Are you Trading or Gambling ?

If you have ever traded commodities/Stocks/Forex online, it is easy to understand how some people can turn this type of venture into pure gambling.

Online trading allows an  trader to buy and sell a highly leveraged futures contract and  low priced options  with the mere click of a mouse due to advent of Online trading. This can be a very dangerous combination in the hands of an undisciplined person and thats the reason why most of the traders end of losing money.

I’m not afraid to admit that I fell into this trap shortly after I first started trading  online for my personal account back in early 2000. Sure, I started off very slowly by taking only the best setups and preciously guarding my trading capital. Unfortunately, it wasn’t easy to sit and watch the screen all day and only take two trades that last all of about 15 minutes.

Needless to say, I decided to fill the time by taking some extra trades where I would just grab a few ticks profit and exit. Sounds simple – right?

Let me tell you, this is a sure fire way to get yourself into trouble. I would eventually get whipsawed like crazy or hold positions too long and end up taking a loss that was many times greater than my profit objective.

Those were the early days and I’m glad I got the gambling out of my system. Many people will get lured into this trap, as it is very difficult to resist. However, you have little chance of being successful at trading commodities online if you cannot control your urges to gamble.

I don’t believe there is a wilder casino in the world than an online trading account. You normally have at least 10-1 leverage on your money and all it takes is a click of the buy or sell buttons to make a bet. The decision you have to make is whether you are going to be a gambler or a disciplined trader.

  • Gambling is uncertain. No matter how much you know about it, you don’t own it all. It’s all about probability which you don’t have control upon.
  • On the other hand, in trading if you know the rules, you rule it. You own it all.
  • Gambling is a zero-sum game minus a usually higher commission. Trading is a 0.06%-sum game (average annual real return) with usually lower commissions. The unconditional odds of winning are higher in trading, although you might have a significant edge in poker or some other form of gambling to make the odds more favorable for you.
  • The trader is not able to keep the profits he makes on each trade, rather he is making his money strictly on a commission basis. The gambler bets to make or lose money on each bet he makes and keeps the profits or eats the loss rather than on a spread and commission basis.

To become and remain a disciplined online trader, you need to have a trading plan. The trading plan will outline the specific trade setups you are looking for, along with a basis for profit objectives and stop losses. Do not take any trades that aren’t included in your plan. It doesn’t matter how attractive they look.

There is no doubt you will get bored if you sit and watch futures quotes and charts all day and hardly take any trades. This is actually good. Many of the best traders actually find trading boring. It is the habitual losers who are always seeking excitement when trading .

Would you rather make money and have the feeling of accomplishment and some boredom, or would you rather have the excitement, stress and anger while eventually and blowing out your trading account?

Trading is more like being the bookmaker or owning the casino. You essentially are quoting odds and spreads, and doing everything you can to reduce risk.

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