All the Greats Failed First
Failure catalyses growth — if you can reflect and learn
After a phenomenal run in April and May, too many traders have given back their gains during the recent choppy environment.
This stack is for them.
Trading is tough.
…but that’s also why it can turn you into a better person.
I often revisit this quote from Paul Tudor Jones (emphasis mine):
“I think it’s no coincidence that our greatest champions, our greatest artists, our greatest leaders, our greatest everything all seem to have experienced some kind of gut-wrenching loss.
“I think their greatness, in part, was fashioned on the crucible of that defeat. Two years before Lincoln was elected as maybe our finest president, he lost that monumental Senate race to Stephen Douglas.
“To a certain extent, I think that holds true in my field as well, and I am leery of traders who have never lost it all. I think that intense feeling of desperation that accompanies such a horrifically deflating experience indelibly cauterizes great risk management reflexes into a trader’s very being.”
As a trader, you don’t have to lose every last cent (like PTJ did) to have that “horrifically deflating experience”.
But you do need to experience defeat. Preferably right after a big victory, just to make it extra painful. (Speaking from experience…)
From agony can come lasting change.
Failure provides opportunity to grow. It reveals who you truly are.
The very fact you choose to learn from it, rather than give up, builds your character in a way that victory never will.
…and as a trader, you’re going to need that strong character. Because even if successful, you’ll go through deeply unpleasant experiences.
From the same source, PTJ pointed out:
“There are two unpleasant experiences that every trader will face in his lifetime at least once and most likely multiple times.
“First, there will come a day after a devastatingly brutal and agonizing stretch of losing trades that you’ll wonder if you will ever make a winning trade again. And second, there will come a point when you begin to ask yourself why it is you make money and if this is truly sustainable.
“That first experience tests an individual’s grit; does he have the stamina, courage, guts, and smarts to get up and engage the battle again? That second moment of enlightenment is the one that is actually scarier because it acknowledges a certain lack of control over anything.
“I think I was almost 38 years old when one day, in a moment of frightening enlightenment, I knew that I really did not know exactly how and why I had made all the money that I had over the prior 17 years. This threw my confidence for a jolt. It sent me down a path of self-discovery that today is still a work in progress.”
Many traders have spoken about this “path of self-discovery”.
It plays a major role in why this thread resonated (after a slow start — not optimised for the algorithm):
If you let it, trading inspires you to grow as a person.
From failure comes an opportunity to grow.
…and looking back, it can mark the turning point in a trader’s journey.
For example, PTJ blew up in 1979, aged 25, on a bad cotton trade. In his Market Wizards interview, he said (emphasis mine):
“It was at that point that I said: ‘Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?’
“That was when I first decided I had to learn discipline and money management. It was a cathartic experience for me, in the sense that I went to the edge, questioned my very ability as a trader, and decided that I was not going to quit.
“I was determined to come back and fight. I decided that I was going to become very disciplined and businesslike about my trading. […]
“[Since then,] I am always thinking about losing money as opposed to making money.”
Many years later, in an interview for Goldman Sachs, PTJ described this (and another blow-up) as “phenomenal learning periods”.
Or take David Ryan, who gave back a full year’s profits and more (which he described as “pretty much blowing up”) before studying his trades and identifying his mistakes. Armed with a determination to not repeat them, David proceeded to win three consecutive USICs.
Mark Minervini’s “pivotal moment” also came from studying his trades.
A specific contributor was the loss adjustment exercise outlined in Trade Like a Stock Market Wizard.
In this exercise, Mark adjusted his losses to an arbitrary 10%, accounting for some winners turning into losers and some smaller losses becoming bigger.
Over 20 trades, his compounded return changed from -12.05% to 79.89%:
“The hypothetical improvement in the overall portfolio performance seemed too dramatic to be believed. I rechecked the math two or three times, and the numbers were correct. Instead of having a double-digit percentage loss in my portfolio, I would have had a gain of more than 70 percent.
“Is it possible that such a small alteration could have such a dramatic impact on performance? Absolutely! This revelation was a pivotal moment in my trading. I was convinced that risk management was the key to success.
“From that point on, I grew very risk adverse, and my results improved dramatically.”
Mark went on to achieve an average annual compounded return of 220% over 5½ years (from mid-1994). Not to mention two USIC victories, 24 years apart.
In his first guest post, Christian Flanders shared his version of the loss adjustment exercise, which was instrumental in getting him off the boom-and-bust rollercoaster and returning a compounded +1,327% over two years.
Reflection can also happen away from technical trade review.
For example, take this memorable moment from Martin Luk’s first guest post:
“One day, I was daydreaming, trying to imagine how my trading would look after 10 or 20 years.
“I suddenly realised that if I truly want to become consistently profitable, trade for the rest of my life, and manage a much larger account, I cannot make those simple mistakes and ruin my account again.
“I cannot make random trades and suffer a 20% drawdown. I have to follow the rules and make disciplined decisions. If I keep overtrading now, I will still overtrade in the future, no matter how experienced I become or how big my account grows.
“In that moment, I shifted my focus from short-term to long-term, and the urge to overtrade went away.”
Keep in mind that Martin suffered multiple huge drawdowns before this realisation: a -50% drawdown (through death by a thousand cuts) in 2021, then twice losing five months of profits in just one month during 2022. He repeatedly tried to overtrade his way out of drawdowns.
