What I Learned Losing a Million Dollars (Columbia Business School Publishing)

After having read several books about trading and investing, I came across this one here. I have read it on my Kindle and enjoyed the style of writing. Well, I did not lose a million because I had none, but made similar mistakes as laid out in this book. Giving emotions the control over your actions is like in nearly every situation a bad thing to have, but it hurts especially in the markets.
Nevertheless, the author describes his way of getting to a point where emotions took over and charged him for the improper treatment of his trading style in advance. I think this one is a good read for every one new in the business but also it is a good one for more experienced traders because you should never forget how you got where you are. I clearly recommend this book.

Great lessons about luck, ego, power, demise, recovery, and conversion to wise but not fearful risk-taking. A good and helpful read for those who participate in the market and especially those intending to enter the market. As with most things in life, some planning, knowledge, and experienced counsel tends to help us favor "luck". Being a careful thinker and planner myself, Moynihan's story rings home. As with King Solomon's admonition, Moynihan learned the principal that that wealth gained wisely sticks, wealth gained hastily generally disappears quickly. For the extroverts and high risk takers, this book is like a blinking yellow light. One would be wise to head the signal.

If you are reading this review, I encourage you to buy this book. Even if you do not learn anything from it, it is a remarkably entertaing and easy read. A friend of mine and I still laugh about some of the stories 10 years after reading it.

Jim Paul was a great speaker and lays out the truth of his experience without whitewashing it. I know I can still learn from this, and if I had learned more the first time I read it, I would be better off than I am now.

It is not cheap because it doesn't sell many copies. Why? I have no clue. But it is well worth the money. I am ordering a second copy because a client won't return my original that I loaned to him.

Amazing book! Most books tell you how to make money but, I feel that's important for one to learn how to control loses. In Market Wizards, Steven Cohen said that his best traders are only right 70% of the time. If you don't learn to control loses during the other 30% of the time you won't last very long in this business.

This book should be required reading along with reminiscences of a stock operator.

Yes everyone needs an "exit strategy" - and this book says why it is a must for any investor but Moynihan goes beyond that one point for a full investment philosophy. He could have more specifics to the examples to better distinguish those who are not caught by emotionalism and those who are but still a must read.

Interesting and original. A refreshing divergence from the endless line of "how to make a million dollars" books. A lot can be learned by studying losses, rather than gains.
5th star left out because I found the last part of the book, regarding the psychology of the investor/trader/gambler somewhat repetitious.

A dull account of an egotistical man who lost his family's entire net worth as a result of his own hubris. Turns out he's not a good trader nor a good investor. I purchased this because it was recommended by Tim Ferris on his blog, but I did not like this book at all, and do not recommend it.

Books can generally be categorized into one of the three groups. Education books teach us; entertainment books amuse us; and reference books inform us. This book combines education with entertainment to make it easier to recall the lessons by remembering the story. Furthermore, quoting from page ix, "it cost the author a fortune to learn these lessons; the reader has the opportunity to benefit from this knowledge for the mere cost of a book - a true bargain." In short, recommended.

