People don't know how to bet in proportion to their bankroll. In Two for the Money McConaughey's character worked at a national sports betting picking service and pushed his clients to go all in almost all the time with as much as they had. This is a recipe for disaster, because no one is right 100% of the time and there is one scene where one of his clients calls him back from a payphone after he lost everything. I see this at the casino, and I've had friends that bet like this.
For example, I had a friend who started with 2 grand and put all his money into one option play. It worked out and he had 5 grand afterwards. Then he took that 5 grand and used it all for another play. He won and then had 8 grand. He did this several times and then on the 6th time after going all in he lost it all...the option expired worthless. If you have an 80% win rate with your picks in the stock market that means statistically out of 10 times you will win 8 times and lose 2 times. Now in those 10 times you roll the dice, you will not know when the two losers are going to pop up in those 10 different bets. If you bet 100% of your entire pile every time, you will have 100% chance of losing all of your money, as 2 times out of those 10 (providing that you can even keep a 80% win rate) you will lose. I see people pushing it at the casino at the craps or blackjack table and I see people doing this in the stock market. To me, they come off as degenerate gamblers. They are not doing it to actually see a profit, they are actually doing it because they get a rush putting thier money and risking it on the line, it makes them feel alive.
This site is not for the latter. If you need a thrill, go play craps. If you want to profit long term using this site then this is what you do:
First of all I recommend that you separate your money into 10, preferably 15 or 20 different piles. Then pick a site online or trade for yourself with your broker but no matter what site you decide on using, only use 1 pile per pick. Now if you have done your reasearch and you can find a site that you feel has a winning record of 70% plus, and you only use 1/10 or 1/15 or 1/20 of your money per pick, this means in the long run, you are going to make money. You will be able to absorb hits every now and then. Also not every loss is going to be a total loss, as most sites will not allow the option trade to expire worthless. If I see my trade is going wrong during the excepted time window I do things in, I cut my losses and take the loss, very rarely is the loss total, but some fraction thereof.
I am an armchair theorist first, I do extensive research into a system because I never jump in first and then figure things out: I am not a risky gambler. As a matter of fact, I dislike putting my money at risk. However, you have to endure risk in order to realize profit or loss. Risk is a part of life. In order to have an extrordinary life you can't play it safe. If you do you will have a boring little uninspired life.
It took me about 10 years to come up with this contrarian style of trading. I learned the basics first from Contrarian trading experts from the 70's and 80's and through trial and error, I learned what works in the market and what doesnt work. And believe me, most things dont work as the expert traders in the market have attemped to make trading an insider club to the fullest extent of the law in order to make money off the masses. There are timing aspects that I follow in order to compensate for this and also this helps me to trade against the crowd in the market. The crowd often is wrong, I find these situations where the crowd is wrong, and I take advantage of it. Again, to see some of the things I went through with the market during the time it took me to learn how to trade, you can watch the below video. Its about 20 min long, and yes, the production value is pretty low, but the information that is contained in it is priceless and will save you about 10 years of grief in your learning curve at how to make money in the market:
About Burn Money
Imagine walking up to a craps table with 500 dollars in your pocket. You have a system for winning at the table and you figured that with the fluctuations and standard deviation that occurs at the table 500 dollars should cover it. The only problem is that it is your last 500 dollars or close to it.
You start to play and you are hitting a cool streak and your bankroll is now down to 390 dollars. Because you don't have much money, you start to worry about the 390 dollars you have left. You start thinking about your rent. How you could use the money for other things you need around the house. About your water and light bill. This causes you to start locking up and slow down your betting, thus defeating the system that you use at the craps table. Your money works its way down to 350 and you get cold feet and decide that you can't risk this money, that you must be nuts risking this valuable money.
What just happened here is that you went and gambled money that you couldn't afford to lose. This in turn caused further loss because instead of letting the standard deviation play out ( letting the money swing up and down continue) you cut it off at 350 dollars. The deviation swing if allowed to continue playing could have continued down to 200 dollars but then could have swung back up past 500 dollars to eventual profit. But since you truely needed the money for other things, you stopped in the middle of a downswing in the deviation and walked with a loss.
Burn money is a concept where the 500 dollars you have with you to gamble you can afford to light on fire. You can only gamble if your rent is paid, your bills are paid, and everything that you need for the most part is satisfied.
Furthermore Burn Money also is replaceable money if needed. Say you lose the 500 dollars. Do you have the means to throw another 500 dollars at it? Then another 500 dollars if necessary THAT is the concept here of burn money. What this does is loosen you up when you are gambling it, thus providing the intelligent gambler and easier ride up and down the standard deviation, preventing you from tightening up and gambling in fear, causing a restrictive and fear based form of gambling that almost always loses.
Again, gamble in your means, and it is always luxury money. Money you had left over on the side and money you can afford to lose. Never gamble off of a credit card, never gamble your rent or utility money, have a replaceable stream of income for your gambling activities.
More to come and have a nice weekend, more picks on Sunday.
Mark
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