If you think that experienced traders don’t make mistakes, think again. I remember Stanley Druckenmiller, one of the best (if not the best) global macro traders in history talking about how he lost billions when he went long the tech stocks in 2000 missing the top of the bubble by an hour or so.
Even though he knew he shouldn’t have done that and told himself many times to refrain from buying, he eventually fell into the emotional trap of the fear of missing out (FOMO). He didn’t learn anything from that mistake, it was just a normal human impulse. The reality is that such emotion driven mistakes do happen and no one is exempt from them.
Another common mistake experienced traders fall into is market timing. Timing well the market consistently is basically impossible. The market is a big chaotic thing that, especially in the short term, can be noisy and very volatile.
Jim Rogers, another famous global macro trader who co-founded with George Soros the Quantum Fund, is not shy to admit that he’s very bad at timing the market and although his fundamental views often proved right, timing is what made him lose money.
He once went all-in short six stocks that he had the most conviction in. Two months later he was completely wiped out. Was he wrong? Not at all, because 2 years later all those six companies went bankrupt. Unfortunately in trading, being right but being early eventually ends up in being wrong.
Mistakes will be part of your trading career no matter how good you are or how much knowledge and experience you have. What will make the difference is how fast you will recognize your mistakes and how well you will manage them.
