Book: 20250623 to 20250717, "What I Learned Losing a Million Dollars" by Jim Paul, Brendan Moynihan

20250623 - Forword

Successful trading is not about discovering a great strategy for making money but rather a matter of learning how to lose. p viii

20250623 - PART ONE Reminiscences of a Trader - 1

Personalizing successes sets people up for disastrous failure. p3

There is no bad guy, although some people do bad things.

It's same to say that there is no "successful people, only people won a number of times".

20250623 - From Hunger - 5

20250623 - To the Real World - 11

20250623 - Wood That I Would Trade - 32

20250623 - Spectacular Speculator - 40

Jim Paul was very smart and lucky, but not wise.

Is his loss partly due to lack of knowledge of statistics?

What I can learn from it?

1. I could be wrong. Quite possible.

2. Never all in.

3. I don't really know what's going on.

Everything I know is my imagination. Some of them are right, and some of them are wrong.

No matter how smart I am, no matter how many books I read.

20250630 - The Quest - 59

Learning how not to lose money is more important than learning how to make money. p64
As always, when most of investors try to do it this way, this tip stop working.

It's easier to bet on industrial ETF, but success is not guaranteed.

For example, the ETF of lithium battery production. Who can image that the lithium price dropped from around 600,000 RMB to 60,000 RMB in 3 years? It's disaster to the whole industry.

I think, the best bet is something similar to NASDAQ index fund, as technology is going to take away the lunch of other industries.

20250630 - PART TWO Lessons Learned - 67

What's the role of first principles here?

20250701 - The Psychological Dynamics of Loss - 73

We lose points for wrong answers on tests in school. Likewise, when we lose money in the market we think we must have been wrong. p74

In many cases, there is no right or wrong.

1. It could be randomness.

2. It could be necessary compromise, like Go board game.

People tend to regard loss, wrong, bad, and failure as the same thing. p76

Only opinions can be right or wrong; facts cannot. p76

20250702 - The Psychological Fallacies of Risk - 85

In casino, we don't lose money if we don't do anything.

In stock market, we may keep losing money if we don't do anything.

This means the probability of amrket events is not open to any kind of numerical evaluation. Therefore, all you can do is manage your exposure and losses, not predict profits. p96

We don't know the probability, but we do know the trend of economy in a democratic and rational country. We can use this prediction to speculate and invest.

AI is an obvious huge tide. Robotaxi and Optimus are the possible the first two products of AI in real world.

I think, the essential difference between investment and speculation is the source of the price changes: the former comes from operation profit, and the latter comes from market emotion.

If we are buying the company instead of the shares, then we are investing.

20250703 - The Psychological Crowd - 100

In a crowd people do things they wouldn't ordinarily do because they are anonymous and feed off the power provided by the crowd.

This is the reason that those protesters with face mask are so "brave"!

The reason people who try to make back losses quicky lose again is because they are in an expectant state of attention ready to pounce on any trade suggested. p109

People can only hear what they want to hear. How to solve this problem? Don't expect to hear any news, good or bad. Admit that we don't know what's going to happen.

If I believe that FSD, ROBOTAXI and OPTIMUS will bring in huge amount of profit to Tesla, what signal will push me to sell?

20250716 - Rules Tools and Fools - 117

Well, if I had an ego problem at one million dollars, what kind of problem would I have had if I had ridden through the valley of death and cheated death? p118

When we put money into saving account, and the interest rate is 2%, and the loan interest rate is 4%, we actually give 50% of investment profit to the bank as management fee.

The risk is low, but we still need to face currency inflation.

If I buy a stock because I think earnings are going to be up but then the stock starts down, I've got a problem. p122

You can't calculate the probability of a trade's being profitable; you can only calculate your exposure. So all you can do is manage your losses, not predict profits. p125

This is the strategy of those fund managers. They ignore fundamentals when follow their plan to take actions.

It's not for investors. Investors only use their spare money to invest, and should have huge buffer to avoid disaster result. The most important thing is to only invest companies that we like their products and services, and believe their potential growth.

Or, the better way is to invest in passive stock index fund, which depends on economy trend.

In a fair market, the index is decided by two factors.

1. How many and what percentage of local people have a job;

2. What's their efficiency and productivity?

If most of companies automated their factories, the productivity is high; if at the same time almost everyone have full time job, then the index will keep going up.

Having and following a plan means, by definition, you are not part of the crowd. p132

And if implemented properly, it's actually quite boring waiting for your buy/sell criteria to materialize. The minute it starts getting exciting, you are gambling. p138

20250717 - Conclusion - 145

The rules are for gamblings. So Mr Paul think speculators are just like gamblers.

I agree. But we should not try to win by gambling.

20250717 - Postscript - 152

Managers and corporate executives can become too attached to a project and personalize it, and they are susceptible to the losses due to psychological factors just like Speculators are when they personalize market positions. p157

The real problem is ego. We need to admit that there are so many things we don't know, or our opinions are wrong. We are ignorant regarding most of the things, and should be ready to change.

This book reminds me of "Talking to Strangers" by Gladwell, Malcolm: Any rule is better than no rule.