If you are ever feeling down about your trading losses or feeling sorry form Ackman’s current disaster trades long J.C. Penney and short Herbalife then this article may put both of these losses into perspective. These losses really show how crucial it is to have a price level that will indicate that you were wrong and will need to stop out at. There is no reason to ever take a huge loss to your trading capital, position sizing, stop losses, and managing the risk of ruin is the first job of a trader, growing capital comes second.

“Two basic rules: (1) if you don’t bet, you can’t win. (2) If you lose all your chips, you can’t bet.” -Larry Hite

Here are 12 of the biggest trading losses of all time, heed the lessons of these tragedies and realize the traders on the other sides of these trades made a huge amount of money,

#12 German billionaire Adolf Merckle, one of the 100 richest people in the world, killed himself by jumping in front of a train—emotionally “broken” over a bad bet on Volkswagen in 2008.

Merckle’s business interests came out on the wrong side of 2008′s short squeeze of Volkswagen. Rival Porsche silently cornered the market on Volkswagen shares, and when they revealed the extent of their stake, the price of Volkswagen stock shot up to levels that made it briefly the world’s most valuable corporation. Many hedge funds who had bet against Volkswagen shares lost huge amounts of money, while Porsche made billions in profit. (more…)