p.s. Below please find some of my favorite passages for your reference.
The moral of the story is: Success can be built upon repeated failures when the failures aren't taken personally; likewise, failure can be built upon repeated successes when the successes are taken personally. Thomas Edison failed roughly 10,000 times before finding the right filament to make an electric bulb. The day his Menko Park laboratory burned to the ground a reporter asked him what he was going to do. Edison responded, "Start rebuilding tomorrow." On the other hand, considering Henry Ford, who started in 1905 with nothing and in 15 years had built the largest and most profitable manufacturing firm on the planet. Yet a few years later, this seemingly impregnable business empire was in shambles and would go on to lose money almost every year for the next two decades. Ford was known to stick uncompromisingly to his opinions: is it possible his company lost so much money because he took the successes personally and came to think he could do nothing wrong? Pgxiv
Concentrate your investments. If you have a harem of 40 women you never get to know any of them very well. - Warren Buffet Pg61
I'm always thinking about losing money as opposed to making money. Don't focus on making money; focus on protecting what you have. - Paul Tudor Jones pg64
One investor's two rules of investing: Never lose money. Never forget Rule #1. - Warren Buffet pg64
I cant get out here; I'm losing too much. -Loser's famous last words pg73
The first psychological fallacy is the tendency to overvalue wagers involving a low probability of a high gain and to undervalue wagers involving a relatively high probability of low gain....The third is the belief that after a run of successes, a failure is mathematically inevitable and vice versa. Fourth is the perception that the psychological probability of the occurrence of an event exceeds the mathematical probability if the event is favorable and vice versa. Fifth is people's tendency to overestimate the frequency of the occurrence of infrequent events and to underestimate that of comparatively frequent ones after observing a series of randomly generated events of different kinds with an interest in the frequency with which each kind of event occurs. Sixth is people's tendency to confuse the occurrence of unusual events with the occurrence of low probability events. Pg95
Man is extremely uncomfortable with uncertainty. To deal with his discomfort, man tends to create a false sense of security by substituting certainty for uncertainty. It becomes the herd instinct. - Bennett W. Goodspeed pg100
To repeat the leitmotiv of the book thus far: people lose (really lose, not just have occasional losing trades) because of psychological factors, not analytical ones (chapter 5). The personalize the market and their positions (chapter 1 thru 4), internalizing what should be external losses (chapter 6), confusing different type of risk activities (Chapter 7), and making crowd trades (chapter 8). Pg114
A fool must now and then be right by chance. - William Cowper pg117
The uncertainty of the future when facing a market loss triggers the Five Stages of Internal Loss. Have you ever said to yourself "No way! Is the market really down that far?" That's denial. Have you ever gotten mad at the market?...That's anger. Ever begged the market or God to get you back to breakeven so you could get out? That's bargaining. Has a market loss ever changed your sleep or diet patterns? That's depression. Ever have a firm liquidate one of your positions? That's acceptance. Unless you have a plan, your potential loss is unknown and you can count o n suffering through the Five Stages, losing more money as you go through each of the stages. Pg131

Or at least learn from others that have been down the path before. Aesop says it a little more poetically ~ 'Better be wise by the misfortunes of others than by your own'. True that it is better to learn from others if you can, but it is not always that easy. We would like to think that we learn from our own mistakes, but we don't always do and it is even harder to learn from others. However, reading and learning from this book does provide one with the opportunity.

I found one of the better lessons learned to be, ''Changing you initial time horizon in the middle of a trade changes the type of participant you are, and is almost as dangerous as betting or gambling in the market". How often does one find themselves holding a position with a paper loss and saying 'its a good long-term investment'. A good lesson is to sell if you hear these words.

Another lesson could be, "You can't calculate the probability a trade being profitable; you can only calculate your exposure. So all you can do is manage your losses, not predict profits".

Irrespective of the quotes, if you are in the investment profession or only a weekend investor, then the lessons my assist you in becoming a little better investor. On the whole, a good read into the real time vagaries of investing. The book also provides a glimpse into the world of uncertainty and chance. Though it is currently out-of-print, it isn't too hard to find a used copy online.

This is a very intersting investor book that is not written like an investing book. Its not boring or have a ton of formulae.
The author tells a story, his story and what he learned. The million dollar lesson so to speak.
Has some good insight and definitions that each person who has a 401k or stock account should read to get to know what kind of "investor" they are and how to watch out for yourself, or beware of yourself and how you operate which is at times contrary to your best interests. Some solid psychology that I wish I had a few years ago that would have saved me a few hundred thousand.

This is I think one of the first books I have read on investing that the author is not trying to sell me anything.

Great book. I just listened to the audible audio.

Having personally lost (far less than a million dollars) in the markets, I could relate.

The principle theme is that there are as many ways to make money in the market as there are ways for animals to live in the jungle. But there are only a few ways to lose money and once you know how to play the market games, most of them relate to psychological factors (internalising losses and becoming ego involved).

In writing about the few ways of losing money and how to avoid them, this book should be invaluable to anyone involved in trading or investing. It is also very entertaining.

