Many of us know that one of the greatest mistakes an investor/trader can make is risking too much capital in any one trade/investment. However, what should you do when it all goes wrong? What should you do if this is what you have done? The impact of allowing a trade to turn into an investment can be utterly devastating. Here is an extract taken from just one person. This was from the GameStop option saga last year:
“Barring deaths in the family, this has been the most devastating two weeks of my life,” says Will Brown, a 30-year-old North Carolina fish farmer. He tried to reverse a $20,000 loss trading other stocks by plunking down his remaining capital—a few thousand dollars—in GameStop options. At one point, he calculates he had a position worth $300,000 or so, a sum almost entirely evaporated. “I’m coming to terms with the fact that I have nobody to blame for this but myself.”
You can rebuild
What many people don’t tell you is that you can start again. You may be just left with the words, ‘told you so ringing in your ears’. You may think you are starting from nothing. However, you are not. You are starting with the knowledge that you should never let a trade turn into an investment. That is, in itself, valuable. It is also a lesson that many, many traders have learnt before you. Including some great and very successful ones. No one likes talking about losses, but all traders deal with uncomfortable losing trades and runs. Some hugely successful traders have also ‘lost it all’ in their trading past. Rebuilding can take time, and the losses can be painful. However, with hindsight, a large loss can actually be teaching you a profitable lesson that will benefit you during your entire trading life.