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A Foolish Mistake by Me... Please Learn from It!

By Dr. Steve Sjuggerud
Thursday, September 11, 2014

Darn it!
 
I did it... again!
 
I made a foolish mistake. And it cost us profits.
 
I am sorry. I should know better by now... I've been doing this for 20 years!
 
Let me explain what I did, and how I hope to do better next time...
 
You should evaluate every trade you make – both the winners and the losers – to see how you could do it better the next time.
 
If you are honest with yourself, your biggest lessons will come from your losers. Then you will become a better investor.
 
If you learn from your mistakes, hopefully you only touch that particular hot stove just once. (The financial markets unfortunately have a lot of "hot stoves.")
 
This week, I made a major blunder...
 
I had set a 10 percent stop loss on a trade I entered almost two months ago, and the trade hit that stop this week.
 
Now, I realize, a 10 percent loss in one trade isn't the end of the world for my readers... After all, we are currently sitting on seven triple-digit winners across my two newsletters (and many more positions up 90%- and 80%-plus). Life is good.
 
The thing about this 10 percent loss is, it is my fault. I broke my own rules. And that is what brings me down – this was an entirely avoidable mistake.
 
For the specifics, here's what I told my paid subscribers on July 18, 2014:
 
Regular readers also know I have three criteria for investments. I look for investments that are 1) cheap, 2) hated, and 3) in the start of an uptrend.
 
In the case of corn and wheat, we have the first two in place. However, at this moment, we don't have our uptrend – yet.
 
The thing is, today's extreme is REALLY EXTREME. There's a good chance that if I wait until next month's True Wealth issue to share this idea with you, we will have missed it.
 
TODAY is what a bottom feels like. I can't tell you exactly when we'll see the actual bottom. But I can tell you the bottom is likely close enough that I don't want to wait until next month to invest.

There it is. "We don't have our uptrend yet." And "I don't want to wait."
 
Those two sentences have cost me more money in my investing career than anything.
 
"Steve, you're often right, but early," fans will tell me. That's polite of them... they know we've made a lot of money together.
 
You might give me credit and say I was "right but early" in many cases... But our objective scorecards (known as our brokerage account statements) tell us that I was wrong in those cases. Your account statement isn't giving me any credit.
 
You might think I'm being hard on myself here. It was simply a 10% stop loss that was hit.
 
The thing is, you need to be hard on yourself about your mistakes, so you don't repeat them. This is real money we're talking about, after all – your money.
 
I am not smarter than the market. None of us are. So for optimal results, I know that I need to wait for "confirmation" that I am right on an idea. The simplest, clearest way to do that is to wait for the uptrend.
 
Please follow my lead, and cut your losses when you have them.
 
Also, do what I say and not what I did... For optimal investing results, wait for the uptrend.
 
And lastly, be hard on yourself about your mistakes. Figure out why they happened so you can prevent them from happening again. Doing this will make you into the best investor you can be...
 
Good investing,
 
Steve




Further Reading:

Back in March, Steve shared another one of his investing mistakes with readers. "It's important today because what happened then is happening again today," he writes. "I want you to learn from my mistake, so you won't make it too." Get the full story here.
 
And last month, Steve shared a valuable life lesson he learned outside of investing. "I thought I was living right," he writes. "But now I think I've gotten off track." Learn Steve's valuable lesson here.

Market Notes


A GOOD SIGN FOR THE BULL MARKET

Transportation stocks hit a new all-time high last week... and that's good for the bull market in stocks.
 
The "transports" are a widely followed sector, thanks to Charles Dow. Dow is the legendary founder of both the Wall Street Journal and the Dow Industrials Average. He also developed a famous method of stock market analysis called "Dow Theory."
 
One of Dow Theory's main ideas is to monitor both industrial shares (the manufacturers of goods) and transportation shares (the transporters of goods). This gives the investor a "big picture" view of the economy and stock market. Dow reckoned if both manufacturers and transporters were enjoying higher stock prices, they were "confirming" a bull trend.
 
Below is a two-year chart of Dow's modern-day transportation index, the Dow Transports. The index tracks America's largest railroad, trucking, and freight companies. As you can see, the index is in a long-term uptrend and just broke out to a new all-time high. It's still a "Dow Theory confirmed" bull market.
 

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