Learning to fold

In Rochester there was a mayor who desired so strongly to leave behind a legacy in the form of a project called the Fast Ferry. He devoted all his time and millions of the city's dollars with the goal of a ferry that crossed Lake Ontario from Rochester to Canada. This was no ordinary ferry. It had exquisite architecture with game rooms, casinos, and restaurants. No expense was spared in the planning and execution. Unfortunately, not much thought was devoted to the clientele. It turned out that no one wanted to ride a ferry across the lake and the project was in a deep hole. As a response, the mayor threw more money at the project trying to make it bigger and better. He added the construction of a dock that would house the ferry and ran advertising campaigns to promote the ferry and dock as attractions. The project fell further and further. There is no happy ending for this story.

Inside the Fast Ferry

Keep that story in mind and let's change directions. I've been teaching a few student how to play cards. I found that the games usually end quickly. I try to give as many opportunities as I can but in the end, I win quickly and convincingly. Most importantly, I noticed a pattern among all amateurs, one that I find the be the greatest cause of failure: Amateurs rarely fold. Folding is a move where a player will bow out of the current battle, forfeiting his capital. Amateurs do not think about the longevity of the game but are too focused on the current hand. No one wins every hand . In fact, no one even wins close to 1/2 of the rounds. The experienced players know when to cut their losses and when to continue while amateurs will dig themselves into a deeper hole, refusing to lose the small amount on the table.

As a stock trader, you MUST MUST MUST learn to fold. As an amateur, I found it difficult to take a loss. I was so focused on each individual trade and I hated to lose. I hated to lose because I hated to lose money but more importantly, I hated to lose because it represented a state of failure. I keep a log of all my trades and every red row shows a loss. I try so hard not to add another red row. At times i forget that if I make $1 million in a year, it does not matter how many losses and how many wins I have. Even if i lose 4 out of 5 trades, the value of the million is the same. In poker, I do not keep track of how many hands I lose and how many I win. I focus on the end goal of having all the chips. Losing chips here and there is part of the plan. I must cut my trading strategy from the same fabric. Trading is a long term endeavor. I will always lose trades and I will always win trades. The importantly thing is to not dig myself into a bigger hole and throw more money at a project that's a lost cause. Abandon pride and learn to fold.

-Still Broke