Right now I'm at the Wynn Las Vegas hotel. Last night, in the elevator, a guy told us that there is a person in the casino who has lost $60 million gambling here. 60 million dollars. Think about that for a second. Now, this may be a rumor but even if there is a shred of truth to it ($1 million? $500,000?) then it's an amazing lesson for us.
Would you allow yourself to lose $60 million while playing blackjack or poker? Most of would say of course not. But think for a moment -- that's because $60 million represents something important to you, while it doesn't mean much to the guy that lost it in the casino. He might be worth over a billion dollars. It's all relative! Traders only allow themselves to irresonsibly lose what they do because they don't appreciate the present and future value of their trading stake.
If you started gambling with $60 million and started losing, you would at least put some money aside, right? You would at least stop gambling when you only had $10 million left, right? $1 million. You say that because you value $1 million and what it can do for you now, and what you might be able to turn it into later. It represents a substantial and meaningful "blessing" or something so important that you would protect at least that much.
But then we take a $10,000 account and we blow it all the way. Why? Because we don't appreciate what $10,000 can do for us now and in the future. Or $1,000. Or even a $250 account.
Until a trader appreciates the true present and future value of his trading stake, he's going to keep blowing up his account.
