The Tycoon Report

How Not to Lose Money in the Markets

Thursday, May 21, 2009 | Bob De Dea

When I was a new investor, I made some stupid mistakes and, as a result, lost bunches of bananas and crates of coconuts.

If you're a novice, and if you're like me, you probably spend a lot of time reading The Tycoon Report, culling information, and trying to apply it to your own situation.

You've also more than likely put in even more time studying charts, listening to webinars, and Googling "sector rotation" and "the difference between call and put options."

Maybe you paper-trade a little to see what if. Maybe you've dabbled with a few shares of a stock or one option contract to see what happens.

But still something holds you back.

Call it whatever: fear of failure, fear of success, fear of making a mistake, fear of losing your shirt or blouse, caution (see "fear") -- I've written about this before so I won't get it into it too deeply here. Suffice it to say that success is not all it's cracked up to be.

Don't get me wrong -- it's great (notice the qualifier "all" in the previous sentence). But success isn't guaranteed; if you're not enjoying the trip, it's going to be miserable. Focusing on only results can be counterproductive. We must also realize that the journey is as important as or more important than the destination.

Of course, as investors we hope to eventually arrive on our journey toward financial independence, but it's what we've learned all along the way that counts, that satisfies with a sense of accomplishment, and that makes possible our eventual success. To quote someone we can all acknowledge has beaten the odds:


The truth is that you will fail. You will beat your head with a coconut shell, or feel like you want to. Getting whipped in the market is a fact of life. Get used to it. To swim with the sharks, you've gotta kiss a few frogs.

Well, OK, I mixed metaphors (or what's a "meta" for?) -- you know what I mean.

At some point, you're going to have to get your feet wet.

Expect for there to be some mistakes, some bumps in the road, some missed opportunities. If you adopt a system and stick to it, though, I assure you that there will also be some "great gets" to make it worth your while.

Two Lessons

One of the most valuable things I've learned in my tenure as a student first of Exchange-Traded Funds (via the "ETF Master Trader" system), and then directly at the feet of both Teeka Tiwari and Chris Rowe, is not to put all my ova in one bucket.

And I'm not just talking about betting the farm on one trade. I'm talking about the approach that we take as investors.

It's OK to sit on the sidelines and wait for the conditions that you decide are right for you to trade. Then stick to 'em.

For example, I have a friend who buys into market declines at intervals of 10% drops; he then sells into rallies at 25% gains. I'm not sure whether he developed this approach on his own or if he adapted someone else's, but he doesn't stray from it and it's proven to be profitable for him. (He's also pretty good at figuring out what to buy.)

Another possibility is to always be in the market, playing both sides (raging bull and Teddy bear), and finding the balance between the two that the market indicates and that your comfort zone dictates. A system that reflects a little personal style goes a long way to help you feel in control of your money and your financial destiny.

That's one of the most valuable things. The thing that's been hardest to learn is something that both Teeka and Chris have been reminding us in their subscription services communiques (Point & Profit and Trend Rider) -- and it's important enough to highlight it here ...


We all want to feel secure in knowing that we've done the right thing or made the right move or played the right security. It's human nature.

But if there's one thing the market has taught me, it's humility.

We must be disciplined about how we think about what we know and not give ourselves too much credit. The market will inevitably prove us wrong at some point. The thing is that we never know when that could happen.

So, each of us must be clear about our approach to investing and our limits. We must have our own rules of engagement by which we enter the battle ... rules that tell us when and how to proceed ... and rules that let us know that it's time to retreat.

Without such rules, we're just a ping-pong in the ocean.





Bob De Dea
Guest Contributor
The Tycoon Report