26 Celebrating Failure
Celebrating Failure
I have failed severely three times this semester while doing
options trading. In an extremely simple sense, options trading is a trader
betting a security will either go up or down in a specific period of time. The
reason I failed was because I kept using the same strategy and it clearly didn’t
work. I did what is called buying on the dip. Basically when a stock falls a
significant amount, you buy it at the bottom hoping it will rally back. I tried to do technical analysis to see the
support and resistance lines and plan my entrance and exit strategy.
After losing big on GoPro, Qualcomm and Snapchat, I decided
enough is enough! Undoubtedly my strategy is not effective and unless something
changes my account balance will get lower and lower.
Learning from my mistakes I have updated my strategy and
merged value investing with technical analysis. This means I initially only
look at the fundamentals of the company, i.e.: the company’s balance sheet,
income statement and cash flow statement. Once determining if the company is
significantly under or overvalued, I will then do technical analysis to
determine a good entry point. Subsequently, switching strategies has enhanced
my p/l from 0-3 to 3-0.
Failure is an extremely hard thing to deal with. People hate
failing and talking about their failures, is even more of a challenge. However,
failure is a great thing it teaches people specifically what not to do. In one
of the lectures professor Pryor talks about how a business that has failed a myriad
of times knows much more than a company that has only had success. Because the
company that has failed knows what they did wrong, but the successful company doesn’t
really know what they did right.
Early on I handled failure very poorly. I would blame other
variables or people. Over the years, gaining more experience, I started
handling failure better. The biggest thing is I don’t let it get me down. When I
fail or someone tells me I messed up, I never get angry or combative with them.
Generally, I will go back to my desk and in my head, think of ways how I could
have done it better. The biggest thing is not getting heated. Staying calm and
collective allows me not to get emotional about my screw up and process my
failure easier.
Over this course I have learned that all business experience
failure and a lot of businesses don’t come back from their failures. I believe
that this semester I have become significantly better at handling failure. I
think my risk tolerance has stayed the same, however whenever I do take a risk I
gain more from the experience.
Kai - Thanks for sharing your Celebrating Failure post. I can relate to your failure experience. I dabble in the market as well. Two of the three companies you listed in your post, I considered buying over the past few months. I almost bough SNAP shortly after the IPO - and fortunately my trade expired. Failure is tough to swallow, particularly when the result affects the bank accounts. But, as you suggest in your post, use the failure as learning experiences.
ReplyDelete