Casino, sports betting, poker, and day trading often appear associated with each other.
But should they be put in the same bag?
Here’s what we’ll learn today:
Gambling is taking a risky action, in the hope to achieve the desired result.
Gambling has an outcome that is typically binary. You either win or lose and typically the losses are bigger than the gains.
You have no control over when to stop winning or losing on a particular bet. You can’t take profits, or take a loss when you want.
You are obliged to wait for the final scene, which statistically is always against you.
What does that mean?
It means that the outcome of a particular action may be positive or negative, but in the long term, the accumulated result will be negative.
Day trading is taking a risky action, with a statistical certainty that a desired result will be achieved over time.
When you trade, things are different than the simple binary outcome, it can be very diversified.
You can win big, win small, lose big, lose small, or even breakeven.
Your decisions are based on a written trading plan, and a clear set of rules.
Where did they come from?
Mainly statistics, that studied data and helped to find events that occurred more often than not.
That’s what’s called an edge, which means that statistically, the outcome is favorable to you.
The outcome of a particular action is always random, but the long-term result will be positive.
Day trading is not gambling by itself.
What can be gambling is how traders treat the day trading activity.
When day trading is done by following rules that give you an edge, then it’s not gambling, the odds are in your favor. You have a statistical certainty.
When day trading is done by impulse, by feeling, that’s when it starts to smell like gambling. You are not following rules, you don’t have an edge. You can only hope for the best.
Here’s a list of signs you may be gambling instead of day trading.
So you’ve just started your trading day and you’re patiently waiting for your first trade.
A nice setup appears and you’re in.
Now you just need to wait for the price to move in your direction to take the first profit.
Instead, horrified, you see the price coming against you, and hitting your stop loss.
You start breathing faster, your heart beating increases the speed, and you just shout to the market:
“This is not going to stay like this!”
And that’s when you start shooting everywhere.
Like a machine gun firing in the dark and trying to hit something by luck.
You’re not the same person anymore.
You just want revenge, you want to get your money back as quickly as possible.
No matter what it takes.
You just can’t wait for a proper trading setup to form after taking a loss.
And you keep repeating this procedure until you’re exhausted at the end of the day.
Every time you open a trade in the market, some nervousness will appear, and some adrenaline will be pumped into your body.
This will be more evident when trading with real money, as well as some nerves, tension, stress, and excitement.
Although these emotions are normal, they should fade out considerably with time and practice.
When you find yourself trading because you love that adrenaline and excitement feeling, you are being motivated by the wrong factors.
Your actions will tend to be based on emotions when they actually should be based on logic by following a plan with specific steps before placing a trade.
Trading may enter so deeply inside your life, that at some point nothing much is left.
You stop meeting with your friends and family.
Your mind is always wondering about the next trade.
You get restless if you need to be away from your trading platform.
You try to cut with every single activity that is not related to trading.
If you ever find yourself in a situation similar to this, be careful, you may have a gambling problem with trading.
Trading with safety requires trading with a proper risk management plan.
Which includes stopping trading after a certain number of trades, a certain period of time, or a pre-determined loss limit or profit target.
A professional trader always knows when to stop, either on a profitable day or on a red day.
And besides that, he takes action and actually stops.
A gambler just can’t stop.
He wants to feed himself with trades, one after the other.
There are two types of gamblers regarding spending limits.
Both of them just keep depositing on their trading accounts, a lot of times with devastating consequences.
Ask yourself: why are you trading?
What are your goals?
For most people the answer is simple, they want to day trade to make money!
Either as a main income or as a sideways activity.
But the thing is, trading is hard, it takes time to learn.
You’re not going to learn overnight how to make money trading.
It’s statistically proven that you’ll lose money during the first months, if not years.
Still, most beginner traders, jump into trading with real funds.
Now, you tell me…
How silly is this?
You know that you’re going to lose money for a while.
Your broker gives you the option to practice with paper money.
But you still decide to trade with a real account?
“Oh, but demo accounts are not exactly the same as real accounts.”
That’s a fact but think about the real account as a 2nd step toward your graduation as a trader.
Demo accounts are easier to trade for a number of reasons.
Meaning that you may be able to get profits while trading a demo account, but you fail when trading a real account.
But the thing is, most traders are not even able to get consistent profits on a demo account!
They are not ready to start the practice on a real account!
But they still do it.
Why?
Because of the urge to start making profits.
Skipping important steps of their development process as a trader.
Thinking merely about the outcome, and not in the process of becoming a trader.
And that my friend, that’s gambling.
Most gamblers don’t know that they are gamblers until it’s very late.
A lot of them don’t even ever recognize the problem, because they deeply believe that they don’t have any problem.
But then, the losses start to appear.
