Our daughter is quite the gambler. I don't know where she got it from, but she has nerves of steel when it comes to gambling. Black Jack is her game of choice and she does pretty well with it. She will routinely win $500 - 1000 at the tables when she plays. But here's the lesson: she only plays the high limit tables. Compare that with my own gambling habit which is very conservative. I prefer to play Craps, but only play the low limit tables. I take the higher percentage bets and will usually win about $50 over the course of the evening.
She says she "can't be bothered" playing the $5 tables for two reasons: first, the low limit tables are filled with "amateurs" who don't know what they're doing and will "pull the good cards" from the deck; second, and most important, you can't make any money on the low limit tables. You can play all afternoon at a $5 table and be lucky if you're up $100.
You see she figures she will win a certain number of hands, so she needs to make those hands pay off. In order to do that, she will play the $25 table. With the higher risk, comes greater reward. But perhaps most important for us traders, is that she is fully prepared to walk away from her risk capital, usually $200 - 300, when she sits down. She doesn't hesitate for a minute to risk $100 (or more) on a hand. It's something to watch... but she hates it when I "hover" so I usually don't.
The night our daughter dispensed this advice, she and her mother cleaned out my wallet and headed to the Black Jack table. They left me with $18. Wandering the casino floor I came across a $15 high limit Craps table. No one was playing. The $10 tables were packed, but no one was prepared to risk a little extra at the higher stakes game. I admit I was a little embarrassed when I put my $15 on the table - but I had enough for one roll, so I decided to take my chances.
Now, I should mention that my attitude about the $15 was without apprehension. I didn't hesitate for a moment to walk away from the money should I crap out. This was a unique feeling as I'm usually uptight when I'm playing a larger bank roll at a low limit table. I knew the game, I knew what I needed to do, and I took a chance with the opportunity.
The very first roll I doubled my money. I now had enough to "lay odds" - which would increase my earnings if I continued to win. Again, without apprehension, I wagered the $30, and again I won. Within a half a dozen rolls of the dice I had $163! That's a 987% increase in a matter of minutes! Not a bad return on $15!
In spite of the dealers urging me to continue (I'm sure they were relieved to be doing something instead of just standing around) I happily took the money, tipped the dealers, and left to see how my wife and daughter were doing. Our daughter was absolutely right. In order to make "serious" money, you have to be prepared to play the higher limit tables (but ONLY after you know what you're doing!)
So how does this translate for us traders? First and foremost I think it is imperative that you ONLY trade with money you can afford, and are prepared, to lose. We don't like to think about losing our investment capital, but that is the only way you can do what you need to do to win as a trader - namely risk the money necessary to make a good trade. If you are apprehensive about losing your capital, you're almost guaranteed to lose it. Gambling and trading are not that far removed. Yes, as traders we do "analysis", but the fact remains that whether it's a chart or a pair of dice, NO ONE knows the future.
Having the correct attitude about your trading "stake" will make a world of difference to your success as a trader. If you're not comfortable with the amount you have to risk, look elsewhere. Consider options, mini-contracts or other lower cost alternatives, but be sure you are prepared to walk away from your trade if things don't go as planned. I can not stress this point enough. There's a reason that the Government makes me warn you all the time to only trade pure risk capital, but I bet you never thought that being emotionless about your investment would actually make you a better trader, did you?
Erich