WALK INTO ANY casino, and the first thing you will do is exchange your hard-earned hundreds for a pile of worthless plastic chips. It’s a distraction meant to insure that, as you gamble, you aren’t paying too much attention to the dollar amount being won or lost.
And while traders aren’t gamblers per se, a similar thing happens in the market. In the real world, cash is a scarce and valuable commodity. But once the check is written and sent to Schwab, hard-earned money becomes, at least in our minds, a stack of chips, ready to be anted up at the nearest table.
And when a click or keystroke can mean thousands of dollars, a fully funded brokerage account feels like Harrah’s on your hard drive. From the craps table to Comverse Technology (CMVT), it’s much easier to lose big money when you’re not thinking about the money.
So no matter at what level you play the game, you’ve got to get in the habit of keeping it real. In my experience, the best traders aren’t gun-slinging gamblers, but pragmatic realists. They’re better at seeing the world the way it is rather then the way they’d like it to be. (more…)