Plato cave myth was not just that “crazy” idea that you had to learn one day in high school to pass an exam.
It’s an idea that, even more than 2,000 years later, is still relevant in our daily lives, influencing much of human thinking today, and that today will help us understand why we suffer so much from loss and what psychological strategies we can use to overcome it.
I’ll be concise. I don’t want you to hate me, but it will be worth it if you want to learn how to manage a drawdown.
Plato says that the people chained behind the wall are us, human beings, and they and we only see the reality we perceive, even if it doesn’t seems reality.
Only those who are able to get out of the cave know how to differentiate reality from the shadows.
As Mulder and Scully said: “The truth is out there”
What lessons can we learn from this?
First lesson: Reality is NOT just what we perceive.
As Daniel Kanheman says in his book “Think Fast, Think Slow”
“We focus on what we know and ignore what we don’t know, which makes us rely too much on our beliefs”
Second lesson: Fear makes us make bad decisions
What Plato explained in this myth – which was a critique of Greek society at the time – is that human knowledge, represented as light illuminating the shadows, is a metaphor for ignorance and fear.
Let’s take an example. You see.
What happens when you explain that you can make money in the long run with sports betting?
From 10 people you tell about it
– 7 won’t pay any attention to you
– 2 will think you’re a gambling addict.
– And hopefully, 1 will listen to you (if you’re not boring) and think
“hey, maybe you’re not that crazy”
Fear of failure, fear of losing something or fear of what others will think of me limits us.
Third lesson: We are afraid of loss.
Our brains are set up to survive by avoiding risk and seeking comfort.
In other words, work a bit, watch a lot of memes on the sofa and eat whatever we want.
However, we know that living involves risks, and investing is a good example of this.
One of the average investor’s greatest fears is losing his money.
We suffer a loss two times more intensely than a win of the same value.Loss aversion by Daniel Kahneman and Amos Tversky
This scenario causes a kind of paralysis in the average investor, which explains their poor long-term success.
Generally the process is as follows:
1-People hear about possibility to make money in gambling
2- They buy when the investment is on a winning streak.(FOMO)
3– And they sell when the investment goes on a losing streak (Loss Aversion)
This implies that the average investor rarely makes money in the long run, or if he does, the price of commissions eats up all his profits.
Buying when something is very high and selling when it goes down doesn’t seem like a very good business idea.
¿What is a drawdown (DD) ?
“The decrease in profit from the previous maximum reference point to the minimum during a specific period of time”
In other words, a drawdown is the losses experienced over a period of time, from its maximum to its minimum.
In conclusion, losing money makes us all very nervous.
And we see this every day at WinnerOdds.
In every drawdown or when two or three big bets are lost, the same thing happens:
-> This bet has ruined my profits for the day or for the week.
–> Every Sunday we lose. The system doesn’t work at the weekend
-> High odds are very difficult, I always lose them.
-> And I give up
Well, this reasoning is fallacious.
No worries,let’s look at some tips to help you.
5 tips to overcome a drawdown
There really is no shortcut or magic potion. Sorry 🙂
In fact, there will be people who will never understand it, even if you explain it to them a hundred times. It’s part of human nature.
However, if you take these 5 tips into account, I’m sure you’ll understand it much better than most of them.
And that’s already a plus for you.
1- Know the product you are going to invest in
This is the basics.
You have to know what you are investing in before you invest. Simple.
The more you know about the product, the better you will understand why certain things happen and that will help you to be more confident and make better decisions.
For example, if you invest in WinnerOdds expecting to make a profit every month, it is very likely that when the bad times come, it is likely that you will feel cheated and make bad decisions.
To get to know a product like WinnerOdds it is essential, among others:
– How to beat the bookies (Ebook by our CEO)(Highly recommended)
– Popular FAQS on WinnerOdds (Web) (More info there)
– Webinar WinnerOdds 2017 (Vídeo) (Spanish) (CC on Youtube)
2-Learn the basics about how our brain works
This section is highly recommended.
It is not necessary for betting, but it will help you better understand why you feel what you feel and why we do what we do.
The literature on this is unlimited, but I think these five books are the basics to understand this structure.
Choose the one you like best
– Think fast, think slow (Book) (Highly recommended)
– Undoing project (Book) (More easier than Think fast, think slow) (Same ideas)
– Juega bien tus cartas (Book) (Only in Spanish)
– Trading in the zone (Book) (trading psicology) (Applicable to bets)
– Before You Know It: The Unconscious Reasons We Do What We Do (Book) (How works our brain)
3- Be Consistent
Consistency is one of the bases of any investment and also of WinnerOdds.
You do not win or lose until you close the operation.
A drawdown is a part of the investor’s way.
4- Be patient
And only when you acquire the necessary habit and constancy will you start to see results.
And that, requires a long-term commitment.
If you want to get results from an investment like WinnerOdds, you have to think in months and years, not days or weeks.
5- Bet & forget
In other words, bet and forget it. Pick made, pick forgotten.
The best strategy to win money in gambling, and live your live.
No obsessions. Don’t follow matches. Don’t watch games.
PS: Everything recommended in this post is content that I have tested and read myself.
There is no affiliate link. We gain nothing from this.
It’s your choice, take it or leave it.
PS2: If you want to read the analysis we did during the worst drawdown in our history, we leave you the article:
If you can think of more strategies to overcome a drawdown, leave them in our comments, we will be happy to discuss them.
Miguel Figueres 🙂