This book by Jim Paul and Brendan Moynihan is a book any trader should read The book correctly states that there are lots of different ways to make money and only a few ways to lose it. Therefore you need to concentrate on not losing first
If you have not read this book you will see the markets in a completely different light and one that could lead you to bigger profits and is simply one of the best investment books ever writtten.
What I Learned Losing a Million Dollars is a fascinating, insightful, easy-to-read true story of Jim Paul's rise from a humble country background to jet-setting millionaire trader and Governor of the Chicago Mercantile Exchange.
It is an examination of the lessons he learned from losing a million dollars in the market which brought about his demise and then covers his rise from the ashes.
This book contains no technical theories and really focuses on how NOT To lose money there are plenty of ways to make money so how come most traders lose it?
The answer lies as we have stated that:
It's not how you make money that's important there are many ways to do that, but are only a few ways to lose it and if you are mindful of them and don't make losing mistakes - you can emerge a winner.
The book is essentially divided into two parts:
The first half of the book about Jim's life makes you feel close to him and the experience he is facing as his world crashes around him. It's both funny and sad in equal measure and is a superb fiction story.
After the loss and its aftermath, comes the authors views of what he had learned and this really is original, thought provoking and insightful. The authors show you how to identify and manage the risks, both monetary and emotional that is part of any decision making including trading.
Playing great defense
The authors covers the key areas ALL losing traders fail in, that let losses get out of control.
Key areas covered are:
- The three biggest mistakes traders make and how to avoid them.
- Why the most important part of building wealth is not losing it.
- The psychological pattern which all losses take in a traders head, regardless of the position size
The discussion on the risk/reward ratio, and why most other books get it wrong is perhaps the most interesting part of the book.
This point is worth the books price alone as the aothor explains
Why you have to take into account the PROBABILITY of return, and PROBABILITY of loss, when trading and not simply divide the size of your expected return by the size of your expected loss, as most authors suggest if you do you will lose!
This really is the key point of the book if you want to keep losses under control as it states in the preface.
This book is a case study of the classic tale of countless entrepreneurs: the risk taker who sees an opportunity, the idea that clicks the intoxicating growth, the errors and the collapse. Our case is that of a trader, but as with all case studies and parables the lessons can be applied to a great many other situations.
If you want a book to show you the importance of emotional discipline and the art of risk management, then this is it.
This book has recently gone out of print, so get your hands on a second hand copy or get to the library and read it.