If you had no money and I gave you one dollar, would you consider yourself financially wealthy?
Most people would say no.
What if I gave you $40 million instead? Would you consider yourself financially wealthy then?
The answer is probably “yes”.
Therefore, this means if I kept giving you one dollar over and over again, there would come a point in time where one extra dollar would be the difference between being wealthy or not.
The question is, what is that point?
This is known as the bald man paradox and it relates to a strange problem with newly profitable traders.
Newly profitable traders end up disappointed
When traders start becoming consistently profitable for the first time, something strange often happens.
They become frustrated and disappointed!
The problem relates to the term ‘consistently profitable’. It’s usually treated as a destination to be reached rather than just another milestone in the learning process.
Part of the issue comes from the fact that the phrase ‘becoming a consistently profitable trader’ is thrown around tirelessly as if it’s the ultimate goal for traders.
It makes it seem like the progression for a trader is this:
- You start off burning out accounts (losing 100% of the capital).
- You then start losing a bit less than that each month.
- Progressively over time, you lose a bit less and a bit less.
- Then you finally pop through the break-even point into untold riches as a consistently profitable trader.
Here’s what that looks like:
As you can see, there’s a problem. There’s a big gap between reaching break-even…