever learn this lesson, they win the market but most of the time at this point majority of traders give up from the market, they lose their patience and left the market and who learn the lesson they start losing less capital.
Think of S/L as an insurance policy, you hope for you never have to use it.
But it’s good to know you have the protection, you need it.
I know how you understood the reason why there are very few successful investors/traders. And accepting the losses is totally opposite behavior from human nature. That’s why it’s hard to make our mind disciplined in that way as successful investors.
As a human nature, it is very common to blame others for our losers and failures. So if you want to become a good investor/traders. You have to take accountability for your losses. By blaming others you will not able to learn anything new from your mistakes. That’s why you have to follow some rules about the market.
Rule no. 1. Take accountability for your Portfolio Returns.
The key to successful trading/investing is not finding great companies or not counting only P/E ratio. But it is originally getting out of losing trade with small losses. It looks very simple concept but it is totally against of normal human mindset/psychology.
The Journey of Where we are! and Where we want to reach!
If you are not ready to accept losses during investing, the market will make you learn from its volatility and educate you very well. The journey towards successful investing is not easy It is the journey of failures, frustrations, dissatisfaction.
Losing money is not fun. Still, you have to experience it. Because it cannot be taught in seminaries or classrooms.
As losses are not fun. That’s why you need to stay away from big losses. Because if you are down to 50% in your portfolio. You need to cover 100% return to come back to the original capital.
Because of this mistake, you lose your time maximum and market needs maximum time. We need not to so timing in the market. Rather than we need to give time to the market.
Rule no. 2. Take your S/L (losses) quickly
As I told you booking loss is not easy as a trader/investor. As per our psychology, we tend to sell our profitable trade/investments early and hold or add more in loss-making stock/trade. Why are we doing this? Because we have anchoring bias towards our buying price. We have the fear that this much of profit will go away and we hope that your losses will take a u-turn soon.
As a trader/investor ask yourself i.e. should I buy more if it down from its buying price? You will find your answer for yourself only. And if you want to create a wealth from market then this thing will definitely help you i.e. Pyramiding which means buy more in winning or profitable trade/investments.
You do not need too many profitable trades, you need only a few trades to create your wealth. Averaging your winners will help you to generate your wealth faster.
Rule no. 3. Focus on Eliminating Anchoring Bias.
First of all focus on “ why you are not able to book loss?”
Because you never plan your exits. Do you focus on when to enter? How to enter? Which point to enter? But never thought of when to exit? At which point you will close your position? Because with entry your exits have the same importance.
When this time will come, for exit along with loss then you will not be able to book your position. So when you do buy or sell. And if you become wrong then you have to stick with your discipline to not having huge losses.
Rule no 4. You should have solid Risk & Money management plan.
If you hold your losses, it will affect your capital, psychology, and confidence in the market. If you face a huge loss then you lose your confidence in the market and stop thinking of new opportunities and start doubting your own judgments and observation.
That’s why if you strictly follow risk & money management then you do not need to get scared. Your risk management will prevent you from unlimited losses. And allocation (money management) will help you to diversify your risk and help you to not going out of the market.
Rule no. 5. Don’t try to time the market, give time to the market.
As we discussed earlier timing in the market. That investing /trading is not easy and no one is master in it. So if you keep doing mistakes, then you will learn continuously.
“In investing/trading it’s not about how much you make. But how much you don’t lose” – Barnard Baruch
Just start following this thing and see how your portfolio will compound over years.
Have a great learning.
And still, you need any help then contact our Heroic Investor Management Team.
Call on: 02230987899
*Professional investors/trader on niftymillionaire platform is Bindul shah. (Sebi Registered) Sebi Registration : INH000003663 (Bindul shah Sebi Registration : INH000003663)