90% of traders are gamblers because they trade without a plan, risk and money management and eventually blow of their account and blames market for their losses.Whether you Buy OTM options thinking of some black swan events or buy stocks thinking its the next multibagger . Any trade taken without a plan is considered as gambling. The losses of the gamblers is where the majority of the profits come from to the winning traders in the markets who have an edge.
Gamblers looses feed the profitable trader who trades based on plan and risk and money management strategies. The biggest problem that gamblers have is their emotions that cause them to always lose in the long term by placing bets based on feelings instead of the odds. Think of times you have taken trade based on an impulsive emotions, this is top of market or this is bottom. Stock cannot go below this level etc.
The winning traders trade based on probabilities being in their favor and pick their trades carefully based on the best chances of success based on their trading strategy
Professional traders are more concerned with risks than they are rewards. The gambler on the other hand comes into every trade with the attitude of, “How much can I make on this trade?” With no respect to risk this type of attitude is a recipe for disaster.
Most of Professional traders are good at one this which is – risk management.
Small Exercise might help you to understand if you are gambler
Categorize your trade you have taken in last 4 months as mentioned below
1. Did you follow plan make money
2. Did you follow plan you lose money
3, do not follow plan do not make money
4. do not follow plan but make money
Most of gamblers are in 4 category and eventually end up blowing their trading account.
How to start doing Professional trading and avoid gambling
- Start working on your risk management, Prepare yourself for series of losses.
- Define how much risk you are willing to accept for each trade.
- Trade Small till you develop the cognitive skills
- Take 10 small loss but no single big loss
- Work on trading psychology, How to keep emotions aside.
- Work on your mental health
- Build psychological capital
While this article may have sounded a bit negative about some areas of trading as we have told the real facts. There are too many media ads showing all the promises of getting rich trading Futures.
If you truly have a passion for trading first spend some serious screen time studying and mastering the process of trading, developing cognitive skills.