What I Learned Losing a Million Dollars

I read this splendid book some time ago. I think Taleb is right about saying this book is the best book ever written in the finance literature. Usually, when you read a finance book, the author will come with a cliché story about how he got insanely millionaire, basically a get-rich-by-the-book (this is what Taleb calls the "winner bias"). But Jim Paul got the courage to write about his failure story in order to teach us a long life lesson, namely, "don't think you're successful 'cause you're a genius... it's nothing but luck." I feel fortunate for having one of this rare pieces in my personal library, and furthermore because I grasped the message.

I recommend you to read it!

This is an interesting original book. Instead of focusing on strategies and tactics, it focuses on the emotions and human psychology involved in gambling, speculating, investing and trading. The author, having been very successful ended up in losing more than one million dollars. As he analyzes his behavior, he traces his success mostly to luck and to the lack of a plan. More important that making money in the stock market is not to lose a lot of money. A very good and entertaining read.

An alternative title to this book could be, "What I learned losing my ego."

After describing a meteoric rise to the top of the Chicago food chain, Jim Paul essentially boils down the secret of his success to being a cocky punk with an exceptional lucky streak that had to run out.

I think he gives himself less credit than he deserves in ascribing all his early success to luck--it takes confidence and selling ability to take advantage of the "lucky breaks" he got--but that is beside the point. His main message is that success fed his ego until he felt that winning was his birthright. He thought he could do no wrong, which led to inevitable downfall.

One small quibble. The ironic thing about Paul's stories of loss are that he was 99% there most of the time. If he hadn't have let the bean oil get back to zero, he could have walked away with at least a couple hundred grand in profits... if he hadn't let the stock options purchased for an eighth (or whatever it was) go to zero after seeing them hit $4, he could have had six figures in profit there again, etcetera.... I got the impression that even the big downfalls in this book were actually success stories with "oops" endings tacked on.

In this light, I didn't really understand the blurbs on the back talking about how Jim Paul shows you the perils of the trading game. What perils? The perils of not taking a huge, monster profit when it is sitting in front of your face?

This is why I have to think the book will probably just reinforce the ideas that readers already have when they pick it up. Someone with a big ego and a small mind could easily think in the back of his mind, "Nice story, Jim... good thing I won't make the same mistakes you made. Because while you just thought you were the man, I actually AM the man, heh heh..." But then again this isn't much of a criticism. I mean, who can reach those types anyway?

The last half of the book reads almost like someone else wrote it, and has some very good points. I liked the way he took comments from a bunch of the "pros" (traders who have won big and kept their winnings) and juxtaposed their ideas, to show how successful traders' thought processes are sometimes totally different and often contradict each other.

It really hammers home the point that there are multiple paths up the profit mountain, and that discipline and defense are often the only truly common elements among a broad universe of strategies. I also thought the book made a really great point about odds--hat the reward to risk ratio on a trade has nothing to do with actual probability of success for that trade.

An entertaining book worth a weekend read.

($1.5 million, actually)

If you've read Nassim Taleb's Fooled by Randomness (or others), then you've heard the stories of young traders who weren't even alive during previous market crashes who make soaring fortunes, convince themselves of their own greatness, live the high life, then come crashing down when suddenly the market turns and they're left broke and unemployed after realizing markets don't always go up. Most of those traders don't write books, but fortunately Jim Paul did (and he's older than my dad).

This book was on Tim Ferriss' recommended list and I've heard several people cite what it taught them, and given that Paul was a Kentuckian I was interested to read the tale. It's a quick read and mostly interesting. If you've already read quite a bit of Taleb, Kahneman, Arielly, or other behavioral economists then you might not glean much insight into human behavior. But the vast majority of people I've met in the finance industry have not read those authors and suffer from the same hubris.

