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How To Trade The U.S. Election: Lessons From 4 Years Ago

When you trade, you get things wrong. The only time that becomes a problem, though, is when you can’t admit it, whether to yourself or others. I learned that from bitter experience.

I was working on a desk in London where one of the guys had a client that nobody liked. We all took positions, and therefore often small losses all day. When this one trader got a position as the result of quoting this one customer, however, he always seemed to be wrong, and every time he recorded one of those losses, we would all give him a hard time.

Eventually, rather than record a loss from one of those trades, he decided to try to turn it into a profit. Rather than cut, he averaged, then when that went against him, averaged again. Before long, he was hundreds of thousands in the hole and taking the loss just wasn’t an option. That ended up costing him his job, and the rest of us our bonuses for a year or two.

All because he couldn’t admit to getting something wrong.

The same thing can happen to individual traders too, just without the peer pressure. Sometimes, we just can’t admit to ourselves that we were wrong, and we run losses until they become disasters. That can mean big losses, which is bad enough, but there is another downside as well.

If you can’t admit you are wrong, you can’t analyze what you did wrong. You can’t learn from a mistake that you don’t admit to.

I mention this because, in the midst of…

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