Which Way the Volumes - Ed Bugos

The Naked Truth
How many different ways can there be to write “buy gold”?

Before this decade is out it will hit our $2000 mark, and nobody will remember that we were one of the very first to call for it because there will be thousands of forecasts calling for much higher numbers by then… by the nation’s blue chip analysts no doubt.

More and more people will be right as the gold bull gets on. Ultimately, who was first won’t matter ‘tall. In this business, the saying goes; you’re only as good as you’re last trade. Hence, traders live and die by the margin, both literally as well as in the context of utility theory.

That also applies to newsletter writers, analysts, money managers, and gurus – a guru is one of the aforementioned that happens to get on a good roll. However, in this business, as almost any other, taking losses is an inevitable part of any successful trading program.

When I tell people that, specifically those that are new to the investment scene, I often get a blank stare. They don’t know whether to believe me.

I’ve heard countless “stories” about this or that person that has traded and never lost; but after 20 years in the industry I have yet to meet any single one of these gurus. Of the thousands of industry professionals and clients that I’d ever met or spoken with, not one has avoided taking losses. In fact, whole books have been written on the subject that the biggest key to trading is knowing to cut your losses. Just imagine how rich one could be if they profited from every single trade they ever made.

More relevantly, imagine the kind of discipline that trader would need to avoid the inevitable loss – each trade becomes harder and harder to contain the ego! In this business, prior success begets losses more than any other factor.

Without fail, I have heard such tales from only two sources – from those with little experience, and from those that promote something. And without fail, one of the leading causes of failure in the business of investing or trading is the inability to realize mistakes and to take losses.

A good trader is merely someone that is capable of perceiving his/her own weaknesses and strengths; a bad trader does not have a handle on his own worst enemy.

This came to me through experience, but also, there is a story. A long, long time ago, when I was still a buck, my passion to excel at this sport led me to cold call one of the nation’s top traders. I did not expect to get through, but I did.

My goal was to find a way to work for him despite the technical barriers in my way – geographical, qualifications, good looks, etc. His name was Ed too. Paraphrasing because my memory on it is vague, I said something like, “Ed, you’re an icon (I may have said acorn) and I want to be one too.” He replied, “well, then what you’ve got to do is go stand in front of the mirror all day in your birthday suit, then call me back.” I did, at least for half an hour anyway.

I stood there, puzzled and bored, wondering, how the hell am I going to beat my competition standing here naked? I started to think the guy had pulled the wool over my eyes – that he must be rolling around on the floor thinking he got some young pup to run around nude all day in search of the holy grail of trading. Hah, hah, hah. As it happened, he wasn’t accessible, which confirmed my fears that the joke was on me.

It wasn’t until years later that my epiphany came and I finally understood why I had failed the test. I didn’t understand that what he was really telling me was that the defining characteristic of a good trader was one who could withstand looking at all their own flaws. I had figured that out the hard way.

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