The book is summed up in the beginning, but here's the book in a paragraph:
It is a study of losing in order to win; success too often sets the stage for failure. The key lesson is not to personalize success or failure. Every business book written by traders with recipes for success contains contradictions. Following one "successful" strategy will put you at odds with someone else's "successful" strategy. Just because a person appears successful (or not) does not mean that he is, he was most likely lucky (even if convinced otherwise). People don't write books about the unlucky. One way to get an edge in life is to study the rules and use them to your advantage. If you're a trader, use a hard rule to cut your losses and walk away. First, decide what kind of market you are going to participate in, then decide what kind of market analysis you are going to use, and then what your maximum acceptable loss is. Be disciplined not to deviate from your rules. If someone asks you "are you in, or will you stay stupid?" simply explain that person's trade may be successful but it's not part of your own strategy. Understand that losses are objective, they will happen, and they're not your fault. But not minimizing those losses by walking away "when it becomes painful" is your fault, and that's what Paul stresses.

Paul grew up in Elsmere, KY not far from Cincinnati. Even as a nine year old in the 1950s he had to work to pay for his Catholic school tuition and books. He enrolled at the University of Kentucky in 1961 and essentially invited himself into a fraternity, then hustled someone at cards to avoid hazing. He was not a model student but did well enough in business and economics because he understood it intuitively, although he was horrible at math. He grew up working at a country club and it seems his dad knew some people, eventually he joints the Army and gets into OCS via a Congressman's phone call. At OCS he finally buckles down to obey the rules and give his best effort, graduating at the top of his class. He gets to miss Vietnam, which is a bonus.

He gets an MBA from Xavier which helps him broaden his network. He struggled with the math-intensive courses in the MBA program, and gives encouragement to anyone with a weakness: learn from the division of labor. "If you can't do something pay someone who can and don't worry about it." He gets on with a firm that offers him a job trading and learning from other more powerful brokers, basically by reading the book related to their psychological evaluation so he knows how to get a perfect score. (Find the rules and use them.) By 1969, he keeps getting the idea that he is "better" than everyone due to his ability to climb. He turns down a low offer with a big NYC trader and ends up doing better in Cincinnati.

When fired, he moves to Cleveland and a small firm entering the commodity markets, booming after Nixon closes the "gold window" in 1971. He sets up shop on the Chicago Board of Trade using "LUCK" as his name tag in order to get noticed and remembered. He quickly gets elected to be part of the Board of Governors, making him privy to the inner circle that runs the exchange, easily making $200-300 annually. But he admits that the "vast majority" of his wins were "lucky," he had no idea why he was making money. When the market for timber tanks, he is fired and is taken off the Chicago Board. This leads to a time of depression and a near suicide attempt. It's here he decides to learn rather than change careers.

He studies books by all the legendary traders and self-made millionaires, finding most of their trading strategies contradictory and therefore unhelpful. He then begins to pay attention to what they say about losses, and realizes it's better to control your losses than worry about wins. Paul's mom sadly commits suicide over his dad's debilitating illness before learning of the loss of his Chicago job, but that event also helps put loss and depression in perspective.

He learns not to internalize external losses. Market losses are objective and only God knows what markets will do. But Paul was taking everything personally, including losses with his client's money, that they put up knowing there was risk. Markets don't always go up, just like Kentucky doesn't win every basketball game. Betting on Kentucky to win and taking it personally when they lost was dumb. He reads On Death and Dying and describes the five stages of grief as similar to what irrational traders feel. He basically discovers the myth of the hot-hand and the false runs that fool traders and Vegas gamblers.

Paul notes the crowd/herd mentality. While the Buffetts of the world may claim to make money by moving against the crowd, this is not always the case. More often, if everyone else is headed for the exits that's a sign you should too. When it becomes "painful," get out. The crowd removes inhibition, people do more and risk more when in a crowd due to its anonymity.

Decide what kind of market participant you are going to be, what kind of market analysis you are going to use, and what your stop-loss rule will be before you enter any market. Peter Drucker reminds us that "There is no perfect decision." People who ask why the market is up or down usually want to justify their own trading positions, they're either arguing with the market as to its wisdom or figuring out when the timing will work in their favor-- both are silly. LBJ did not have an exit strategy or stop-loss limit in Vietnam, like a trader who just throws bad money after good down the rabbit hole. When someone asks you what the market is going to do answer according to the method that you use to invest, or your model, not according to your subjective opinion (working in an economic forecasting office, I agree). Write your plan down and stick with it. When you feel pain, stop.

