A word of warning: there's nothing about indicators/setups/technical analysis/trading techniques in this book -- just what the cover says, thoughts on the causes of losses in the market.
One of the profound things I found in the book is discussion on the risk/reward ratio, and why most other books get it wrong. The author claims he doesn't understand math, yet gives a great explanation why you have to take into account the PROBABILITY of return, and PROBABILITY of loss, otherwise you're just fooling yourself. If you simply divide the size of your expected return by the size of your expected loss, as many other authors suggest, lottery would be the best investment (risk $1, return $1 mil.)
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This book should be required reading for anyone who thinks they "wanna trade like the pros" and become a full-time financial markets trader. This book makes it clear that most people don't lose because of what the market does but because of how they respond to the markets ... and how they handle losing trades.
Jim Paul's realization that there are countless ways to make money in financial markets and only a few ways to lose it is very insightful and though provoking. Read it again and again.
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This book was recommended to me by another trader. I'm glad I picked it up. There are enough books out there that tell us how they make money...but too few tell us how to avoid losing it. This book is a must read! All the mistakes that we as traders make are outlined, explained, and amusingly told in this book that I fear too few traders have read.
The book makes you feel that you could have travelled the same road as the author which brings it home all the more powerfully.
The lessons are not just conceptual or psycho-babble. These are applicable lessons that you can use in your own trading as soon as you put down the book. The approach and an awareness that this book gives you helps you understand you do the things you do.
Again, this is not an outline of how to trade. These are important lessons about how we accept a trading loss, how to analyze losing trades, and finally how each of us can be tempted to rationalize losses.
A great book!
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Book review
http://www.allbusiness.com/specialty-businesses/482827-1.html
What I Learned Losing a Million Dollars.
By Banfield, Eric-Charles
Publication: Futures (Cedar Falls, Iowa)
Date: Tuesday, November 1 1994
Subject: Book reviews
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From golf caddie to millionaire trader, Jim Paul figured he had "the Midas touch." Unwilling to ascribe his success to luck, he simply believed he was better than everyone else at making money.
He lost it all in 75 days. So, instead of relearning
how to make money, Paul began studying how to lose, and learning about the psychology of risk and loss. Now he shares his lessons.
What I Learned starts with Paul's entertaining yet harrowing life story. In the second half, co-author Moynihan provides the intellectual context. Reviewing the story, the two analyze not what traders do, but how they think about risk, manage losses, and distinguish performance from self-worth.
The result is a fun read that may undercut the market for "get-rich-by-trading" books. As many suspect, advice from "the pros" is wildly conflicting. Everyone's method differs. For each expert peddling diversification, shorting, averaging-down or spreading-up, another advocates the opposite.
The only thing common among good traders is the ability to develop a plan and stick to it, setting firm exit parameters. That is, plan to control losses -- they will occur. Or else you'll find yourself denying the position is moving against you. You'll be angry at the market -- it's "wrong." You'll pray just to get back to breakeven. You'll fall into depression. You won't accept reality until the clearer closes you out.
Paul exhibited all those "Five Stages of Loss" as his soybean position crumbled.
The book spares readers of equations, including just one "flow chart" diagram linking the concepts. Paul and Moynihan at one point lapse into strained distinctions among gambling, betting and speculating. But at least they make the distinctions. Several traders can't tell an arb from a spread.
The authors include many supporting quotes and anecdotes from traders, philosophers and decision makers. I'd recommend the book to anyone who's suffered any episode or pattern of serious loss, financial or not.
The Psychological Dynamics of Loss, May 30, 2002
By Christopher G. Roche (Weehawken, NJ United States) - See all my reviews
The title of this review is a chapter in Jim's book. I bought this book after Jim passed away on September 11, 2001 in 1 World Trade Center. He told us about this book in 1997, and I was so glad it was still in print. It is an excellent book, and it is written by an extraordinary individual. When I met Jim I could tell he was amazing, and his personality comes through in this work, which is part autobiography and part trading treatise. Jim's rise and fall and subsequent rise again makes for an incredible story, and his insight into the markets are superb. Even if you are not interested in the market, this book is worth purchasing just to learn more about Jim's amazing life story. Jim is candid, funny and dynamic in this work. I wish the world had more people like Jim Paul and more books like "What I learned While Losing a Million Dollars."
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A captivating life story of a real person who lost a million and a half bucks, with the conclusions he made from it. The first half -- about the guy's life -- reads like a superb fiction story. Not extremely educational in terms of trading per se, but a lot of fun to read. The second is a thorough and insightful analysis of the psychology of losing -- product of both the authors own experience and his studies afterwards. Quite a few deep thoughts.
