What would you do if you ever had a losing year?

Discussion in 'Psychology' started by thriftybob, May 20, 2007.

  1. I wonder if it will happen again?

    I lost money in 1987, and it scared me, BAD.

    I guess Ive either been smart or lucky since then. If I ever had a large percentage losing year now, being "early retired" (not by choice), it would be VERY bad because I don't have a check coming in or years to make it up with.
     
  2. Assuming that this is a serious question, then you need to change your attitude towards trading.

    Part of your trading philosophy ( which comes before your trading methodology) might be
    'no losing months' or 'no losing weeks'

    One way or another, do not allow yourself the option of a losing year.
     
  3. Rocko1

    Rocko1

    You can consider applying a hard risk management scheme, where you stop trading after a certain drawdown occurs for the set period.

    e.g. No more trading if drawdown exceeds 10% per quarter, half year, or etc.
    This way you'll know exactly how much risk you're taking while preserving capital.
     
  4. 20 years straight since '87 and not a single down year? That's better than 99% of mutual & hedge fund managers. You must have quite an equity base built up if you've been trading 20 years compounding gains nonstop..
     
  5. Yup. In 1987 I lost about 30k, which was 38% of the portfolio, the entire loss being taken in 2 days. I made some back by the end of the year by doubling the bet after the crash, but it was a very scary time. I was at least somewhat diversified, but that didn't matter on "no bids" Monday. You couldn't get through to sell even if you had tried.

    I pretty much avoided putting any major money in the market for a long time after the crash, was completely out in CD's 2000/2001, and never went "all in" again until the world collapsed around me in 2002. Since then I'm up 600% after tax.

    If I was to lose 38% of liquid assets, like those 2 days in 1987, it would be catastrophic. At this point in 2007 it would be impossible for me to have a losing year because I'm being pretty conservative.
     
  6. PS: It was a lot easier to "not lose" money being out of the market all those years, but you don't really make much, either after inflation is taken into account.

    I was a techie, and generally in tech stocks, for example in 1987, so its probably a lucky thing I stayed out, because 2000/2001 would have crushed he kinds of things I was into.

    For the rest of 2007, I think I'm just going to keep limiting exposure and keep the profits already taken banked. I seriously don't think the market is going to give me much more this year than I've already taken, anyway.
     
  7. =========
    T Bob;
    Dont think you will make ''much more'';
    its still May , not half over with???????

    Usually do best in 4th quarter

    Big losing year iis possible but unlikely;
    if one cuts back size.
    :cool: