Using Money or Status as a Measuring Stick

It's easy to get lost in society. With scores of people walking or driving past you, and with tons of media/advertising messages being fed to us daily, it's sometimes hard to tell where we "stand" in the context of all that's taking place around us. There are people of different ages, personalities, occupations, and of course wealth.

In our need to find our place in society, we often "cling" to or overemphasize certain attributes that we feel best define us in the context of those around us. Unfortunately, our lives get so caught up that we sometimes define our worth or success level to some simple metric as a measuring stick of where we stand relative to others. The most obvious choice for many is money and sometimes status.

But before you throw your hands up and conclude that it's just human nature, consider a few things:
- It's human nature to go to war, but we shouldn't all be going to war
- It's human nature to feel jealousy, animosity, and anger, but we shouldn't be all those things all the time
- It's human nature to buy high and sell low - and we know how that ends!


Let's not succumb to so-called human nature in this case and ascribe our self-worth to our wealth. There's so much more to our existence and so many random factors out of our control that eventually determine whether we end up with more wealth.

Succumbing to this mentality is especially dangerous if we are to try to make money as traders. With psychological evidence that proves that losses hurt more than gains bring pleasure, it's only a matter of time until one is psychologically in the gutter, along with any chance of making prudent trades.

Here's a "mathematical" look at what this attitude can have on your psychological state, assuming you're currently a break-even trader who wins 50% of the time (to highly simplify things, also always has the same dollar amount gain as losses).

A gain represents a 10% increase in your psychological state and a loss represents a 15% decline

Trade                                                Psychological State (5 = neutral, 10 = exuberant, 0 = suicidal)
Transfers money into account          5                              
1. $100 Gain                                     5.5
2. $100 Gain                                     6.05
3. $100 Loss                                     5.14
4. $100 Gain                                     5.66
5.  $100 Loss                                    4.80
---> Damn, despite 3 gains vs. 2 losses and a net $100 profit, you end up unhappy!! (less than 5, i.e. neutral)
6. $100 Gain                                     5.29
7. $100 Loss                                     4.50
8. $100 Gain                                     4.95
9. $100 Loss                                     4.20
--> After alternating between gains and losses a couple of times, the situation gets worse and worse. You get mentally exhausted and your self-worth starts to decline in spite of still being profitable!!
          
You can see where this is eventually headed. One thing to note is that you're on the road to becoming suicidal faster than the above simplified example indicates since your lower self-worth will soon lead to more clouded decision-making, accelerating the losses along with your self-worth in an almost self-fulfilling manner.

But not all hope is lost!

One positive side-effect of being beaten down to the pavement time and time again is that every time you get up, the bruises hurt a bit less each time. Eventually, you ever so slowly start to realize that your true worth isn't at all related to society's money measuring stick! Sure, money can enable many things, but it's not an end in itself. Life goes on after losses. Birds still chirp, you hopefully still have your health and interests, family, etc. You have the potential of becoming more grounded after a series of losing trading experiences (assuming you didn't jump out of a window)!

By becoming more balanced and de-coupling your self-worth to your net worth, one stands a much, much greater chance of making sound decisions and allowing those decisions to be reflected in one's bank account rather than allowing negativity to whip one out of shape even in good times.

By becoming more self-aware of our often impractical and self-destructive tendencies (such as associating our self-worth to money or status), we can rise above our base reactions to events and bad trades to not only become better traders, but also better human beings who actually enjoy life for what it is and not through the kaleidoscope of society.