You get out of control, start chasing the loss, and the day doesn’t end well.
Sounds familiar?
You know, losses tend to affect you more emotionally than gains. It may reach such a level that you start to feel aversion to them.
You can’t stand them, you can’t accept them.
Then you start to do strange things, like trading without a stop loss.
Or starting to spend endless time and money trying to recover your money back.
Traders that are thinking clearly, will always know when to recognize that it’s time to accept a loss and move on.
A lot of people come into the trading industry without even liking the act of trading.
But they end up doing it because they see other people trading.
Their friends, people that they follow on social media…
They want to feel that they belong to a certain group of people.
They want to have the “trader status” in society.
This act of mirroring others just to feel accepted doesn’t tend to end up well when it comes to trading.
First, trading requires a lot of effort.
Second, if you don’t like it, you’re less likely to commit the way that is needed.
And the outcome is only one.
Gambling and failure.
How good does it feel when you make money?
Not only when trading, but making money, in general, increases a lot your dopamine levels.
Every time that you get a paycheck from your job, you just want to spend it, buy new clothes, buy a new watch, dinner at fancy restaurants.
The thing is that when you have to work hard to get paid, the excitement tends to vanish.
But when trading, the reward is immediate.
And it can take only a few minutes, if not a few seconds if you’re scalping, to get that instant reward.
Your brain is addicted to dopamine, and when he knows that you can get a fast hit every time that you take a trade, he’ll do everything that it takes to keep you trading.
Reddit WallStreeBets traders are an example of this. They get together just to gamble on the market.
Heck, they celebrate the losses even more than the winners.
You feel like a champ there, the more you lose, the more respected you are.
But unless you’re trading for fun, for gambling, they are not the kind of traders that you should follow.
If you want to be a successful trader stay away from people that have self-destructive behaviors when it comes to the markets.
Trading with consistent profitability and excitement don’t match together.
As someone said once, trading is the slowest way of getting rich quickly.
Although it may appear easy, it’s not as easy as it seems.
It’s simple though, you just need to follow a set of rules.
But who in the world would know that following rules can be so hard?
Because you want your reward quickly.
You want to grow your small account fast, instead of compounding your account slowly.
You can’t stand to earn $10 on every trade, using proper risk management techniques, when you can easily increase your risk to earn $100, or $1000.
That’s what kills a lot of traders.
Every trading strategy has a drawdown and a series of losses is normal.
The thing is that you need to be able to survive those series of losses.
Every single time.
You can have the best strategy in the world, but when you’re not able to go slow, you lose your edge, you lose your margin, and you lose your trading account.
So, stop gambling now, and don’t exceed your maximum lot size.
Invest in yourself.
Invest in knowledge, get free trading courses, and then, purchase more to learn deeply.
Anything that is related to trading, consume it.
Learn about chart analysis, patterns like the head and shoulders chart pattern, technical analysis, and fundamental analysis.
Then, when you find something that you identify more with, you can start to filter.
Focus on that particular trading strategy that you feel more comfortable with.
Gain deeper knowledge and become a pro.
Take your time to read the past history of the charts over and over.
Study naked charts, indicators, trendlines, trading triangles, supports and resistances, supply and demand zones.
Plot everything on your charts, take screenshots and build a library that will be your base of knowledge.
After you have your library, start taking notes.
Fill spreadsheets with the trade results of a particular trading strategy.
Understand how many times each trading pattern gives you a win or a loss.
What you’re trying to achieve here is to find something that happens successfully more frequently than not.
Now that you found your edge, it’s time to write it down.
Build a list of rules that you need to follow to find your trades.
Make sure that you include not only the entries but also the exits, how to manage your trades, how to manage your risk, what time frame to trade, and so on.
This plan will be your bible, every single action that you take on the markets must be defined here.
There should be no room for thinking or guessing when trading, just rule-following.
Now it’s time to practice what you learned and found.
It’s like playing an instrument. You may know how a guitar is played, and what strings to press, but that doesn’t mean that you can do it with the right speed and accuracy without doing it over and over.
Be honest with yourself and with your development before diving into trading with real money.
Now I want to hear about you.
Have you ever gambled when trading?
Let me know below in the comments.
When you trade with Sierra Chart, it feels like you're back to Windows 98. That old-school look, with ugly buttons,…
When MetaTrader at some point was banned from prop firms, Match-Trader appeared as a natural replacement. And it was a…
Not all prop firms support TradingView, but some of them do, and they are quite interesting. If you like TradingView,…
Starting to trade a prop firm challenge without a free trial first can be a recipe for disaster. Things can…
Nowadays many people prefer to pay and get paid in crypto instead of a FIAT currency. Whether it's because of…
Not many future platforms have a web-based version, but Tradovate is one of them. That's one of the main reasons…