If you hang around day traders at all, one of the things you hear them echo is that losing money in the market is a “good thing.” When I went to the first international day trading conference, which happened to be held in my area in the fall of 1999,1 heard this repeated by presenters: “You’ve got to learn how to lose money.” Upon hearing this, it was easy to think they were just being pessimistic. But what they were trying to say by this is that you need to learn how to lose without it knocking you out of the game. You need to be able to handle a loss that may rip your guts out emotionally and not let this make you quit trading, even if it makes you gun-shy for a while.

In this way, they see losing as necessary and positive, so that they may learn the lessons of loss and be able to sustain themselves psychologically to keep moving forward in their learning curve.

Of course, because almost all day traders lose significant amounts in learning how to do short-term trading, this “losing is good” belief might be just a rationalization (good excuse) to make losing more palatable. I mean, if they could learn the lesson without having to lose too much, I’m sure they would prefer this, no? Perhaps this is another example of cognitive dissonance, the concept we presented earlier: If I tell myself losing is good and necessary for learning, it doesn’t hurt so much and I am more able to handle the financial loss and the blow to my ego. I am less likely to give up in failure.

One of the things that sustaining a loss can do is broaden your perspective about the place of money in your life. I have found that having some losing positions over a long time no longer seems like such a big deal, as it did many years ago when I first began trading individual stocks. But it makes sense to say that one should never be risking amounts of money that, if lost, would deprive one of a single meal.

Some would say your losses should never deprive you of any sleep. But that is asking for a lot. Because sooner or later, the mistakes we make in timing, judgment, execution, or just bad luck can lead to some losses that very well may keep us awake at night. To the degree that any difficulty falling asleep can be used to analyze our mistakes so we are not so quick to repeat them, a little insomnia, as one of my teachers used to say, is nothing to lose sleep over.

Here’s an example of one that caused me to sleep fitfully. It was the third straight day of massive selling in early January after they ripped the apron off the mother of all tech rallies. I happen to have added to my position in Lucent Technologies about an hour before news was released that, for the first time ever, they would fall short of their first quarter earnings.

I spent the afternoon in my office seeing patients and did not find out that something was drastically wrong until I called in for phone quotes in the late afternoon. I couldn’t believe what I was hearing. I told my wife, who works in the office suite with me, that I thought it had to be a misquote. Other stocks I own move 20 or more points up or down but not Lucent. When I finally got online at home and discovered the earnings warning, I was momentarily shocked. For a while that evening, I noticed I was not paying attention to the outer world, just my thoughts about the miserable day with the market.

I couldn’t believe my bad luck to have bought more shares just before this news was released. And yet there was really no possible way I could have known of it. It was not as if I had made a bad judgment in buying, as the stock had gone down along with everything else that day and it looked like a decent buy. What looked like a nice potential gain turned out to be a big loss. It would have been bad enough to have the stock drop 20 points from where I left it when I went to the office with just the shares I already owned. But what added insult to injury was that I had had the misfortune and terrible timing to buy more just before it tanked in after-hours trading! It seemed like a cruel hoax.

Talk about not sleeping at night. Between Lucent and my other fast-moving tech stocks all suffering gigantic losses, it was probably the worst day of net worth loss for me in the market that I can remember. I am much more invested now than I was back in the crash of 1987 or other major corrections since then. But that’s the game: If you’re gonna play, you have to take the bad luck with the good. So, the Zen master might ask, “How do you become illuminated at moment when you learn Lucent dropped 20 points?”

Attachment to our money and fear of losing it makes it tough to take reasonable risks with our trades. I am much more willing to invest large amounts of money in stocks than I am gambling it away in Las Vegas. I simply will not let myself look at chips as “just chips.” I am always aware of exactly how much each chip is worth and therefore am never willing to adopt the gambler’s mentality of taking big risks. I will take risks with stocks but not at the craps table, even when I am rolling the dice and on a hot streak. So, I usually end up making money for everyone around me by hitting a lot of numbers but don’t end up with much for myself, despite holding the dice for 15 or 20 minutes when on a good roll.

This attachment to the implied value of the money and my not being willing to unduly risk it became very clear when I was at a Monte Carlo night party. This is where they have all the games of a real casino but it’s just play. I found myself holding back from betting the $100 chips at the craps table, even when it was play money and the denominations meant nothing¡ªthey were all equally worthless. I didn’t want to lose my play money too quickly and be out of the game. I was trying to preserve my capital, practicing good money management, just like a good investor. This attachment to the value of denominations on the chips, though, does not make me a good enough gambler to ever strike it big in Vegas. I can easily live with that.
When we think about our relationship to gain and loss in general, not just with money, is gain always positive? Is loss always negative? When we reflect on past experiences, is it ever true that what we thought at the time was a gain was actually a loss and that what we thought was loss turned out to be a gain? I certainly have had this shift in the way I evaluated the initial “loss” when later, I saw how losing something was actually necessary to open up the possibility for a future gain.

Craving, Clinging, and Attachment
Buddhists talk about the process of craving and clinging. Craving comes from our relationship to feeling; feeling is the condition for craving. Craving is also translated as “unquenchable thirst.” Craving is the movement of desire to seek out and sustain the pleasurable contacts with sense objects and to avoid the unpleasant or to make them end. Craving may be to have something or become someone or something or the craving to make something end.

When we crave something, we lose our sense of authority, giving power to that which we crave. We have a restlessness of appetite and think there’s never enough, that just one more thing is needed to satisfy us¡ªwhether it be one more mental state, one more experience, one more orgasm, or one more big trading gain. This becomes a basic hunger and can color our daily world so that no matter what we have, it feels like it’s just never enough.

When craving becomes intense, it becomes clinging. The way it becomes strong enough to become clinging is when fixed positions are taken about how the world is. Clinging, or attachment to these positions, helps us define a sense of identity, of what we believe in and what matters to us. It also involves our holding onto our values of right and wrong and what we think about how the world is and how it should be.

While, from a psychological point of view, all of this is necessary as part of the normal development of individual personality and character, Zen takes a different stance. It proposes that we not become too rigidly attached to any person, place, or thing. Zen is interested in personal enlightenment and the enlightenment of all other beings. Psychology is interested in shaping our character and finding and creating a healthy balance between our own personal needs and the needs of others.

Now let us look at one result when we are not satisfied with what we have and instead want what the other has. Here’s a psychological and social artifact of the great bull market we have enjoyed.

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