Many people have entered the activity of investing and trading with money they could not afford to lose and as a result they started their trading with “scared” money.
Their fear of loss was bigger than their desire for gain and they traded with a nervous and anxious state of mind.
“Scared” money never wins!
It’s wrong to borrow money to trade or take out a second mortgage on your home for trading capital.
The way to begin is to determine how much you could afford to lose financially and then from that amount determine how much money you could afford to lose emotionally.
Financially allocating an amount of money for risk capital is very different from emotionally allocating it.
Anything can and will happen in the market!
Develop the habit of only trading with money you can afford to lose financially and emotionally!
Always take full responsibility for your own actions!
It’s easier and more convenient to blame others for your actions or to lie to yourself.
You have to realize that your success or failure is all your own and while it may be convenient to blame the specialist for “screwing you” on an execution or blame your broker for a string of bad picks …
But, the ultimate responsibility for your actions falls directly on your shoulders.
Nobel Prize winner Economist Milton Friedman (1912 – 2006) once said that, “There’s no such thing as a free lunch!”
In one small phrase, he summarized the very nature of all economic transactions!
What Friedman said was that for every benefit there is an offsetting cost, and while that cost may be temporarily imperceptible it exists indeed, and will eventually make itself known.
Look at it as a sort of an economic interpolation of Newton’s Third Law of Motion:
For every action there is an equal and opposite reaction!
Every aspect of investing is based on this notion as every transaction is, in fact, a zero-sum game.
Any profit from an investment-bought is offset by a loss or an opportunity cost, to the previous owner of the investment-sold.
The market is not offering any free lunches!
Nobody is entitled to extraordinary returns…
Without equivalent and compensatory levels of risk!