Larry Pesavento - Pain is the Other Side of Strength
by Larry Pesavento
There is an old Chinese adage that says "that which does not destroy me will make me stronger" It refers to the internal battles with one's self. Experts like Larry Pesavento will point out that trading is certainly an internal battle. Once you conquer the man in the mirror the battle is won. As Socrates said, "know thyself."
Trading can release levels of emotional pain capable of bringing down the best trader like a Warren Buffett or a Larry Pesavento. Reports of suicide, although a rare event, are always frightening. Pesavento says that he remembers the last days of the great trader Frankie Joe in the mid 80's. He was one of the best on the street but to himself he was a failure. In his 30's, he checked out of the game!
Pain is the body's "red light" system to alert us of a problem. In trading, the source of this pain must be uncovered to prevent it from being fatal.
According to traders like Larry Pesavento, most pain in trading comes from these sources:
-
Holding a loss day after day and watching it go lower and lower (reverse if short).
-
Receiving margin calls each day and meeting them to have some hope that the stock will reverse itself.
-
Watching a trade soaring to the sky and you didn't have the courage to buy it.
Just ask Larry Pesavento...trading in pain is a recipe for disaster. This is especially true of neophyte traders who use revenge trading to recoup their losses. Adding to losing positions will be the executioner in these cases. Recent examples of Linux ($320 to $12/share) and Kr. Koop ($70 to $0.70/share) plus hundreds of others amply illustrate this point.
It is the opinion of traders like Larry Pesavento that pain relief is just a phone call away! Do the right thing - exit the position - It does three things for immediate relief:
-
It stops the bleeding in your account and preserves capital.
-
It allows you to think clearly for the first time in a long time.
-
It gives you quiet time to realize what you're doing wrong and develop a trading strategy to recoup your losses.
Trading Hint: If you listen to traders like Larry Pesavento and you are in a long or short position that has lost for the past five days and is getting worse - don't imagine that it's going to get better. Pesavento and others would say that you could just as well pour gasoline over yourself and begin smoking! The chances are about equal that you will come out OK!