All traders share unanimously one desire: making money.
However, all the successful traders and investors also share one big quality: they are not attached to their money.
If this seems paradoxical, have no worries: this article will help you identify the difference between recognizing the value of money and being attached to it.
Furthermore, you will be clarified on why attaching to money is counterproductive, and why it harms the original purpose of the trader in the first place.
Understanding and absorbing the concept of indifference is key. Let’s jump into it.
What It Means To Be Attached To Money
Most people are, even if they say otherwise. But none of them is a liar, they’re simply not aware of what it truly means. Generally speaking, this concept is mistaken at the very basis.
Being attached to money means being subjected and emotionally influenced by it.
How many people you know you could say their life gravitates on their money? All of them, except for some very rare humans.
But this is not something that only belongs to individuals: money is the mover of our society. This is not a bad thing; money itself is not a bad thing. Actually, it is thanks to it that we evolve at an incredible pace.
Capitalism has been the most prolific system for mankind, with all of its strengths and weaknesses, and money is the center of mass of this system.
If we are being realistic, money has always been the center of mass, not only in capitalism but from the very moment humans have discovered its properties.
So what’s the problem with it?
Again, money itself is not the problem. It is the way people approach it. When one totally depends, as a person, on the quantity he possesses, he has transformed a means into a god.
In the trading world, a trader is attached to money when:
• His emotional state is dependent on it
• The quality of his trades depends on the amount of his capital
• He constantly thinks about the amount of his capital
• He decides to trade in relation to how much money he made or lost before
• He does not think about profits in terms of percentage but in terms of quantity of money
If you recognize your attitude summarized by this list, you may want to correct it as soon as possible, for the sake of your wealth.
Recognizing The Value Of Money
The confusion between these two different concepts is incredibly common in trading, but it has roots in the general attitude of people.
Poor people think that wealthy ones got money because they’re attached to it. At the same time, they talk about money as they recognize its value and purposes.
In reality, it is in the exact opposite way.
Money only goes into the hands of those who TRULY understand it. Rich people have recognized the true value of money, i.e being an INSTRUMENT, and they’ve realized that being emotionally attached to an instrument blocks their way towards wealth.
Here it comes again to our aid — the example of the house and the hammer.
Imagine a builder whose dream is to build his house, but he is too attached to his hammer. He can’t risk breaking it, thus he doesn’t even learn how to use it. He is so emotionally attached because with it he can build his dream, that it became his god. He ends up worshipping his hammer and never building that house.
The builder has confused the value of his instrument, and for that, he never realizes his purpose.
To recognize the true value of money, it is firstly needed to understand what it is, then it will be clear there’s nothing to be attached to.
The Consequences Of Being Attached To Money In Trading
Since trading has a lot to do with life itself, the consequences are pretty the same: staying poor.
Because attaching to money means being subjected to it and emotionally vulnerable, it is going to bring no positive outcome. Whenever emotions take in, there’s no room for money. Therefore, no way of enlarging one’s capital.
Do you ever wonder why you feel it easier to make profits after you suddenly operate with a smaller capital?
That’s because you’re considering that amount in a different way from the one you had before/your main one, simply because it is smaller.
But what if the capital was larger? Still considered differently, but in the other way around: it would be a lot scarier to use it.
Any decision you make when you’re emotionally influenced by the amount of money you use is going to cost you clearness of mind and neutrality, and more importantly, you become a victim of fear — fear of losing that money or not making enough of it.
Fear is the root of the problem. It always is. That is ever-present in a biased mind.
How do you know if you trade being attached to money?
If you’re used to trading with $100,000 and you start trading with $100 as a joke, it is certain that you can turn it into $200 much more than you can turn $100,000 into $200,000.
This happens simply because you don’t care about a hundred dollars: you’re not attached to it, for this you trade without fear. But when you increase the number, there comes your attachment.
To spot this weakness in your trading, ask yourself these questions before taking a trade:
-If I had much LESS money than this, would I take this trade?
-If I had much MORE money than this, would I take this trade?
Through these interrogatives, you will immediately understand if your decision is biased by the amount of your money. A just decision would be intrinsically valid regardless of the quantity of capital, and the only factors related to it would be of a logistic nature.
How to Detach Yourself From Money
There are three main ways, pretty easy to understand, very hard to apply. But remember: nothing is hard to accomplish when there’s a strong will.
1. Ignore the number
To be free from attachment to money you have to ignore the amount of it in your capital. Make it disappear from the list of components that bring you to a decision. Reach the point where you start ignoring it unconsciously.
In most traders, the number that represents the managed capital is the very first mover: you instead want to remove it from that role and put it a the bottom of the list.
This logistically changes if you trade with a large capital; at that point, its dimension is important to consider. But rest assured: by that moment you will have already overcome the attachment problem.
2. Think in percentage
There’s a reason why no great trader or investor sits at his desk at the end of the year and says “I made 100 million dollars this year!”. He much more likely says “I made 40% this year!”.
40% of what? 40% of his WEALTH.
The good trader thinks in percentage.
He knows that to manage his capital and enlarge it, he needs to think in percentages. If he thinks of ‘quantity of money’, his perspective is blurred and he is going nowhere. Instead, he knows very well what money is, plus how and when to think about it.
Make sure that you absorb this concept and that you start referencing with percentage units.
3. Treat every money the same
The successful trader is able to treat $100,000 as $100, or $1 million as $10.
His state of mind slides throughout the environments without being influenced by them: his mind is a constant over a world of variables.
When the trader reaches the point where he is the constant, the amount of money will increase as a natural occurrence, because discipline means growth. But those variations in the amount do not influence his state of mind.
Make sure your mind is a constant over all types of environments and amounts.
By doing this, a lot of great qualities will take place in your trading attitude:
- You will lose the bias, and as a direct consequence, you will start to look at the trades for what they really are.
- You will have an uninfluenced mind that will be able to analyze markets from a much clearer perspective.
- You will not feel forced to take trades, and you will spontaneously avoid running into unnecessary risks.
- You will be free from this kind of fear.
- You will automatically start to see money as an instrument.
In conclusion
The way a trader approaches money and the influence it has over his decisional capability is KEY.
Money is an instrument, not a god; this is a truth that very few people understand in the modern world.
Being attached to money means being vulnerable to a lot of weaknesses whose fear is the progenitor.
The good trader spots his society-inducted attitude towards money and corrects it for the good of his desire. When he will have conquered the quality of the wealthy men, he can become one himself.
Everything described in this article has the sole purpose of being informative and providing general information. The author has no intention of providing any financial advice, legal advice, or tax advice. Do not rely on this article to make investment decisions. Seek professional help before making any such decision. The author does not take any responsibility for loss or damage of any nature. The use you make of the information contained in this article is your sole responsibility.