The reason why trading IS gambling (Why it's important)
Hello everybody and welcome,
First of all, thank you for the interest you show.
The goal of this content, is to empower you with the tools you need to shift your psychology and level up your trading.
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Before we start, let me just say that I do not have any product to sell. My content is free and my only goal is to provide valuable information to help traders being more successful and consistent when trading.
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Some explanation regarding the introduction above :
What I want to emphasize through that example, is that often times, when trading, you will face losing streaks. It is inevitable and we can also assume that it is recurrent. It is important to note what happens in the mind of a trader : doubt.
Why ? Because of not accepting the fact that trading is gambling.
I know ... It might be hard to "accept" because people often times think that trading is all about skills, but it is not.
Let me explain :
When you trade, whether you are long or short, you rely on nothing else than other people to make profits. The problem is, you do not know if these people have the same convictions and beliefs as you do regarding what the market is going to do in the future.
So there's randomness involved in trading because every moment is unique, i.e. it involves different people.
But, if you have an edge, meaning a "strategy" that puts the odds in your favor (whatever it might be, trading pullbacks, momentum trading, morning panics, gap strategies, etc...) : YOU ARE THE HOUSE. You win over a LONG period of time no matter the outcome on a trade-to-trade basis.
Now, considering what we just said, should we care about what is going to happens to the trade I highlighted above ? Absolutely not. Why ? Because we have accepted the fact that the distribution between wins and losses is RANDOM in the market. Therefore, whatever the outcome is, we know, that we will be profitable in the long run.
Why does that actually matter ?
Well, it matters, because as I stated above, traders doubt when they encounter a losing streak. They question their edges, their skills, they start questioning their rules and strategies. What is likely to happen ? They blow their account.
Fear, the biggest enemy in trading
Apart from doubt, the trader that just has gone through 4,5,6,7 or more losses in a row, is afraid. He is afraid to put on that next trade, even though that trade could be a homerun and wipe all his losses.
Fear paralyzes us, it reduces our focus and narrows our attention to what we fear the most.
You probably recall the time when you put on a trade and you kept bagholding a loser, you were paralyzed, you just couldn't sell. There's a funny thing that happens everytime when you hold on to a loser, whenever you decide to sell, the market bounces back. This is because you are not alone on that boat and human psychology is universal.
Once you have accepted that, you will be able to focus 100% on your actual trading errors, which are related to your knowledge and your skills. You will never doubt or have a moment of indecision if your edge appear on the chart. You will take the trade and don't care at all what happens next, because you know that trying to figure out if it's going to work or not has no sense.
Thank you for taking the time to read me. I really appreciate that.
Make sure you comment below if you have questions or just wanna add something.
Thanks a lot,
MyTradingJournal
First of all, thank you for the interest you show.
The goal of this content, is to empower you with the tools you need to shift your psychology and level up your trading.
----------------------------------------------------------------------------------------------------------------------------------------------
Before we start, let me just say that I do not have any product to sell. My content is free and my only goal is to provide valuable information to help traders being more successful and consistent when trading.
------------------------------------------------------------------------------------------------------------------------------------------------
Some explanation regarding the introduction above :
What I want to emphasize through that example, is that often times, when trading, you will face losing streaks. It is inevitable and we can also assume that it is recurrent. It is important to note what happens in the mind of a trader : doubt.
Why ? Because of not accepting the fact that trading is gambling.
I know ... It might be hard to "accept" because people often times think that trading is all about skills, but it is not.
Let me explain :
When you trade, whether you are long or short, you rely on nothing else than other people to make profits. The problem is, you do not know if these people have the same convictions and beliefs as you do regarding what the market is going to do in the future.
So there's randomness involved in trading because every moment is unique, i.e. it involves different people.
But, if you have an edge, meaning a "strategy" that puts the odds in your favor (whatever it might be, trading pullbacks, momentum trading, morning panics, gap strategies, etc...) : YOU ARE THE HOUSE. You win over a LONG period of time no matter the outcome on a trade-to-trade basis.
Now, considering what we just said, should we care about what is going to happens to the trade I highlighted above ? Absolutely not. Why ? Because we have accepted the fact that the distribution between wins and losses is RANDOM in the market. Therefore, whatever the outcome is, we know, that we will be profitable in the long run.
Why does that actually matter ?
Well, it matters, because as I stated above, traders doubt when they encounter a losing streak. They question their edges, their skills, they start questioning their rules and strategies. What is likely to happen ? They blow their account.
Fear, the biggest enemy in trading
Apart from doubt, the trader that just has gone through 4,5,6,7 or more losses in a row, is afraid. He is afraid to put on that next trade, even though that trade could be a homerun and wipe all his losses.
Fear paralyzes us, it reduces our focus and narrows our attention to what we fear the most.
You probably recall the time when you put on a trade and you kept bagholding a loser, you were paralyzed, you just couldn't sell. There's a funny thing that happens everytime when you hold on to a loser, whenever you decide to sell, the market bounces back. This is because you are not alone on that boat and human psychology is universal.
Once you have accepted that, you will be able to focus 100% on your actual trading errors, which are related to your knowledge and your skills. You will never doubt or have a moment of indecision if your edge appear on the chart. You will take the trade and don't care at all what happens next, because you know that trying to figure out if it's going to work or not has no sense.
Thank you for taking the time to read me. I really appreciate that.
Make sure you comment below if you have questions or just wanna add something.
Thanks a lot,
MyTradingJournal