Avoiding The Suicide Trade At All Costs

Last week at my family’s traditional Thanksgiving dinner Uncle Richard was missing from the table.  I am sure he would have been there if he could have been but he was dead, having wrapped his car around a light pole earlier this year.

Richard was my father’s younger cousin and even as a little kid I knew he was somewhat of an odd guy, as evidenced by that fact that he actually insisted that people call him “Dick” instead of Richard.

At my high school graduation ceremony he offered me, all of seventeen years old at the time, a celebratory “bump.”  Hiiiiii-fuckin-yooo…..!!!  Fortunately I always subscribed to the Willie & Lester philosophy of “say ‘nope’ to dope, and ‘ugh’ to drugs” and took a pass.

Back in the 70’s he was married to a later day flower child who although hot in that “I-don’t-shave-my-armpits-but-am-into-free-love” type of way, was a vegetarian extremist.  She would always show up at holiday dinners with “nut roll”, and make her kids eat it instead of turkey or ham, or even stuffing if God forbid there was any sausage in it.

Despite his quirkiness, to an outsider his life had pretty much played out by the book.  Star football player in high school, into the military for a couple of years, college degree, and then a steady job with a solid East Coast company.

Later in life his mother had left him a good inheritance, so financially he was set.  He was re-married, had two grown kids, and a couple of grandchildren.  His life was “dialed in”.

But a closer examination revealed a guy who had demons to fight.  There was a reckless streak to him that constantly put at risk all the things he had worked so hard for in his life.

The pattern was always the same.  His life would go for years at a time without incident and then out of the blue he’d inject a massive dose of bad judgment into it and nearly go off the rails.

Once after a night of partying with his friends he pulled his BMW over by the side of the road to “take a rest.”  Two weeks later he awoke from his coma.

His car had gone up in flames so completely that it melted all four tires to the ground.  He suffered burns over a good portion of his body, only minimized by the fact that the owner of the house which he parked his car in front of saw the flames and doused him with his garden hose as he was rolling on the ground with his clothes on fire.

His story was that he had lit up a cigar and then dropped it on the floor mat, which started the fire.  However the police report made mention of an “accelerant” of some kind and there was speculation, in hushed tones of course, that it was actually some sort of botched Viking style funeral pyre attempt.

I shit you not; this is a photo of the car the next morning in the local paper.

I didn’t know why he did the things he did and to tell the truth I didn’t really care.  I know that may seem callous but it’s the truth.  He was twenty-five years my senior and a “holiday relative” at best, whom I saw maybe once a year.  When I did see him our entire conversation would go like this….

“Hey buddy…how are you doing?

“Pretty good, what have you been up to?”

“Oh you know, the usual, how about you?”

“Same old, same old.”

“Yeah, I can relate.  I am going to grab a drink, let’s catch up later……”

Of course we never would catch up later because we didn’t care enough about each other to do so.

The party line in the family is that he lost control of his Porsche around a tight turn, but the real story is that after leaving his favorite watering hole he decided to race a guy in a Ferrari. It is up for debate as to whether these incidents throughout his life were really covert suicide attempts or not, but this last bad decision achieved the same result no matter what the intent.

Despite my ambivalence about Uncle Dick, watching his antics from a far during my formative years taught me a couple of very important rules for life in general and they have always served me well, but it took me a long time to realize that they all also translate perfectly into trading.

Rule #1: There is no amount of good work that can’t be undone by one bad decision.

You’ve had a good day trading?  A good week?  A good quarter?  Maybe even a good year trading….doesn’t matter, one bad decision and you can give it all back.

Rule #2: There is an inverse relationship between the amount of time and work needed in order to create and the amount needed to destroy.

Do you spend hours and hours each day looking at charts, talking with traders, running scans, reading all the SEC documents you can get your hands on just to get an edge in your trading? One split second “gut” trade and it is all for naught.

Rule #3:  Sometimes your worst decision will be your last decision.

If you make a decision that is bad enough in trading such as ignoring your stops, adding to a losing trade, or over-leveraging your account, not unlike my uncle, it won’t matter what your real intent is, the outcome will be a “suicide trade.”

Trading in the abstract can be about many things; control, ego, risk, stimulation, “mommy issues”, etc., but at the end of the day, your success at it is measured by dollars.  If you have more of them when you finish than you had when you started, you are a success.  The rub is that as long as you are still trading, you are never finished, and all three rules remain in play.

