Are You a trader and a gambler

By | October 12, 2017 4:48 pm
2 Comments
When I started trading back in 2000, like most novice, traders I was actually gambling. I was luck that I found my Trading Guru who helped me in this difficult journey.
 
Traits of a gambler:  I did most of this in my early days so speak from experience

  1. Failing to follow strict money management rules
  2. Having no fixed strategy,Jumping from 1 strategy to another.
  3. Not keeping a trading journal
  4. Over trading and Over Leveraging
  5. Trying to “win back” losses
  6. Trading in Options to make big money overnight
  7. Moving stops in the “hope” that a trade would come back to me – “Hope” is NOT a strategy!
  8. Gambling/trading for a longer time period than planned
  9. Loss of sleep due to gambling late into the night or inability to shut off thoughts of Trading/ gambling – Used to dream about trades, how sad was that!
  10. Exhausting supply of money; using money for gambling rather than for paying bills
  11. Feeling depressed or suicidal because of gambling losses
  12. Feeling remorseful after gambling

Many people think they are traders when they are really just gamblers that could get better odds in Las Vegas betting on the roulette wheel than what they get in the financial markets. The difference between a trader and a gambler is similar to the difference between a casino and a gambler.

There is a big difference between a trader and a gambler.

THE EDGE

Casinos have a statistical edge in their games of chance against the players of those games.  The casino also has table limits so a gambler cannot keep doubling down to eventually win there is a ceiling to the bet size the casino is willing to take the risk on.

Another huge edge that the casino has is that it has no emotions; the casino does not care about any player and whether that player is winning or losing. In contrast the gambler is filled with emotions wanting to win back all their losses so they trade with the odds against them and usually trade bigger and bigger wanting that one win to get them back to even when it usually just takes them into bigger and bigger losses.

How to Be a Trader NOT a Gambler

  1. Trade based on the Strategy which has edge and have been back-tested thoroughly.
  2. Trade small position sizes based on your account NEVER put your whole account at risk of ruin.
  3. Trade a plan NOT emotions.
  4. Trade after having a through plan.
  5. Trade with the correct position sizing since risk management is your number one priority and profits are secondary concern.
  6. Trade in a way that eliminates any chance of financial ruin NOT to get rich quick.
  7. Trade with discipline and focus DO NOT change the way you trade suddenly due to winning or losing streaks.
  8. Trade in the present moment and DO NOT get biased due to old wins or losses.

The question is what side of the market are you operating on? Are you with the majority who gamble and lose their money or are you with the minority acting as the casino picking up the profits that the gamblers consistently lose?

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