Three Rules for Avoiding the Suicide Trade

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

Richard was my father’s younger cousin and for as far back as I could remember, he did odd things, like insist that people call him “Dick.”

Dick never seemed to know where the line was – the one you’re not supposed to cross – like when he offered me a celebratory “bump” at my high school graduation.

I took a pass.

Despite his quirks, to an outsider, Dick’s life followed a familiar playbook. Football star in high school, military for a couple of years, college, and then a solid job with a venerable East Coast company.

In the early 70’s he married a later day flower child, who though beautiful, was a vegan extremist. At holidays, she would bring nut roll to dinner and force their kids to eat it instead of the turkey my mother had spent all day preparing.

Later in life, his mother left him a sizeable inheritance and from all appearances, he had things dialed in nicely.

But a closer examination revealed a guy who had demons to fight. He possessed a reckless streak that constantly put at risk all the things he had worked so hard for.

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

Once, after a night of partying with his friends, he pulled his BMW over to 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.

[Note: The photo at the top of this post is the actual photo of his car which appeared in the local paper.]

He suffered burns over a good part of his body, minimized only by the homeowner – whose house he parked in front of – dousing him with a garden hose as he rolled across his lawn, clothes on fire.

The story was that he lit a cigar and dropped it on the floor mat, sparking the fire. However, a police report made mention of an accelerant, and there was speculation, in hushed tones of course, that it was really a botched attempt at Viking style funeral pyre.

Growing up, I didn’t know why Dick 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 older than me and I saw maybe once a year. He was a holiday relative at best.

When I did see him, our 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’m 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 regarding his demise is that he lost control of his Porsche going 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 and the light pole won.

It’s up for debate as to whether the bad judgment events in his life were really covert suicide attempts, 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.

They all also translate perfectly into trading.

Rule #1: There is an inverse relationship between the amount of time and effort needed to create and the amount needed to destroy.

You can spend hours and hours each day looking at charts, talking with traders, running scans, or reading all the SEC documents you can get your hands on, just to get an edge.

But one split second “gut” trade and all your work is for naught.

Rule #2: There is no amount of good work that can’t be undone by one bad decision.

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

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

If your decision is bad enough, 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, it might be your suicide trade.

In the abstract, trading is about many things; control, ego, risk, stimulation, mommy issues, etc., but at the end of the day, you measure your success by dollars. If you have more of them when you finish than you did you started, you are a success.

The rub is, as long as you are actively trading, you’re never finished – and all three rules stay in play.

Of course the last rule is the most critical.

You can violate Rules #1 and #2 – sometimes repeatedly – without causing permanent damage.

What trader hasn’t watched their hard work/profits go away in one stupid, often spontaneous decision, then swear they will never do it again?

But violating Rule #3 is the killer.

And the temptation to do so is always out there, waiting just below the surface.

Sometimes you see the warning signs, like those yellow barrels in Jaws – circling around, then going under, pretending there’s no longer a threat – but always stalking you, waiting for that momentary lapse of discipline and judgment to strike.

Chris Rock once said that the moment his daughter was born he knew what his number one goal in life was. Not to make money or be a success, but at all costs, to prevent her from becoming a stripper. (In his words, “to keep her off the pole.”)

And if you are active in the market, your first goal, above everything else, is to avoid the suicide trade at all costs.

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