How to prevent trading turning into gambling...

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Old Mar 18, 2007, 4:02am   #1
 
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How to prevent trading turning into gambling...

Over the last couple of years I have been questioned by many and been told that gambling and trading both are one and the same and I have always been defensive that although it might seem like the same there is a vast difference......but what my post is trying to address is that ...
Do you face the following problem when you loose the profit you earn in a day and some of your equity and then you rush into the market to recover you loss.....your trading turns into gambling....what do you do to prevent this kind of behaviour ?
It would be nice to hear the experience of other traders and how they control the Schizophrenia of the trader turning to a gambler........

I have learnt that if you follow your trading plan and you make a certain amount of loss per day.
you should switch off your trading workstations and start literally focusing on other important parts of life so that you do not get the call from the Markets.............."come to me and loose it all"

All I deas would help a lot of people on these forums ...
Happy Trading

Rav
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Old Mar 18, 2007, 4:40am   #2
 
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Discipline. Plain and simple.
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Old Mar 18, 2007, 8:37am   #3
 
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Clearly identify what happens, what you think etc when this occurs. You may find that really focussing on it actually stops it from occurring.

Then inoculate yourself against it. Brett Steenbarger's book on Trader Performance has some good stuff on behavioural and cognitive approaches.
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Old Mar 18, 2007, 10:21am   #4
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I think that a good starting point would be a clear definition of the term " Gambling ".

I found this on a Google search.

Gambling (or betting) is any behavior involving risking money or valuables (making a wager or placing a stake) on the outcome of a game, contest, or other event in which the outcome of that activity depends partially or totally upon chance or upon one's ability to do something.

I would prefer to think of gambling as an activity where the outcome cannot be affected by the person making the wager. ie. you wager your money and hope for the best but you cannot take any action to influence that outcome.

Trading is very different in that you can take a multitude of actions to modify the financial result of the outcome being wagered upon.
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Old Mar 18, 2007, 10:51am   #5
 
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IMO, thats not a good definition wrt trading. A more useful one for deciding what's good and what's bad might be:

"Gamblers are playing a game of chance and behaving recklessly, largely for the thrill. Traders have specific intention integrated into all their actions and take calculated risks with the purpose of profit."
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Old Mar 18, 2007, 12:22pm   #6
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Quote:
Over the last couple of years I have been questioned by many and been told that gambling and trading both are one and the same and I have always been defensive that although it might seem like the same there is a vast difference.
Why be defensive ? I have no problem with being classed as a gambler. Any activity that involves an uncertain outcome is a gamble. You may well have the odds and statistics on your side but at the end of the day I don't see how it is not a gamble if risk is involved even if you have discipline and have evaluated all possibilities.


Paul
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Old Mar 18, 2007, 12:41pm   #7
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Risk is involved in every aspect of our lives so is life one big gamble ?

It is risky to cross the road, fly on a plane and change a light bulb so when we do these things are we essentially gambling with our lives ?

I guess we are really.
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Old Mar 18, 2007, 12:51pm   #8
 
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hmmm, well Gambling is perhaps basing decisions on random events, chance etc, but speculation, is some form of derivative from latin , to observe or something, . So its fair to say if one can assume risk based on considered observations with some sort of structured businness model of buying goods (money) in order to sell on at a profit, its just like any other biz?

Obtain goods, markup, sell in the market = profit, less costs etc....

Gambling ? not seeing it this way , well you know what I mean maybe, having a punt without knowing whats likely fair value to pay for the goods (Money) in order to obtain a return on purchase.

Now anyone see that film Two for One ? sports gambling, recco's in the U.S. Al pacino, run a betting advisory, he went to a Gamblers metting for addicts, lol ended up leaving his card in case any of them had a relapse (ruthless b.astard) , but his character suggested that gamblers, wanted to feel the asshole tightening, that moment of them taking a loss, because it made them feel alive. They need to lose, because it made them feel alive.

O.k. I touched on some thread about people feeling bored, saying I couldnt remember feeling that etc. and asked the question , why ,how some get like this , ?

No replies came but, what popped into my head a couple of hours later, was maybe people dont feel alive, dont know they are alive, its not enough, living dead?

We are alive, but maybe many tend to forget that. Or never have realised it, or its taken as granted, or something.

mumble , mumble.......

See where this is heading?
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Old Mar 18, 2007, 1:12pm   #9
 
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What I can see in my first post here also, is that lacking knowledge, of your market for exachange of goods, the auction market, while we rush into, typically having punts, trial and error route to aid learning with no parent guiding us whilst we learn to walk before we can walk properly.

That can blow alot of people out, even though they maybe generally content in life, but I think it would help if you are o.k. with who and how you are with yourself in life.

So i suggest to prevent gambling, firstly give yourself some big loving. Do we love ourselves? Is that important ?

Second, knowledge .

