Monday, November 26, 2007

After a Devastating Trading Loss

The year was 1982. I had been short most the year and was doing quite nicely in this, my fourth year as a trader of U.S. stocks. For the first time I allowed myself to think about trading as more than an avocation: as a potential source of ongoing income that could help free me to do the writing that I loved best.

Then we hit mid-August. A ferocious rally drove prices sharply higher and left me in the red. I decided to hold and wait for a pullback, but the pullback was mild. We moved sharply higher again in the fall and I was forced to take losses that consumed not only most my profits, but all my dreams of supplemental income.

I'd have to say it was the most depressing period of my life overall. I was questioning the work I was doing in community mental health--a great learning experience, but not a viable career path--and I was not happy in my personal relationships. The trading losses were the icing on a not so delectable cake. The bottom came in a bar in Homer, NY after too much to drink and a smoke that I discovered too late to be adulterated. It was not a happy time.

I'm convinced that the most successful people are not those who avoid those ruts in life, but the ones who use those to turn themselves around. I discontinued trading and embarked on research regarding market timing that, I vowed, would enable me to never make the same mistake. Out of that research came the work on new highs and lows and sector lead/lag relationships that I draw upon to this day.

I also turned it around socially. After consuming a full bottle of scotch at a New Year's party at the end of 1983, I found myself too inebriated to ask the pertinent questions of the woman I had met. Had I asked the questions, I would have found out that she was not yet divorced, had three children, and was nine years my senior--not at all what I was looking for. Today, after 24 years, she remains my wife and the best decision I ever made.

With the marriage in 1984, I inherited shared responsibility for three children. The steps I didn't take for myself I had to take for the new family. Gone were the drinking and partying. I parlayed my community mental health experience into a student counseling position at Cornell University, taking a 33% pay cut in the process. One year later, impressed by the Cornell experience, Upstate Medical University in Syracuse hired me and I joined a medical school faculty.

At Upstate, I realized that my counseling skills were not ideally suited for the medical school environment. I undertook a lengthy review of the research and practice literatures and taught myself the fundamentals of an emerging approach to helping called "brief therapy". Shortly thereafter, I began teaching brief therapy in the psychology and psychiatry programs. In 1990, I published my first review paper in the field, then another in 1992. I had found my niche: one that would lead to over 50 published papers and book chapters, two books in psychology and psychiatry, and two books combining my trading and psychology loves--and, of course, this daily blog.

I look back on that trading loss in 1982 and now see it as the beginning of a turnaround, not as the ending of a dream. But it took an unflinching and unforgiving look in the mirror to make that turnaround. It also took relationships with people I loved enough to want to make more of myself.

I've received several emails and blog comments from traders who have been through devastating trading losses. This post is for you. What doesn't kill you *can* make you stronger, if only you can sustain that hard look in the mirror.


Resilience and the Courage of Your Convictions

Blueprint for an Uncompromised Life


BirdMan said...

Thanks Doc...

Marc said...

"That which does not kill you..."

I think you know the reference.


Flatwallet said...

Wow Doc...great story of never hear real personal stories anymore...I feel happy for you...I like the touch you added on what doesn't kill you only makes you stronger...Happy holidays

Anatrader said...


We all have a story to tell and often it is inspirational to others because it has helped us to overcome somehow.

I recall Forrest Gump said along these lines: life is but a box of chocolates?

All I know is life has its ups and downs and one just has to pick oneself up and try again and again like a Bruce to make it or arrive.

Here is the link to a very touching and inspirational video:

Which we should all emulate being more fortunate in being whole physically.

Dave said...

Now that is an inspiring post, Brett! Thanks for sharing.

tappy said...

I trade from the coffee pit on the New York Board of Trade. I start each day with reading your website. It's truly a gem, on so many levels.

So Grateful

StockMarketTechnician said...

Thanks for sharing Dr.Brett.

I believe that most who trade the markets have at one time or another been zapped by the markets - like being 100% long in October of 1987 as I was!

If you love trading, however, you will look at these incidences as a learning lesson.


Guru said...

I've been a reader of your blog for only a couple of weeks but find it not only outstanding, informative and of great quality but also inspirational.

jedi said...

great article. i think a market timing component is pretty important unless you have a solid cushion relative to the worst case drawdown of your approach. this is where i made some mistakes this year. i didn't get to cash fast enough and got too greedy. so far, i'm mostly in cash as of now and somewhat positive on the year, but i am really shocked by how much investor psychology has to do with things day after day. these kinds of articles help move my mind in the right direction. thanks again.

Junior said...

Thank you for sharing your story and your wisdom. I thought I had it bad today ...

Krasimir said...

Very inspiring and life-teaching story.

Thank you for sharing it.

Bear said...

Thanks for opening up your kimono. Your focus and dedication is obvious and it's most interesting to understand a part of its origin.

Mary said...

Such an encouraging post ... thanks for sharing.

Brett Steenbarger, Ph.D. said...

Dear Readers,

Thank you very much for the warm and supportive comments; they're much appreciated.


Sergio said...

great post ... i enjoyed it very much. it has helped me bring out some optimism when in the gutter.

Mark Wolfinger said...

A part of your story makes me shudder.

After my best year ever in 1981, I went belly-up in that August 1982 rally. Just one more thing we have in common

Great story. Thanks for sharing.

mlackner said...

One hell of a post Brett. Very insperational.

Ian said...

Out of Chaos comes beauty.

SnapTrader said...

Wonderful post Doc... Very inspirational, as so many have said. This game takes a tremendous amount of perseverence and those times seem to help us build the fortitude to make it through.

Now... where's my scotch?

Barracuda said...

Dr. Steenbarger,

Thank you so much for sharing your experience on your blog.