Learning From Losses: Charles Harris's Lessons From Making (And Losing) Seven Figures On Tesla Stock

Plenty of prop traders have lost fortunes because of bad decisions. But few have been amenable enough to stand in front of a microphone and explain what went wrong, especially when it’s a stock as volatile and contentious as Tesla Inc. TSLA. However, long-time investor Charles Harris had no problem discussing his crash-and-burn, especially since he broke his rules.

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Breaking the Rules

Harris is a long-time portfolio manager at O'Neil Capital Management Inc. whose aggressive style has produced eye-watering gains and stomach-churning losses. But Harris's start was unceremonious, and he found himself trading irrationally with little plan or expectation. Harris’s results improved after developing a system of rules, like position sizing and anticipating price action.

Over 30-plus years, Harris has seen plenty of ups and downs in the market. He traded through the meltdown of Long-Term Capital Management, the dot-com boom and bust, the great financial crisis and the subsequent 10-year bull market run. Harris had more good years than bad and continued ascending the ranks at O'Neil, moving from research assistant to analyst to portfolio manager. However, it wasn't until 2013 that Harris found the stock that would become the focus of his investment process (and eventual rulebreaking) — Tesla.

Highest Of Highs And Lowest Of Lows

Harris was no stranger to losses. Between 2014 and 2017, he suffered a devastating drawdown that saw nearly 90% of his net worth evaporate. Harris has been open about what this period has cost him beyond money: confidence, self-respect and, eventually, his marriage.

Tesla is one of the most volatile stocks in the S&P 500, so imagine the whiplash an investor could get back in 2013 when the company was a long way from a household name. Harris was an early enthusiast of the stock and believed the company had some fundamentally innovative technology on its hands. And despite a career defined by sticking to his rules, Harris began to let his guidelines slide on volatile stocks like Tesla.

Tesla was a big winner in 2020 and 2021, rising from a split-adjusted COVID crash low of $23 to an all-time high of $414. Harris was there the whole way, riding the wave and building an eight-figure trading account thanks to building a margin position. Despite some warning signs, Harris's conviction remained and he stuck with his Tesla position, which suffered a devastating collapse in 2022. Tesla shares plunged to a low of $101 by the start of 2023, and Harris's eight-figure portfolio was now a six-figure portfolio.

Harris explained his losses in an honest and heartfelt video, openly discussing how using margin and ignoring his own trading rules led to one of the largest blowups of his career. Despite the losses, Harris managed to preserve his account through some defensive trading and now preaches about the risk of using margin in a high-conviction stock.

Losses often provide better lessons than wins because mistakes offer a chance for self-reflection and improvement. Plus, you'll never know your true identity as a trader unless you experience both the highs and lows of investing. Do you think you have a trading system that can match up with the best of the pros? SurgeTrader offers a virtual prop trading challenge where seasoned traders can match wits and attempt to earn a coveted funded account. 

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