Third, how do we feel with 1 and 2 already? and anyone else able to add ?
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Old Mar 18, 2007, 1:32pm   #10
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Quote:
Originally Posted by Trader333
Why be defensive ? I have no problem with being classed as a gambler. Any activity that involves an uncertain outcome is a gamble.
Paul
Hi rav700,
I used to feel the way you do, but now I'm much more in Paul's camp. I ask anyone who dismisses trading as 'gambling' to define what they mean by gambling. To some people, it's 100% chance. I point out that if they are correct in their assertion, the traders who make consistent profits week in week out must be a whole lot luckier than any lottery winner! If they don't accept the point, ask them if they've got a pension. I've not yet met anyone who dismisses trading (investing) as pure gambling which relies exclusively on luck / chance and, at the same time, can defend contributing to a pension fund. Once that point is understood, they will usually accept that everything in life carries some risk and is therefore 'a gamble' to a greater or lesser degree. E.g. walking downstairs is something that millions of us do safely everyday, yet it carries substantial risk. Laura Ashley, the famous Welsh fabric designer died from a fall down a flight of stairs in 1985. Imagine two pedestrians crossing a busy road. The first is in good health, enjoys 20:20 vision, is well versed in the green cross code and has a lot of experience in crossing busy roads. The second is blind, deaf and has terrible arthritis. What are the probabilities of the two pedestrians crossing the road safely? Both could get run over. Equally, both could get to the other side safely. As a trader, I seek to stack the odds in my favour by sticking to my trading code (plan) and thereby aligning myself with the first pedestrian rather than the second, blind and frail pedestrian.
Tim.
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Old Mar 18, 2007, 1:51pm   #11
 
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rav700
It should be rule number one not to "loose (lose?) the profit you earn in a day and some of your equity". A good trader should have some method of banking some of the profits as they occur thereby reducing the risk for the rest of the life of the trade. I often watch "the weakest link" (BBC TV) and I'm always amazed how the players can lose all their winnings in a round when they could have banked some. The "TA" of the game (pattern over many shows) suggests that they can often get away with not banking until the target is reached in the early rounds but not the later ones. It is also the case in trading that sometimes the opportunities are so obvious that you almost can't lose but this is not the norm and the trader should be careful not to lose money in the trades in between.
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Old Mar 18, 2007, 1:56pm   #12
 
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Quote:
Over the last couple of years I have been questioned by many and been told that gambling and trading both are one and the same and I have always been defensive that although it might seem like the same there is a vast difference......but what my post is trying to address is that ...
As trader333 says why be defensive, people use the word gambler to mean the lowest of the low my guess would be a vegas whale wouldnt lose sleep over being called it.
The truth is that you are not in a normal job and people simply want to put you in a stereotype box.
My answer to the "thats the same as gambling?" question is usually
Do you have a pension, mortgage or savings and are you happy with a stranger "gambling" with your life savings?? (pause) "I wouldnt be"

with regard to losses the best way I have found is to reduce positions if a loss reaches a % of risk capital if it exceeds this then take some time away from trading.
I also do this if my profit targets are exceeded for the week or month
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Old Mar 18, 2007, 2:23pm   #13
 
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How to prevent trading turning into gambling...

How to prevent trading turning into gambling...


Now we have begun to put forward various definitions of what gambling is or isnt, the main topic of not turning into a gambler ? Or if one already is and wants to change then hows that best dealt with.

I can see it depends on what stage the trader (person) is, with both themselves and their pursuit of trading knowledge.

Does the balance of the self effect the grasp of knowledge outside of the self?, If we partially know knowledge of trading yet not ourselves will this need to be resolved in order for one to further advance self ,leading to further advance in trading.?


Makes sense... is it neccessary ? subjective ?
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Old Mar 18, 2007, 3:22pm   #14
 
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rav700 started this thread Hold on hold on......This topic is being totally aimed at me having a gambling problem of some sort...No My fellow traders it is not.....I am a prety good trader......And I do not have a gambling problem....I am just trying to study the phsychology of a loosing trade to be honest.....and the effect it has on a trader...

When I trade I start by looking at my plan and when I finish I update my plan every day....I am very disciplined....Thank you ......
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Old Mar 18, 2007, 3:36pm   #15
 
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Quote:
Originally Posted by rav700
Hold on hold on......This topic is being totally aimed at me having a gambling problem of some sort...No My fellow traders it is not.....I am a prety good trader......And I do not have a gambling problem....I am just trying to study the phsychology of a loosing trade to be honest.....and the effect it has on a trader...

When I trade I start by looking at my plan and when I finish I update my plan every day....I am very disciplined....Thank you ......
Hello Rav, I didnt assume you had a problem, as you say it may be helpful for members stumbling into the post, I will say "you" at times, as I may also say "we" i'm not directing it at you , although with this post I am,

so its back to the question, How to prevent trading turning into gambling, whoever it applies to, and I can see it could spew into many different aspects ,concerning the individuals, life to date experience, knowledge or lack of, time, peer pressures, boredom.. and explotiation by the market of the typical human condition of ignorance, which is fairly normal , I expect.

Ok well, psychology of a losing trade.... how does that make a person feel, whats a persons reaction? what is the best reaction for the person to have ?

there was a quote and this is where cliches may shed some light after time, it was something like,

If we know ourselves and our opponents, then we need not fear the results of a thousand battles. theres 2 other bits to it, but i cant remember, something like, if we know only ourselves but not the opponent then we may struggle and if we dont know neither ourselves nor our opponents then we are (swearword , F' ed).

Back to knowledge of self and knowledge outside of self....... the inside & outside, ying and yang. You cant shake it off, is that the way it is ? (thats open to everyone )
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