Realising this, and not wanting to “trip over the same stone” again, he finished 2023 +91%, followed by (so far) two impressive USIC performances in consecutive years.
When you speak to Martin, you quickly notice his clarity on who he is (and isn’t), even in his early 20s. Almost certainly the result of his willingness to be introspective.
Writing is another great tool for introspection.
The friction forces clarity. For example, Mo Gad shared (emphasis mine):
“[In 2022], my account went on a crash diet, losing 75% of its weight. As painful as 2022 was, it was the best trading lesson I ever experienced.
“I pulled my act together: Pen, paper, charts. Entries, exits, rules. Repeat. More time, more charts, different cycles. Boom! For the first time, I could write out my trading strategy with clarity. […]
“Writing out my strategy gave me insight into how much pain I could stomach and, more importantly, for how long.”
He followed up 2022 with two consecutive triple-digit years, but with still plenty of pain and mistakes involved. Like he said: “Trading is the most transparent and self-reflecting activity.”
Plus, “mastering the market is very hard — but mastering myself and my emotions is exponentially harder.”
Also from the USIC guests, Clement Ang suffered a -70% drawdown before achieving +522% in USICs 2024 and 2025.
In this tweet, he shared how he turned things around from that low point (lightly copy-edited):
“When I hit that low point, it struck me to really look inward vs trying to find the magical key/technique to achieving consistent returns in the market. It was an ‘I need to understand myself more’ vs ‘understand the market’ moment.
“Looking back at that drawdown, I realized I’m someone who is impulsive, impatient, and very emotional when things don’t go my way. And the only way to circumvent it was to really implement a routine/system that is repeatable and that takes a lot of the second-guessing out of myself.
“I also found maintaining a personal journal very important (outside my daily market plans). This is where I write about everything outside of the markets and how that may impact my mood/performance.
“I think these two things changed my entire trajectory because I became more patient, mellowed out, and much more conscious of my emotions (sometimes to the point where I know I should fade myself).”
Another remarkable (and new) read is Wey How’s story. The first time I asked him to guest post was over a year ago. I’m delighted to (finally) see him start his own Substack instead.
It took him 20 years to become profitable. Is that depressing or inspiring? Either way, it says a lot about Wey’s character.
But notice his turning point: his wife formally asking him to quit trading, which was when Wey stopped making excuses and blaming the markets. It led him to taking the necessary action to find the system that suits his personality.
Tough periods provide opportunity for reflection and growth.
They mark fresh starts. They lead to big realisations, typically about yourself. And they represent the birth of true rules — the ones you won’t break, simply to avoid the now-intolerable pain.
Remember from Theo Gustincic’s guest post:
“Early in my journey, I faced uncontrolled volatility that brought me dangerously close to major drawdowns. Although I never wiped out my account, multiple times, I did find myself in precarious situations.
“After years of inconsistent progress, I made a critical shift: I stopped chasing strategies, and started focusing on strict risk management.
“This transformed my trading results. It marked my turning point — when I truly became a professional trader, minimising unnecessary losses and maximising gains during favourable periods.”
This is a common turning point: when you stop chasing new ideas, and start making the ones you already have work for you.
You review your performance to identify your weaknesses and find ways of addressing them. You consider your strengths and how you can bring them out more. And you hold yourself responsible for your failures — because this will also make you take action, focusing on what you can control.
My own crushing defeat occurred outside the markets. It was the best thing that could have happened.
It catalysed weekly TTRH publication (for 63 weeks), which in turn boosted my writing and trading skills. It later also enabled me to start my ghostwriting business.
More immediately, this wake-up call transformed my attitude as both a writer and trader. It made me consistent and accountable, committing to process, showing up no matter what. It changed my attitude towards risk, becoming more aggressive and even ruthless when necessary. And through these actions, I was getting myself into a position of strength in terms of skill and reputation.
That doesn’t mean my mistakes have stopped, by the way. As a trader or a writer.
But more than once, I’ve found defeat necessary to grow as a person.
Failure can become the ‘kick up the backside’ to look within, reflect on your mistakes, then take action to prevent recurrence.
Throughout this stack, I’ve linked to resources you may find useful. The reader stories series, showing how we must all learn tough lessons before we can grow, may also help. And if you’ve just gone through another boom-and-bust cycle, I suggest reading this article from Matt Petrallia.
Above all, learn from your mistakes. And remember:
You can’t change the past. But you can change the way you look at it.
- Kyna
P.S. You can explore my full archive here.
Very nice article, Kyna. Clearly shows that no matter where we are and how big is the mistake, we can always take lessons from it, work on it and move forward. We only lose when we give up.
In my case, even though I was reading about risk management and all but I never really internalized it until I made that mistake and experienced the pain myself.
I also kept on trading caring very little about the environment. I kept on opening new trades without thinking about the theme, industry strength. My stock selection was random and I was only focusing on setups.
All the setbacks used to upset me a lot, turning it into frustration. I am still a work in progress, taking things slow and have decided to not give up.
Zooming in a bit. My mistake was not able to take advantage of recent rally but after the character change I was able to reduce the size and frequency of my trading and learning to be patient and maintaining my mental and financial capital. I realized that I have a limited capital which I cannot treat like a game. This kind of thinking has been helpful to me in getting through this choppy period.
These writings sharing examination of a trader's experience, strategies, methods, the links to refer I discovered are extremely a must read, a never miss, requiring multiple reads to sink in. Go deeper.