A Trade or a Gamble?

I love to trade a lot - which is of course a euphemistic way of saying I love to gamble. Although I have been to Vegas more than a dozen times I never laid down so much as a dollar bet in any casino. I have absolutely no interest in backjack, craps, slot machines or any other games of chance and I look down with disdain at the excited masses crowding the cavernous Vegas gambling halls. But deep down, if I am honest with myself, I have to admit that whenever I trade a lot I am just as much of a sucker as every hopeless loser that gives up his hard earned money to Steve Wynn or Sheldon Adelson

If you are constantly trading just for the sake of trading, just for the rush of being “in the game”, just for the momentarily thrill of being right you are gambling. You are trading without an edge, without any solid information and are therefore completely vulnerable to the random vagaries of price.

Towards the end of last year I decided to do something about my toxic addiction and created two separate accounts - one for trades that would only follow my trading plan - the other for all my trading/gambling impulses. But before I share my experience with you allow me to define the difference between a trade and a gamble. The key distinction is information. The less information you posses the more likely the chances are that your trade is gamble.

A techincal trader who only looks at the five minute chart to gauge his support and resistance points is just gambling. On the other hand a trader who looks through the hourly, daily, weekly and monthly support points, carefully calculates Fib retracement positions and only acts when multiple time frames confirm his analysis has a much greater chance of success. Similarly a fundamental trader who mindlessly reacts to the latest economic release without understanding the prior market expectations, the current price flow and and countervailing information on the other currency in the pair is also just gambling.

Notice the unifying theme? Like everything else in life success in trading requires hard work and homework. There is no magic formula, no simple 5 minutes per day method to make you money. In trading, working hard is no guarantee of winning, but not working hard is an assurance of losing, because trading at its core is a game of information and you must always be up to date on what' s gong on in the market or become the sucker at the table.

Now back to my experiment. I subdivided my trading into two accounts - one where I traded only calendar risk on a reactive basis with very disciplined entries and exit rules and strict adherence to money management. The other account was just for my whims and impulses. An interesting thing occurred. My “trading plan” account which I traded far rarely and more carefully became much more profitable and incurred much lower drawdowns. Meanwhile the equity in my gambling account bounced up and down like a hopped up rubber ball. Suddenly the thrill of “being in the game” wasn't so much fun. Like a reformed smoker who appreciates the smell of fresh air, I was no longer drawn to making impulsive trades. That's not completely true. I still dabbled in my gambling account (who amongst us can completely give up our vices?) but my need to trade constantly has been reduced substantially. The less you gamble, the more you realize how stupid it is and that has been the most valuable lesson learned so far.


Source  
Here's How to Trade Smart During the Coronavirus Outbreak

You are more likely to panic when your investments drop and quickly sell out your assets, however, this is not the best way to react when the markets go down...

How our fears prevent us from quitting the unsatisfying career?

You may have heard the famous quotation: "Have the courage to follow your heart and intuition. They somehow already know what you truly want to become". There are the...

How To Regain Your Confidence In Trading

After a big loss, confidence can be running low. Of course, there are many reasons why traders lose money, such as lack of market knowledge, a poor risk...


Top Five Attitudes of Successful Traders

Your attitude toward trading makes a huge difference in your success. What kind of attitude and thinking that's needed to become a successful trader? You should always...

Five Reasons Why Traders Lose Money

By various estimates, 90% of traders have lost their deposited funds (completely or partially) at least once while trading in Forex. We compiled the most...

Popular trading myths you need to stop believing now

If you are a newbie trader and you want to learn the truth about trading, one of the first things you need to have is an accurate understanding of what trading...


Dollar Gains, German Data Disappoints

The dollar edged higher in early European trade Tuesday, reversing earlier losses as traders sided with the safe haven as the recovery in German industrial...

Europe Seen Lower as China Outbreak

European stock markets are set to open sharply lower Monday, as a jump in reported Covid-19 cases in Asia over the weekend prompted fears...

The U.S dollar ended the week higher

The U.S dollar ended the week higher against other major currencies after optimism in the U.S economy and unpleasant data released in other countries...

Top 10 Forex Brokers 2020

200+ Forex Brokers
TOP 10 Best Forex Trading Platforms
Best Forex Platforms 2020

A variety of web terminals and specialized software makes a choice of a trading platform a difficult one for a novice trader. What should be this vital decision based on? To begin with, it is necessary to highlight the main criteria that high-quality software must meet for making money on financial markets...

Top 10 Forex Platforms 2020

All Forex Platforms