Loss in the market is all about Prestige – and not really about the money.

There will be times when life tests you. We all have experienced that time and again. Most of us come thru. Some with positive or required action, some with stoic opposition, some with patience and some with hope and prayer. Each of us has our own way of answering adversities. Since there are so many crises in our lives – of varying degrees of course- we develop a way of dealing with them as the situation demands. So we adopt a mix of the few approaches that I mentioned above.

The market also periodically takes us to points of crisis. And this is only one – losses. All of us think of losses as being monetary. But if you sit back and think, then it is not just money. Many of us in the markets can actually afford that recent loss. But at the mental level, if one cannot accept the loss, then it becomes much more than the ‘monetary’ loss! Money has this funny effect on our brain. We many times do not bother about the thousands that we drop in the market but we are so bothered about paying that couple of Rupees extra at the vegetable market. We will not hesitate to spend a four figure buffet at a five star but giving donation to a worthy cause that runs past double digits makes you feel you are throwing money away!

So, when it comes to losses in the market, it’s not just the money. It is the pride of doer-ship, it is the question of being right and wrong, it is about looking smart or idiotic, it is about your ‘capacity’ to withstand adverse movements etc., etc. It is no longer about whether the amount is affordable or not. It is all about Who We Are! The ‘bigger’ the man the more this difficulty. Bigger, as defined in terms of wealth, position, knowledge, standing etc. So, loss in the market is all about prestige- and not really about the money.

This is why people have difficulty in taking losses. They feel their ‘prestige’ is at stake and not really their money. And when it is a question of your ‘naak’ then no amount of money is worth forsaking that!

This begets the question – is this right? Is this the way to do it? And the answer is obviously, No. So, what is the correct answer? We need to Play the Game, knowing and accepting that the profits and losses are part of the game and are not distinct from it. How would you feel if you are told that you have to play cricket but bowlers cannot be hit for boundaries and sixes? Clearly, those strokes are part of the game and if you are a bowler, you should expect to be hit once in a while for fours and sixes. Nothing wrong with that. Obviously no one is going to be happy being clouted for a six but hey, he doesn’t break down or throw a tantrum! He accepts it and goes to the top of his bowling run to send in the next one- possibly to similar fate! In the same way, we have to see losses similarly- as something that occurs and it has to be accepted and that we should then go on with the game. Like the bowler, you adjust your line and length, try to outwit the batsman etc.- but you still deliver the next ball!

What do traders do when they incur some losses? They sulk or get depressed, find all sorts of reasons to blame everyone but themselves and try to “punish” the market by shorting it or even not participating in it! Or, they simply quit, saying that this is not for me as there is no winning this game! But that is not the correct perspective. Just Play the Game. That’s all. Develop the right attitude and understanding of the game. And play it.