Investor's
Library 
Review of
What I Learned Losing a Million Dollars
By Jim Paul and Brendan Moynihan
This is a valuable book on trading psychology. It’s not your typical book about trading, which purports to show how to get rich by revealing secret trading strategies or can’t-lose analysis methods or by describing how the author discovered the secret to unlimited wealth and proceeded to extract it from the market.
Instead, as the title implies, it is a tale of woe from a self-admitted loser who, in the space of three months, lost his entire net worth of 1.6 million dollars and went deeply into debt. It is co-authored and self-published by Jim Paul and Brendan Moynihan, both with extensive backgrounds in the brokerage industry.
The underlying theme is that, if one aspires to be a successful trader, it is more beneficial to study the pitfalls and mistakes that lead to losing than to focus on ways to make money. The reader is shown many, many ways to trade profitably -- almost as many as there are participants in the market. Yet, ironically, the majority of traders lose.
On the other hand, there are very few ways to lose. Many highly successful traders (such as Jim Rogers, Paul Tudor Jones, Richard Dennis, and so on) are said to espouse the opinion that the most important factor in achieving success is in the avoidance of large losses, studying the factors that lead to large losses and how to avoid them, which is the major focus of this outstanding book...an unusual and innovative approach.
The authors stress that personalizing losses (for example, taking them personally rather than viewing them as a necessary part of a business venture) is a major factor leading to failure. They contend that success can actually be built on repeated failures (remember the story of Jesse Livermore?) if the failures aren’t taken personally. Conversely, failure can be built on repeated successes when the successes are taken personally.
The book is divided into three sections: The first, “Reminiscences of a Trader”, is fascinating reading. A priceless quote leads off: “Experience is the worst teacher. It gives the test before it gives the lesson.” It recounts specific details of Paul’s personal life, describing the factors in his background that produced the psychological framework and makeup to which he attributes his lack of success as a trader. His entry into the brokerage business, his career as an active floor trader on the Chicago Mercantile Exchange and the details of his final downfall and huge loss are recounted in detail.
The second section presents the lessons to be learned from his losing experience in the markets. A major theme is that there are many ways to make money in the market, but relatively few ways to lose. Most losses of significance are attributed to psychological factors.
The third section shows how to avoid losses due to these psychological factors. In practical and easy-to-understand terms, it presents a simple plan to help one understand, accept and, thereby, avoid catastrophic losses.
He emphasizes the value of having a planned, organized approach to trading. “Participating in the markets without a plan is like ordering from a menu that has no prices, then letting the waiter fill out and sign your charge card receipt. It’s like playing roulette without knowing in advance how much you had bet, and only after the wheel stopped, letting the croupier tell you how much you had lost or won.” No sensible individual would behave like this in a restaurant or a casino, yet there are countless thousands who participate in the market without a concrete plan -- the equivalent behavior in the market!
This book is a valuable addition to trading literature. Most traders, even if they have heard that the psychological aspect of trading is the most important, don’t take this caveat seriously and opt, instead, to concentrate on timing and selection methods or other techniques that “can’t miss”. They would be well advised to obtain this book and study it closely over and over until its valuable message is inculcated into their attitude toward the markets and trading.Note: I wrote the above review of this book when it was published in 1994. It was very popular and sold well until it went out of print several years ago and became difficult to obtain. Used copies, when occasionally available, commanded high prices and were greatly sought after. Tragically, one of the authors, Jim Paul, perished in the attacks on the World Trade Center on September 11, 2001. Co-author Brendan Moynihan has graciously made arrangements recently to make a limited number of copies available again. They are available solely through him and by special arrangement through Traders Press, Inc. More information on this book is available at http://www.traderspress.com/detail.php?PKey=574, where it may also be ordered.
Review by
Edward Dobson, President
Traders Press, Inc.
Greenville SC
