Mistakes are part of the game. In trading, we are all going to be wrong, usually a lot. The key it to minimize your mistakes, learn from your mistakes, and don’t make them again if you can help it.
Late last year, JP Morgan said that First Solar was the #1 stock to avoid in 2013. Well, FSLR is currently the 4th best performing stock in the SPX. This isn’t meant to be a shot at JPM, because no one is perfect, and no one is always right. But if you are going to make calls like that, you better have some thick skin when they go wrong.
I’ve done several Yahoo Breakout videos over the past two years and for the most part I’ve always been bullish. Last June, I was bullish right as the SPX was making a major low. The comments were downright mean in a lot of cases. My favorite was one that said I probably got beat up in grade school. That was very PG compared to some others. Fortunately, I found them also funny. Twitter is the same way. You make a call on there and it is wrong, someone will let you know about it. Again, this is just part of the game. The reason I’m ok with this is I’ve been wrong a lot over the past decade and I’ll be wrong a lot in the future.
Babe Ruth said, “Every strike brings me closer to the next home run.” I like that saying, as I think that is the right attitude to have if you trade the markets.
This brings back a key point I’d like to make. We all make mistakes, the key is recognizing them and adapting quickly. A stubborn trader will rarely be successful. Those that adapt, accept they are human and will make mistakes, will succeed over time.
Speaking of stubborn, check out Apple. Last year at this time everyone loved it and there was no way it could go lower. Well, after a horrible fourth quarter last year, the weakness has continued. In fact, AAPL ranks 490 out of 500 stocks in the SPX, down 17% this year. A lot of people have been stubborn and ridden AAPL all the way down, after riding it higher the past few years. Don’t be stubborn.
If you follow me regularly, then you know I’ve been bullish this year. Yet, back in late February I went on CNBC and noted some reasons I expected a pullback. This of course didn’t happen and I was wrong. Fortunately, I switched back to the bull camp quickly and I’ve been there since. There was a time I might stick to my bearish call, but I’ve learned (the hard way) that being stubborn only ends up costing me. If my indicators change, I change.
So what does all of this mean?
- Mistakes happen, learn from them. One of the most famous examples of this is back in 1992, a ship in the Pacific lost more than 29,000 rubber duckies during a storm. These rubber duckies were affectionately called Friendly Floatees. Instead of just writing it off as a loss, oceanographers began tracking where the rubber ducks ended up. It took 15 years for some to show up clear over in Europe. The oceanographers learned more about the way waves and ocean patterns worked than anything they had ever done before. Now not every mistake will let you learn as much as the Friendly Floatees did, but always be open to learning something.
- No one is perfect. There have been some very smart people who have been extremely wrong during this bull market. Don’t think for a second that anyone is always right. Heck, Sir Isaac Newton is widely considered one of the smartest men ever. After all, he discovered gravity. Well, he also invested a good amount of his personal fortune at the peak of the South Sea bubble. If one of the smartest guys ever can get carried away and invest near a peak, there’s a chance most of us could also make investing mistakes.
- Don’t be afraid to take a chance. You might fail, or as Babe Ruth would say, you might be closer to hitting a home run. We’ve all heard the stories about famous people being on their last dime, before turning it around. One of the richest people ever was steel giant Andrew Carnegie. His family came from Scotland and he said they were so poor, they’d go to sleep so they would forget how hungry they were. He eventually sold his personal stake of his steel company to JP Morgan for $480 million in 1901. That would be $13 billion in today’s dollars.