Ultimately, your life's value is not determined by what you have accomplished but how you have accomplished, your self-worth should not be a reflection of events outside of your control.

The audio version ends with Paul being interviewed by Tim Ferriss, and their discussing Nassim Taleb's praise for this book.

I enjoyed it, I give it 4 stars out of 5. I recommend it to anyone involved in finance or managers who struggle with personalizing success/losses in their projects.

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.
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.)

The book points out very early that many successful investors have opposing styles and theories on how to make money, and that they cannot all be right at the same time. The most important point to take from the book is how to avoid losing money, as this is what is most evident when you study the successful investors, but first they need to experience a loss that teaches them the lesson.

App Fairy says YES!
[...]

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.

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!

This book is so GREAT. The story was entertaining. The educational part was easy to understand and easy to apply to trading or other business ventures and your life. Trading is stressful sometimes. The book will get you prepared mentally to trade successfully. You don't have to be stressed out while still making big bucks. You have to read it to know how excellent this book is. It is still in print. The author, Brendan Moynihan, is a registered seller @ the store.com. Buy from him through the store. The book will be signed with a personal message inscribed to you by Brendan. You will love this book. Guaranteed!What I Learned Losing a Million Dollars

A great book about avoiding cognitive biases that can crush investors. Read this with Thinking Fast and Slow by Daniel Kahneman to get a great picture of how to get a slightly more realistic picture of the events around you.

The book has two parts: first the personal story of a trader who's eventually gone broke in a single trade and - after a short survey of authors and books in the "how to trade right" market - a second part that analyses losses in the market - an analysis which is easily projectable to other social situations where one could say something like "I can't get out here; I'm losing too much." (p.73).

I find the book interesting to read and I liked the idea to think about losses in more depth though I have the feeling that there are a lot more things to it. But to get the general idea of thinking in scenarios (which is also useful in other areas than the market) and as a starting point I would recommend this book warmly.

The stance of the author makes perfect sense. You need to be able to work detaching your ego--to a certain extent-- and therefore keeping your emotional balance. I read the sample and it is full of grammatical mistakes, which makes the book less credible and therefore harder to read. That is why I rated it only with three stars. I don't know whether both the Kindle and hard-copy editions are like that. I strongly suggest to the author to proofread it or seek professional help.

in these turbulent times, any investor must read this book before making any further investments. i have been an investor for many years; it was only after reading this excellent book that i know "get" what investing in the market is all about. this book is even more timely now than when it was written. reading this book will not guarentee you riches but it will help you become a more sophisticated investor with a much better chance of preserving your capital. very highly reccomended

Reading this book was a wise investment in both my personal and professional life. In short, "Failing to plan is planning to fail." Emotions cloud proper decision-making and can only be held in check by the combination of written plans and the discipline to adhere to those plans.

Because, after all, he was indeed a loser.
because he's a human being and he deserves it!

he lost it all out of being stupid.
what's to be learned from it?
some history of the Chicago's pits.
what else? nothing!!!
for a guy who martingales his ass to impress his brother, while explaining to him how the market works, he was lucky indeed to having gone belly up that late.
that's it!
I own an older edition.
Will donate it to the Salvation Army.

The author says he knows that during and before he lost the million dollars, he was not a trader. Which of course he wasn't, having watched a position deteriorate for two months without taking any action. After that lose, he read and "thought" and wrote this book.

So this is a book by a non practitioner for wanna be practitioner. Go figure.

By the way, in so many pages and words, what he struggles to impart, are a few core concepts in zen philosophy.

Waste of money and waste of time. The author doesn't have much to tell the reader when he is using 1/3 of the book telling what big ego he once had. The book is poorly written and the author has problem to getting to the point. If you have read trading books earlier this would not enhance your knowledge and make you a better trader.

Throughout this novel, you are presented with life lessons. These lessons are presented through the story of the author's life, making it an incredible story to read and does a great job keeping reader interest.