If you don’t try you don’t fail, if you don’t fail you don’t learn, if you don’t learn you don’t grow” – Om Malik
Failure is an inherent part of trading. No trader can get every trade correct. One of the lessons in the new Jack Schwager book, Hedge Fund Market Wizards, is that “Don’t try to be 100% right.” In fact the pursuit of perfection in trading will likely lead to catastrophic results. That is why some perspective on failure and loss is a key to staying in the trading game.
Atul Gawande, a surgeon and writer, has an interesting piece up at the New Yorker which is a transcript of a commencement speech he recently gave at Williams College.* Although he is discussing medicine his perspective on failure is worth contemplating. Here is a quote:
So you will take risks, and you will have failures. But it’s what happens afterward that is defining. A failure often does not have to be a failure at all. However, you have to be ready for it—will you admit when things go wrong? Will you take steps to set them right?—because the difference between triumph and defeat, you’ll find, isn’t about willingness to take risks. It’s about mastery of rescue.
It is a bit of cliche to say that your trading losses represent tuition paid. If you don’t learn from your own failures no one will. Those losses will then be not just a financial loss but a lost opportunity as well.
*I also cited Gawande’s fine work on checklists in my book as well.
Update: See Mick Weinstein’s take on the same topic.