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This Wall Street Investing Legend Once Lost $3 Billion in Six Weeks

All investors make bad decisions, Real Money Columnist James 'Rev Shark' Deporre notes, but the best ones learn from them.

No doubt, many traders and investors are having an extremely difficult time with the current stock market.

“It’s especially tough since it’s the first time that many have traded without a dovish Federal Reserve providing a tailwind: wrote Real Money Columnist James “Rev Shark” Deporre recently.

Deporre calls the current stock market one of the most challenging markets that many traders have ever faced. “Yet many are not happy about the decisions and mistakes they have made as this bear market has unfolded,” he said.

It’s important to understand, however, that even the best traders and investors in the world are not immune to mistakes and a lack of discipline. “Even when they know what they should do, there are many times when they fail to do it and pay a heavy price,” Deporre noted.

Deporre points to Stanley Druckenmiller, widely considered to be one of the greatest investors of all time. “He’s known for producing an average return of 30% per year for many years and not having any down years at his hedge fund, and he is profiled in the book The New Market Wizards by Jack D. Schwager,” Deporre said.

Deporre noted a 2015 interview in which Druckenmiller described his biggest investing mistake. It came in 2000 during the dot-com boom.

"So like around March, I could feel it coming. I just - I had to play. I couldn't help myself. And three times during the same week, I pick up a - don't do it. Don't do it. Anyway, I pick up the phone finally. I think I missed the top by an hour. I bought $6 billion worth of tech stocks, and in six weeks, I had left Soros, and I had lost $3 billion in that one play."

So, Deporre noted, "you WILL make some dumb mistakes.”  In addition, “you will do things that you know that you shouldn't. It isn't due to a lack of knowledge. It is due to emotions and being human.”

But another lesson is that if you recognize this problem and address it, then you can fix it. “Druckenmiller came back from his $3 billion loss because he identified the problem, reset his strategy, and went back to work.,” Deporre added.

Get more trading strategies and investing insights from the contributors on Real Money.