Following the environmental and economic disaster caused by the explosion, collapse and subsequent oil spill from an oil rig company BP in the Gulf of Mexico, and in view of the long list of mistakes made, what lessons can extract a trader ?
From general ideas about the most common mistakes traders and an article by Mike Bellafiore on the same line, then these errors compared to the disaster caused by BP and points a trader should always keep in mind are described:
- Without planning the operation before entering. BP did not plan to apply emergency plan disaster. Traders should anticipate in advance how will the operation if not goes as planned.
- Excess risk in operations that can ruin us. The cost to be borne by BP at the end of the whole process can be so high as to endanger its future viability. A trader must control the maximum risk for each trade and avoid those that could endanger your account.
- Lack of transparency and operate our feelings. BP has been from the beginning minimizing the magnitude of dumping and consequently delaying more expeditious action be taken. A trader must be aware at all times of the progress of the operation and should not hide the mistakes delaying the implementation of the plan output.
- Excessive use of leverage. BP has been using traditional methods to seal the leak with no success. A trader must be fully aware of the product you are using and the level of leverage of the same, and very carefully adjusting the position and stops.
- Excessive Trading. The cause of the explosion seems to lie in the holes too fast. A trader must have enough patience to wait for the operation in the intended point respecting the risk benefit ratio.
- Lack of verification (back-testing) system. BP was drilling in deep waters where technology is still largely unproven. A trader should check extensively systems or methods, that will represent exceptional an advantage in the market and get the confidence.
- Lack of accountability in operations. So far BP executives and companies with which it works are dedicated to exchanging accusations. A trader should study the results of its operations and take and study their mistakes, learn from them and improve.
- Isolated and self-sufficiency to the difficulties. BP has tried again and again to find a solution to the spill ignoring the rest of world experts. A trader should seek support, training, support (mentoring), share experiences and knowledge with other traders and try to absorb everything that can be useful and help you improve continuously.
- Have the sole purpose of making money. BP and many other companies all put their economic interests, putting at serious risk aspects essential to the welfare of society. The job of a trader is not only making money but become an excellent operator to take you to achieve profitable operations in order to get the most out of allowing himself to improve their quality of life.
Probably if BP had respected the basic rules governing the exploration and extraction of oil, now would not be in the current difficulties can endanger the welfare and livelihood of many people, in addition to plant many doubts about the company. Similarly, traders who do not observe discipline the basic rules of the game may end up outside.
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