The Professor | Reminiscences of Sang Lucci Part 3: The Monster

By Charlie Bathgate Psychology

By Charlie Bathgate

For this series celebrating the launch of the Sang Lucci Master Course, we went through the analytics and pulled some of the most popular posts from Sanglucci.com history. Each one touches on an aspect of what’s covered in the course. Enjoy!

“There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win. Did you get that? You begin to learn!” Reminiscences of a Stock Operator

You can read the previous post in this series in Part 2.

Alright Lucci. Let’s talk about the thing most traders avoid at all costs: the biggest loss of your career. Walk us through what happened. 

In an episode of Seinfeld, George caught a severance package from the Yankees and declared that the next 3 months would be the ‘Summer of George’.

This was the Summer of Lucci.

George didn’t end up having the Summer he planned, though, and mine ended in quite the shock as well. As I said in earlier posts, ego is a double edged sword, one that if wielded incorrectly could result in loss of limbs. Ego is what allows you to take your seat at the final table but in excess, ego will cloud your judgement and have you obstinately trying to make a play when you have no cards and you know you’re beat.

I had just booked over $2 million in gains. How do you think you’d feel? I remember that day I looked at my P&L up $800K and just sat there and stared for hours. Little did I know I’d soon find myself staring at my first 6-figure booked loss. I was on cloud nine, a high that I didn’t ever think I’d ever come down from. In my head, there wasn’t a single trade that I couldn’t turn into a 6-figure gain.

What was the trade?

I positioned myself heavily in SPY calls after the summer bank run-up. Before any market reversal, there’s always a push in the obvious direction to get the last bunch of suckers on the wrong side of the trade. I was one of those suckers. Every trader falls for these traps though and I’m no different.

All a trader has to do is realize it early and take the trade for breakeven or a small loss.

During these critical moments though, ego can sabotage everything and can set you on a crash course with your inevitable fate. I was up $180K in the trade. I remember how much because we had a bunch of High School kids come into the office that day to help us buy tickets for a Bruce Springsteen tour and a few of them glanced over at my P&L. I spent a good part of a half an hour playing God to the envious and suddenly the position started to come back aggressively on me. I didn’t even care though. I said to myself “eh, it’ll come back.”

It never did come back.

When you get faked out at a top or a low, it rarely ever comes back. I was too stubborn to pay attention though and I watched my P&L go from up $180K to down $400K. I ended up booking the trade for about $350K loss when I just couldn’t take the mental stress anymore.

After I booked the loss I sat in my office for hours just staring. What I couldn’t understand is why I never wanted to sell. I looked back at the tape and saw clearly where I should have let it go. I couldn’t understand why I didn’t listen to that inner voice that was calling out, “Sell, Mortimer sell!”

What happened to you after the loss?

Granted, I was still sitting on a ton of cash and I had accomplished what I set out to do for myself and my father. But a part of me was missing after that day. I lost the drive to compete and kept asking myself if I truly had any value for money in the first place. Some of the most meaningful arguments you have are ironically… with yourself. During these mental battles, you question your principles, values and conviction.

“Who throws away that kind of money? If I gave you $300K would you throw it in the trash?”

“It’s all relative Lucci what are you talking about? You lost a few grand before now all it is is a few more zeros!”

The constant mental stress prevented me from trading with a clear head and I decided on taking a break from it all. So that was it. I quit. I was done trading. My Father was safe and quit his job. The man will never have to work a day in his life again, only if he wants to. I had several hundred thousand dollars in my pocket and was 26. Take a wild guess what happened next…

What did you learn?

I learned more about life and myself in that year than I ever have. I found out what made me happy. Something that people spend their whole lives searching for and are considered lucky if they find it. I learned that that loss needed to happen. The ebb and flow of being human supersedes genes, race, environment and gender. We go through our highs and inevitably find ourselves right back at our lows. This is the law of the land and one you cannot escape. So the sooner you learn to live with that, the sooner you can achieve your purpose and cope with the mental stress that constantly tries to beat you down.

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About the Author

Charlie Bathgate

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Charlie Bathgate is the man behind the scenes making sure everything runs smoothly. He’s also the resident psychology fanatic. He graduated from Duke University in 2009 with degrees in English and Business.

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