Applying Inversion Principle to Avoid Mistakes in Stock Trading

There are always things we can learn from the greats in stock trading and investing. One of the inspiring principles is the one from Charlie Munger - Inversion Principle. Warren Buffet and Charlie Munger have amassed one of the greatest long-term investment records in the history of civilization, having grown the book value of Berkshire Hathaway over the last forty-five years at about 20% per year.

"Invert, always invert"

The inversion principle started when the great Prussian mathematician, Jacobi, who urged his students, "Invert, always invert.". He found that the best way to solve a difficult question mathematics problem was by solving it in reverse.

Charlie Munger then applied this principle to his own life by often saying, "All I want to know is where I'm going to die, so I'll never go there."

In our stock trading journey, we can always apply this theory. This concept will help us to see the right course of actions because we identify the trading mistakes that we need to avoid.

The question that I often ask myself, "What would I have to do to guarantee my stock trading failure?" The following is what I have on my list...

1. Spending more than I earn, failing to accumulate my wealth for trading
2. Trading with no long term goal
3. Not understanding how stock market works
4. Not having a system to trade
5. Never check my emotion (fear and greed) while trading
6. Never learn from my trading mistakes
7. Listen to rumors
8. Let losses run, cut profits short
9. Not disciplined enough following my trading system
10. Failing to do proper position sizing
11. Overconfident in beating the market
12. ...

The question I ask you, "What would you have to do to guarantee your stock trading failure?"