The lure of short term wins

Las Vegas attracts a whole lot of people to its casino’s. The mix is varied from the Superstars to the con man on the street and every one of them has only one reason to be there – an attempt to make money at the games. The thrill of making money via luck is not limited to casino’s either with Lottery tickets being there at the top for a long period of time.

In both the cases, it isn’t that the player does not know the adage of “the house always wins” or even the fact that the odds are very strongly aligned against you. But in both the cases, the lure comes from either knowing or actually winning on a casino or hearing about a person who bought a lottery ticket which fetched him millions.

Every one of them hopes that they shall come out with more money than they go in and while not everyone loses, over a long period every one of them would have contributed to the kitty of the casino in one way or the other. The odds aren’t totally skewed in favour of the casino (who would want to play if one cannot see one single guy making money) but the odds are always in favour of the casino. The odds are actually even worse in lottery tickets (with many a jackpot having odds of 1: a couple of million) but since the news program has the winner flushing himself / herself with the winning ticket, the attraction is far too much to ignore for many.

In the markets, I have seen enormous interest in options since the risk is said to be contained while profits unlimited. Charles M. Cottle in his book “Option Trading – The hidden reality” says that the best professional traders earn around 100% per annum which is about 6% after commissions. Most traders on the other hand expect to double their capital within a month if not less.

As a trader, if you want to survive long enough in the market, do remember that it’s not the small wins that count but the big outliers. Small wins may give you the happiness associated with making money, but it’s the big outliers that actually enable your capital to grow exponentially.