- Posted by hcpg
- on June 9th, 2011
Modern civilization demands abstraction, and money is the ultimate signifier. Most of our interactions are removed from reality. This distancing effect is a common part of our life. We buy an iPhone and all we think about is the dollar price, we don’t think beyond the money — about the life of the person who actually helped construct the phone at Foxconn.
We buy our meat from companies that do everything they can to distance you from the idea that what you are eating was actually a live animal that was butchered. It’s not even called “Cow part”, it’s called a Rib-Eye, another distancing effect.
The distancing effect is even more exxagerated for traders. Money is already an abstraction, for traders it’s taken to a different level where money becomes an electronic number, green and red, bobbing up and down like in a pin-ball game. Compare this to a carpenter who works for an afternoon, makes $100, and goes home with the money knowing what bills the money will pay. Every hour that passes he knows that he has pocketed another $25. The connection is tangible.
Back in the bubble days (tech bubble, 1999) I was in a car with a buddy prop trader, going out for dinner, driving too fast down the highway. We got clicked by a ghost cop car halfway down the route and my buddy was stopped an issued a ticket. He was pretty flippant and I’m sure the cop was happy to give him the $250 ticket. We drove off and he laughed, “Ha, I made that much in the first two minutes of the day”. He didn’t care about the ticket , he had no connection to money, and incidentally enough, to risk.He blew out in 2002 and we lost touch.
The lack of respect for what you gain and can lose is directly related to how quickly traders blow out their accounts. What is essential for new traders, especially prop/daytraders, is to make a physical connection between those flashing red and green lights and income. Basically, what is needed is to try to overcome the distancing effect — to realize that those flashing lights represent hard-earned money and thus do everything in your power to follow the strategy/plan/discipline. In this business to lose money is unbelievably simple. On the other hand, to become a professional trader who can pull money consistently out of the market is quite difficult. The first step in this quest is to respect those flashing lights.
Follow us on StockTwits and Twitter
