Are You a Trader or a Gambler?

You might be treating the market like your own personal casino right now and not even know it. In fact, if you are like many people trading the market, you are probably more of a gambler than a trader. Traders who fail at making money consistently in the market have a gamblers mindset; they do not have the professional mindset and habits that consistently profitable traders have.

How do you know if you are approaching the market like it is a casino or like it is a business?

 

• Are YOU a gambler?

There are basically two types of people trading the market at any given time; people who are gambling with their money, and professional traders who treat trading like a business. As you probably could guess, the gambling traders are the ones who lose money; the professional traders are the ones who make money.

In order to determine whether or not you are a gambler in the market, let’s discuss some of the most common characteristics of gamblers, if you are shocked at how many apply to you there is no need to worry; this article is the first step in changing your mindset from that of a gambler to that of a professional trader.

• Characteristics of gamblers…

Gamblers are addicts; they are people who do the same thing over and over just to get a euphoric “high”, even if it hurts them or loved ones. They view TRADING as a hobby, or as something to do with their free time. Unfortunately, this “hobby” often turns into an addiction.

Gamblers become addicted to the “hope” of gambling, this is why they keep losing and don’t change their habits, they put more and more money into their gambling addiction,Gamblers believe they are always “one away” from that next big jackpot or that next lucky card, so they continue to throw more money on the table, convinced that it will all be worth it in the end, because they think they will ultimately just make back everything they have lost and much more. Typically, what happens to most gamblers is that they lose so much money they eventually snap out of their haze and walk away much poorer, or some sort of intervention is required to wake them up to the reality of what they are doing. Now, we aren’t talking about a once a year trip to the casino here, we are talking about a full-fledge gambling addiction.

Unfortunately, many traders treat their trading activities exactly like a gambler would. Many traders become addicted to the feeling of “hope”, essentially they become addicted to the feeling of getting rich or that the next “big one” is right around the corner. This causes them to behave like they are a gambling addict in a casino; pumping increasing amounts of money into their trading accounts, risking random amounts with no money management plan, meddling in trades after they are live for no good reason, chasing the market, and a whole host of other addictive trading errors.

Traders who are addicted to trading get too much enjoyment out of it. Even when they are losing money they are thinking about ways to “make it back”, or how this is just a temporary set-back and so they immediately begin looking for another setup to trade. For traders who treat the market like a casino, reality becomes a thing of the past, they enter into a sick world of over-trading and over-leveraging their accounts because they are operating purely on greed and hope, all the while ignoring the true reality of the risk involved on every trade. Gambling addicts in a casino think and act exactly like trading addicts do while in the comfort of their own homes,

It is the habits and mindset of a professional trader that separates him or her from a gambler.

• Professional Traders

In order to become a professional trader, you must begin a transition from gambler to professional, this transition will begin in your mind and it will direct you in creating a different reality which will include positive trading habits that will work to reinforce your professional trader mindset.

In order to begin thinking like a professional trader you must think about trading as a business, and just like any business you must understand there is risk involved, real risk, you must figure out a way to compensate for this risk that doesn’t involve running your costs up so high you cannot operate the business anymore. In the mind of a professional trader, money management is the way to manage one’s risk. Correctly understanding and implementing risk reward strategies is the way professional traders compensate for the risk involved in any trade, combined with a refined sense of patience when selecting trades.

Professional traders typically get very little enjoyment out of entering or exiting a trade because they encounter very few, if any, surprising moments in the market like gamblers do, this is because professional traders know what they are going to do in the market before they do it, in other words, they have a trading plan. The fact that professional traders have mastered their trading strategy, means they don’t lose money and then seek to immediately trade to make it back, they are confident in their trading strategy and they rely on the long-term edge to recover any short-term losses. Patience and precision are the tools that a professional trader employs each time they interact with the market, in comparison, gambling traders take random shots in the dark with a very limited supply of ammo; they do this because it makes them feel good, and it gives them their trading “fix”.

To be Continued on How to Transition from Gambler to Trader