At times I feel, in some respects, the lessons learned in golf are very similar to the lessons learned in trading the markets. When you pull out the “big dog” (a.k.a. your Driver) or try and put on that home-run investment idea most often you land way off target with devastating results. Both of these golfers went for it despite their original poor shots and it cost them big!! I want to hit the big shot myself just as we all do, but what wasn’t talked about in both of these stories was what you should do when things start out bad.

When the investment clearly gives you negative signs from the start, the results tend to get worse. As a society of competitors we often times do not want to admit our mistakes. We get so cocky that we think we can play ourselves out of the bad idea. BIG MISTAKE!! How about when Lehman Brothers decided not to take the offer given to them which would have kept them in business today. Its like they never existed. How about Nick Leeson, who didn’t take his medicine, only to take down a 233 year old bank. The list goes on and on.

I learned a hard lesson early in my trading career. A couple of years before I went off on my own I was trading part-time and working for an order filling firm full-time. It was Jan 1995 (I recall it clearly) and I put on a short position with my own money in Bonds (meaning I thought prices where going to fall). You guessed it, prices kept going higher. OUCH!! I said to myself, “Don’t worry, it will come back”. Sound familiar?? After 3 days of torture, I finally took my medicine and covered the trade for a $3,000 loss. I never risk the house anyway but as a competitor it pissed me off!! I want to win!! I missed the original BIG HINT!! The trade started out bad and immediately went $1000 against me. 30 minutes later it gave me false hope and I was only down $500. Instead of accepting the early clues and taking my medicine, I kept the trade and 72 hours later the loss had soared to -$3000. I had enough. In review, if I took my medicine, it would have saved me $2500 and 71.5 hours of my life.

The golfer that started the fire reminded me of that early lesson, which is simple: TAKE YOUR MEDICINE; ADMIT YOUR MISTAKE!! AND MOVE ON TO THE NEXT IDEA!! It has helped me survive and thrive today. Going a little further when thinking about that trading day, I started to laugh when I calculated the loss if I was still holding the bad idea today, 15 years later. It would be close to -$250,000 and never even smelled a hint of profit over the years. I picked the bottom. Instead of saying to myself, “You suck,” I said “GREAT LESSON!!” If you know something about the Bond prices since 1995, they have climbed a bit higher since then. The point of this story is take notice of what you originally get yourself into. If things starts out with bad results feeling like a hard gut punch right away, remember you’ve been notified to WAKE UP!! ITS GONNA’ GET WORSE!! AND IF IT DOESN’T GET YOU THIS TIME, THAT BAD HABIT WILL GET YOU SOON!!

You can’t win, if you don’t play!! Prosperity is at your fingertips! All you have to do is grab it!!

For more RDS articles on trading, visit www.rdstrader.com.