Are you trading or are you gaming? The answer, of course, is “Yes”.
My Webster’s dictionary’s specifies “gamble” thusly: “(vt) to take a risk in order to gain some advantage, inches and, “(n) an act or undertaking involving dewa poker risk of a loss. inches
By these updates, if you are a dealer you are a gambler. The more important question is, then, are you a winning gambler (day dealer, dealer, investor… ) or a LOSING gambler (day dealer, dealer, investor… )? In one of my recent articles, I referred to an undisciplined, incomplete dealer as being neither a dealer nor an investor, but “simply a gambler. inches What I should have called such a person, rather than “simply a gambler”, was “simply an incompetent gambler (or incompetent dealer or incompetent investor). inches
So, what is the difference between a winning gambler (day dealer, dealer, investor… ) and a losing gambler (day dealer, dealer, investor… )? Who is the most successful gambler in a casino? The house, of course. This is because the house has the probabilities on every game slightly in their favor, they keep their proposition wagers small (even a very large bet for an individual is very small for the casino in relation to the size of their total pot), and they play absolutely without feelings. The house knows that over x number of proposition wagers, if they have an edge in the probability of just a small percentage, where x is a huge number, they will come out ahead by a steady and predictable amount. The casino is a consistently winning gambler.
So, what do you as a dealer must do to be a consistently winning dealer? Recognize that you are gaming, and play like the winning players play. Whether you are investing in stock, stock investing futures or forex, or trading longer time frames, your investment or trading strategy must have the same key elements that winning players have in their systems.
Your trading system, whether a day trading system or a system for multiple day trades, or your long term investment strategy, should have the same advantages as the casino owners: Your trading signals combined with your trade management should tilt the risk slightly for your benefit, you should keep your total capital commitment on each trade tiny in relation to your total capital, and you should trade entirely without feelings.
In order to provide these key elements, your trading system, whether you create it yourself or buy a system “off the shelf”, must have the following characteristics: It must give you clear, objective entry and exit rules; it must give you a standard advantage over the market INCLUDING making it possible for slippage and commissions; and it must be a system that fits your personality such that you can operate it without feelings.
If your stock investing system, swing trading system, or long term investment strategy does not provide these three key elements, then you will be a losing dealer and an defeated investor. If your system gives you clear entry and exit criteria, adjustments the odds slightly for your benefit, and allows you to trade objectively and without feelings, then you cannot fail.