The Casino Mentality In Trading

By | September 20, 2016 4:18 pm

Any quick drive through Goa Casino makes it pretty clear who is making in the money – the Casinos!

Why do gamblers keep going back despite losing most of the time?

  • Big hope of making good money in extreme short term.
  • No Plan, Not understanding probabilities
  • Not knowing when to Stop gambling
  • Gambling based on Gut feel or emotions

These symptoms may sound familiar to loss making traders who have lost money in the stock market.
In gambling there are really only two sides to choose to be on, either you are a gambler or you are the house. The gamblers have the long term odds stacked against them. The more they gamble, the more the odds are that they will inevitably lose. The casino has stacked the odds on their side over the  long haul. The more the gambler keeps gambling, the more the odds shift in favor of the casino operator. The more they gamble the greater the chance the gambler will leave empty-handed.
Profitable traders operate like casinos, with the odds in their favor over the long term. They have learned to trade with historically, back-tested trading systems that put the odds on their side. Much like casino operators, they have strong risk and money management, and they make sure few trades cannot break or make their account.
Most retails traders behave like gamblers, with no real KNACK in the market . They trade high risk bet,mostly via options, think they will make big but eventually lose it all.  Many times these traders hurt themselves even worse by buying into the market in a downtrend and shorting into a rally,  believing that they can pick the bottom or top.
New traders often have no concept of risk management and like gamblers they eventual give back all their winnings and then some. Casinos set table limits so as not to expose themselves to the risk of ruin by allowing a gambler to hurt the casino’s bottom line on any one huge bet.On the similar way every trader should have a loss making limit, once hit should stop trading.

Traders must have the discipline to stick with positive expectancy models and risk management. Casinos do not get upset and change their rules trying to win back money from a gambler who goes on a lucky streak, as they know luck eventually runs out. Traders should never go off their trading plan to try to win back money quickly that they lost . Luck is what gamblers hope for while good traders are trading for a positive expectancy. Successful traders and casino operators consistently play the probabilities and manage risk so should you if you want to win.
Trade the market – not the money involved in your account. Each trade must be based on a proven trading system of entries and exits and not by how much we hope to make. Never let failed trades in the past force you to revenge trade and and do not anticipate a signal. Let the market come to you and take it only when it is hit, utilizing rigid discipline.
Winning traders always stick with their historically proven trading system. Casinos do not close down if gamblers get on a winning streak because they have calculated the odds and play based on those odds.  If we can’t beat them, let’s join them, be the casino not the gambler.

6 thoughts on “The Casino Mentality In Trading

  1. amit

    What an Amazing Article BRamesh Sir !!! It touches a cord at various levels!! Each line in this article comes with such precious advice !!

  2. Manoj

    Wonderful article sir. Sir how many trades does it take to at least understand the pulse of the market by learning methods?

  3. Santosh

    very true sir, each and every single word you quote coincides with trader like me. Keep posting to improve knowledge of people.thanks once again. I fully agree with you when you say we must know “when not to trade rather than when to trade” and it is true i make lots of money 4time, 5times i invest in trading and then lose hoping that again same kind of move is expected and I give money to smart traders who do option shorting. We should not trade when market has no momentum


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