This last rule of course is the most critical one.  Over the years (in trading) I have violated Rules #1 and #2 on numerous occasions.  I have experienced seeing my hard work/profits go away in one stupid, almost instantaneous decision, and then swear that I will never do it again, but I have never violated Rule #3.

I know it is out there though, waiting for me like one of those yellow barrels in “Jaws”. Circling around, sometimes going under to pretend it’s no longer a threat, but always stalking me, waiting for that one momentary lapse of discipline and judgment to jump on me when my back is turned.

Richard Dreyfuss as Matt Hooper, Roy Schneider as Chief Brody, and Robert Shaw as Bernie Madoff.

Chris Rock once said that when he had his first daughter he instantaneously knew that from that moment on he only had one purpose in life.  Not to make money.  Not to be a success.  Not to win an Academy Award, but to keep her off the pole at any cost.  If you are a trader it’s the same thing, your one purpose in your trading it to avoid the suicide trade at any cost.

Maybe you think that it is insensitive and superficial to compare the actual loss of life to blowing up a trading account?  Well I am not talking about a 22-year-old college student blowing up his 5K account at Charles Schwab.  I can name five people I personally know that were well into their 40′s and blew up their accounts up and lost major parts of their lives like their spouses, their children, or their homes, and are now suffocating under a mountain of debt (credit card cash advances can fund a trading account.  Hiyoooo…!).  One of them lost ALL OF THOSE THINGS in a three-month period.

And if you throw in the “Madoff’s” of the world, it’s easy to see that the damage the suicide trade can cause can be as bad as the actual loss of life.

By the way, as ambivalent as I may have been about my uncle, I am not a complete A-hole and would never cause unnecessary suffering to his widow or children. None of them have the remotest idea that I write a blog, let alone read it (but Bernie’s wife does, so “fuck you Ruth!”).

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65 Responses

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  12. Great take aways. When I read this post it struck me that your uncle had all the hallmarks of an ADHD suffer. 1. Substance abuse issues due to low dopamine levels. 2. Impulsivity and control issues. 3. Thrill seeking behaviors like speeding resulting in car wrecks. 3. Smooth sailing periods followed by reckless, lack of judgment periods. 4. Odd duck behavior. Sounds just like my dad who had a severe case of ADD.

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  47. Brian, another great post with a solid lesson. As you stated above, trading is a process, there are no short cuts. Yet, as someone who is further down the trading path, what would be the keys lessons that you learned that proved to be most important in moving to the ‘next level’ as a trader? Also, in looking back over your trading career, could you offer some insight as to how a younger trader could accelerate the learning curve to consistent profitability? I am not looking for a ‘short-cut’, rather I just want to map out a clearer, more direct path that can hopefully avoid some of the dead-ends that traders experience. Thank you!

  48. 1. That’ll buff out.

    2. I always wonder why Richards like to be called Dick. It’s like “hey, call me asshole” or maybe there’s something else to it.

    3. What sucks is I think we all have to learn these lessons for ourselves to some extent, and hopefully less, to relate. But it’s great people like you who empower us with the realization of how common and probable it is and keep us on our toes. It may only feel like a tug at first and the next thing you know Jaws is pulling the whole boat under and starts snacking on your torso!

  49. I too have violated rules #1 and 2 many times and took me a long time to develop and adhere to a strict sell/stop policy. Saved my book many times in the last 2 years. Great writing!

  50. Hi bclund
    How did you stop loosing money while you trade? I am asking because anything I touch it goes the other way. Seriously I do not know what to do.

    • If you are doing it right you will lose money more than you make it. But if you keep the losses small and let the winner run you should be net profitable.

      Right now new traders have all sort of advantages that I didn’t have when learning, the foremost of which is the ability to have a “virtual” mentor. Find one on StockTwits, or subscriber to a quality trading service. You will get stock picks but more importantly, you will learn the mindset that successful traders have. You take that and then form your own methodology that fits your personality. It is a process, no short cuts.

      Thanks for reading.

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  53. This post is amazing. Thank you for sharing the personal story. I agree with all of the rules listed and rule #1 is so true in trading but a very painful true in everyday life. Thanks.

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