25 Lessons From 25 Years Of Trading & The Costliest Pitfall Of Them All
Did you know that all gamblers secretly desire to lose? In fact, even after a winning streak they tend to find new ways to maximize risk in order to ensure losses are near.
A few years ago I made a list of 25 lessons from 25 years of trading. The lessons are well worth reviewing, but it is the last lesson that’s on my mind this weekend. Please have a read and then we’ll delve into the 25th lesson and why it’s on my mind.
Every stock will go through a period of accumulation, topping out, distribution and bottoming and a new cycle begins. Rinse, repeat..... (Weinstein Stage Analysis)
Most legitimate double bottoms come with strong MACD/RSI divergences. This is one of the most powerful chart patterns (see $XBI Daily chart in 2022).
Most stocks/markets will be more volatile than you anticipated. Never underestimate the power of a momentum move (up or down). Once the freight train is in motion, it will usually keep going much further than most have anticipated.
A stock being "overbought" or "oversold" is not enough of an observation to meaningfully tilt the odds in one's favor for a trade.
The more technical confluence that exists in a trade setup the stronger the setup.
The best trade setups usually work immediately after they trigger. They barely give you a chance to jump on board.
The market is not the economy and the economy is not the market.
Always separate politics from decisions about money.
The strongest stocks and biggest winning trades normally have big volume driving them higher.
The best traders I know keep their routine very simple. They also don’t use a million technical indicators or Elliott Wave analysis to inform their buy/sell decisions.
Never confuse your macro views or what the talking heads on TV are saying with what is actually happening in the stock market.
Good fundamental analysis and proper technical trading is a killer combination.
Stop-outs are the price of admission in the market - we have to have losing trades in order to play the game. The best traders might only be profitable on 50% of their trades, but they make the winners count and don't get married to losing trades.
The market is a master at forecasting events well ahead of time. By the time the actual news hits, most of the time the market has already discounted it.
Bottoms are a process, rarely a single event. Many stocks start to bottom well ahead of the major equity indices.
When in doubt, stay out - overtrading is probably the most common mistake (aside from trading on leverage) that I see novice traders making.
All gamblers secretly desire to lose - notice that if you are overtrading or trading too large for your bankroll you might be a gambler, not an investor.
You will never buy the exact bottom and you'll never sell the exact top - Don't beat yourself up if you 'leave money on the table'.
When it's the time to buy you won't want to.
When it comes to the market, always assume everyone is talking their own book - focus on your own analysis and less about what everyone else is saying.
At the top the future will look brighter than ever and it will be difficult to develop a thesis for what could cause the trend to turn lower. Whereas, at the bottom sentiment will be so bad that most traders/investors will find it psychologically impossible to press the buy button.
The longer a stock bases, the more meaningful the breakout tends to be.
In junior mining, it's often best to "buy the sizzle and sell the steak" - usually, but not always.
Sentiment follows price, only all the time.
Stay humble, stay grounded. Whenever you are feeling great about the market or your trading, that's usually the time when you should be the most defensive/cautious.
The reason this final lesson resonates so strongly this weekend is the rally we’ve just witnessed across precious metals and mining stocks. August was a month to remember—the best August for gold miners since at least the 1970s. Many junior miners more than doubled, and the breadth of gains has been remarkable.
Gold Bugs Index (Monthly)
The 2025 rally in precious metals and mining stocks brings to mind a famous meme.
The best performing sector of the entire stock market! Who? Me?
After years of fits and starts, including some dreadful performances, precious metals bulls suddenly find themselves in an unusual predicament: sitting on big gains and riding the strongest sector in the entire stock market.
With many market participants now showing huge returns, including portfolios up more than 100% year-to-date, it’s easy to succumb to greed and make undisciplined decisions in pursuit of outsized profits.
After all, we all desire to keep up with the Joneses.
To be clear, this is not a market call, nor am I suggesting things are too frothy. Rather, it’s a reminder that the largest losses often come when we chase short-term gratification and lose sight of risk.
Human nature conditions us to expect today’s trend to continue indefinitely. But in reality, risk is often greatest after extended periods of rising prices.
Another key factor that junior mining speculators must remember is liquidity. Liquidity in this sector can be fleeting. How often have we seen a stock trade 500,000 shares per day during periods of exciting news flow and sector-wide enthusiasm, only to see volume dry up to less than 100,000 shares per day a few weeks later?
If you weren’t planning to be a long-term shareholder, a sudden decline in liquidity can become a very costly problem when trying to exit. Trust me—I’ve been there more times than I’d like to remember.
From my experience, the costliest pitfalls in speculation are driven by greed: chasing fast returns without proper regard for downside risk. We jump in without a game plan, neglect risk management, and base decisions on rumors, trends, or casual recommendations. Inevitably, this separates speculators from their capital.
If it’s thrills you’re after, go to Las Vegas, play craps, or ride roller coasters. The stock market should not be your source of entertainment—because it can be the most expensive form of entertainment out there.
If you absolutely must chase a high-flying stock that’s already had a big run, do it smaller. Start with one-third or even one-quarter of your normal position size. A smaller entry has multiple benefits:
It forces you to follow the company more closely and conduct deeper due diligence.
If the stock continues higher, you’re still participating, even if modestly.
If it falters, you can exit with a much smaller loss, or, with better research in hand, decide whether to build a larger position at a better price.
Greed kills.
Over the long run, FOMO-driven trades result in far more losses than wins.
It’s perfectly fine to let some opportunities pass. It’s perfectly fine to hold cash without feeling pressure to deploy it immediately. The best investment decisions come from research, planning, and thoughtful execution. The worst come from “having a hunch and betting a bunch.”
I’ll close this weekend’s missive with a few favorite Warren Buffett quotes to drive the point home.
“Risk comes from not knowing what you’re doing.”
“You only have to do a very few things right in your life so long as you don’t do too many things wrong.”
“The trick in investing is just to sit there and watch pitch after pitch go by, and wait for the one right in your sweet spot.”
“Never test the depth of the river with both feet.”
DISCLAIMER: The work included in this article is based on current events, technical charts, company news releases, corporate presentations and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. This article is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SedarPlus.ca for important risk disclosures. It’s your money and your responsibility.