My 10 year old nephew Kevin paid me a visit this week. I thought he would enjoy meeting the guys I work with, so I brought him into the office one day. After looking at the screens and watching the prices go up and down, he asked, “How do you make money from all this?”
I shared with him some of the concepts that we discuss on this blog. How we buy/sell commodities and how we cut the losses when they are not working and how we take profits on those that are working.
So then he said, “How do you know you’re right?”
“I don’t know for sure,” I said, “that’s why we protect ourselves by getting out when we’re wrong”.
“You must be right a lot” he then said.
“Not really, we’re right about 40 out of every 100 trades or so.”
“So you lose more? Doesn’t that make you a loser?”
I went on to explain that in some professions it sure would. What if you were an airline pilot? You can’t be wrong at all so to speak. The accountant or the auto mechanic have a little more room for error, but not much before they would be fired. A baseball player on the other hand gets in the hall of fame if he consistently bats 300 or so, which is- statistically speaking - a loser. A team that wins half their games most likely will be in the playoffs.
Mel Fisher, the famous treasure hunter, brought up an estimated 450 million when he found the 1622 wreck of the Spanish galleon Nuestra Senora de Atocha. I guess you don’t have to be right much in that profession to succeed. It looks like once might do the trick.
So, the airline pilot can’t make any big mistakes and the treasure hunter only has to be right once. I guess losing is greatly defined by your profession. We happen to be in one of those professions where losing is part of the process of winning.
Kevin liked the treasure hunt example and I thought I had won him over until we went home that night. Exercising his great sense of humor, I heard him say as we came through the door “Hey Aunt Kim, did you know Uncle Charles is a loser at work?”
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