Jan 05

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The Difference between Trading and Gambling

I was at a Traders Event last year, as always the speakers are trying to sell you their trading books or courses in some shape of form disguised as education. Luckily, most people there know the drill so take what they can for free and spend the time talking with other traders over a beer or dinner. Anyway, one of the vendors was selling some automated trading system (Mike Baghdady – Training Traders) that was similar to my manual style of trading and they were giving away 2 weeks trial. What the heck; always need something to tinker with on my other screen……

When I went over to the young lady to get some details I asked her if the Tradestation platform worked on with UK Spread Betting Brokers. Now this was the funny bit…..she said “we don’t bet, we trade. Mike does not gamble”. I was not going to have a debate there and then about methods of trading (which was what I was asking) as opposed to the bigger philosophical question. That said, the point she made was – if you bet you lose (bad) and if you trade you win (good). Oh poor sweet naive little girl from Cork.

On a side note, and my opinion of course, the difference between Gambling and Trading is simply risk management.  Both traders and gamblers assess their risk before entering a trade/bet and decide their wager – no difference there then. The difference occurs at the point after you place your wager. The gambler at a casino or the track (except poker and a few other games) is wedded to his original plan whatever happens next. The trader though is able to move his risk around the “table”. Hopefully never making his risk bigger, but is able to reduce his risk once the trade goes in his desired direction. He can take some profits off and close the stop even tighter until it is at breakeven and then cannot lose. Let’s face it, if people could cash in their chips as soon as  their horse hits the front the bookies would have a difficult time making money; why they might even charge the punters spreads ! I would say this;

Trading IS a form of successful gambling but gambling IS NOT a form of successful trading.

So to todays wagers, gambles, trades whatever……I went cuckoo at 08:21 after cables flyer and placed a buy order at the break of the 50pip 30min candle. Not my type of trade at all, but after yesterdays huge spike in the morning I thought I’d give it a go……well if “giving it go” doesn’t sound remotely professional or logical or clever; you would be right; 1st abberation in 2011 and since 3rd Nov 2010 (FOMC Day – I remember it well). Bang – down 1% before my first tea break – what gives !! I’ll move my alarm clock to 1st March and get ready for the “how to make an arse  myself excerice re-appears”.

1st mistake of 2011

Fortune did visit me though later in the day. The market was obviously waiting for the ADP Payrolls at 13:15, but the EURUSD was looking sicker than a man with 16 bottles brandy on a fishing boat off Scotland in February, earlier. Price punched thru my key price of 1.3260 twice and each time the pull back got smaller; next time I went for the break at 1.3250 with a  stop at 1.3280, entry timed at 10:20. To cut  a 3 1/2 hour story short I got to both my targets that yielded 2% – saved and up on the week and day. Good gamble !

A friend of mine in Sofia was on the same trade for 3%, now that’s how to bring you down to earth.

Good Gamble / Trade / Bet / Wager

all the best


ps – The automated stuff from Mike Bagdady was all bells and whistles. To use it you need to go on a course – of course……..Thanks but no thanks.

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Permanent link to this article: http://intradayforextrading.co.uk/2011/01/05/the-difference-between-trading-and-gambling/


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