Something wrong...

[forker]

What did ya call me punk.

 

[Atilla]

That is a crutch used by people who wish to delude themselves that they are not gambling. Ask any real gambler - horses, casinos, sports, etc - the smart ones will tell you that if a 'system' doesn't work on level staking, it doesn't work. All of this attention to "money management", risk:reward numbers pulled out of the air - all of it is simply self delusion.

A professional posture will include appropriate position sizing. This means not being overleveraged. In a professional arena, such as a futures exchange, the margins are set at more sensible levels than for example spread betting companies. There are also position limits and liquidity considerations for larger players.

For an amateur, position sizing should be in place to reduce the risk of ruin. Without this, any other efforts are irrelevant as the trader will eventually blow up. However, without a robust strategy in place to take net points from the chosen markets each day, position sizing will not make a trader successful.

All of this is obvious, however the masses persist in attempts to control their gambling and limit losses. It is a crutch to avoid responsibility for haphazard, hit-or-miss trading or more accurately guesswork. Provided the gambler has rationalised affording to lose, he can continue.

The people who indulge in circular discussions with made up risk:reward numbers most likely don't understand the true probabilities of what they are trading. Without this knowledge in place, the numbers are all fantasy.

These terms are marketed to the class of wanabee "traders" - who wish to distinguish themselves from the mere gamblers. Therefore there must be mathematical systems, sophisticated financial terms, and other such props. The nature of the activity is the same - uninformed gambling - but a respectable veneer is added to attract the professional and managerial classes.

kimo'sabby makes a very good point about use of language. Consider the spread betting companies who brand themselves as "spread trading" companies. Consider the nature of the marketing.

Didn't say it wasn't gambling.

Merely pointing out if you place your bet and hope or put it down to luck, that's pure gambling.

Like a business if you manage your trade - which also has inherent risk / rewards then the odds / probabilities of success means one has more chance of coming out a winner rather than a loser. Most business startups also fail due to poor financial control and planning.

You suggesting all the risk management and limit controls on traders are delusional setups?

You then talk about position sizing - well what is that if it isn't money/risk management?

So the sub-prime crises was just about everyone who lost billions and millions were simply unlucky because they over sized positions - didn't see or calculate inherent risk in the instruments against their capital exposure.

Tell me were they professionals or ameteur operators in their approriate position sizing to exposure they faced?

I'm happy to reflect and ponder these issues from an academic point of view - but you are contradicting your self from one paragraph to the next one.


I think you're still pissed at losing bet with your friend and still upset with me. Poor boy - ahhhh - there there there... :cheesy:

 

[kimo'sabby]

Some good points being made. I think it's an important part of the process (psychologically) for a person to know where they stand.

Trading/speculating must start with the understanding that there is no absolute, no magical equations or ratios.

If someone wants to try their hand at trading, they must understand that they are gambling, not only are they gambling but everybody else is too within the speculative arena.

This helps to put a perspective on the difference between successful and unsuccessful right from the off, and also dispels any illusions. (i would hope)

 

[JRP2891]

If you're feeling lucky you are gambling imho.


It's the risk / reward management that makes the difference.

risk < reward

Apologies Atilla, i was attempting humour then which missed the mark.

On a serious note, being a full time trader myself and having met a professional gambler last christmas, i realised there was very little difference in our approach or psychology. The only major distinction was he was talkling about horses, and I was talking about markets. Food for thought.

 

[Splitlink]

No way, 50/50 each trade, it's going to go one way or the other. Just got to get on a hot streak and pile on the size when you feel lucky.

Some folk are luckier that others but, that said, why is that the case? They say that you make your luck as you go along so, maybe, with experience, you learn to be in the right place at thge right time.

 

[JRP2891]

You're right, experience does teach you to be in the right place at the right time, and when you're rewarded for that, 90% of people will call you "lucky". To me that's just playing my edge over and over.

 

[kimo'sabby]

My edge is made up of different components. I understand that the market is not a puzzle, don't try and work out every twist and turn. I also understand the repetitive nature of the market, born out of liquidity being liquidated (if ya like) and it's impact on price (volumatic). So i guess my edge is two-fold.

Charts are like horseracing form.

 

[BeginnerJoe]

If you want to be pedantic, then crossing the road is a gamble. Since a lot of us are very proficient at it, we know we are not gambling. I am of the view that the difference between trading and gambling is risk control and profit performance. If you are consistently profitable, then you are doing trading rather than gambling.

 

[kimo'sabby]

I think a good speculator is a good gambler. I try not to use the word trader so much because it can be used to describe a variety of jobs and doesn't automatically mean that a person is speculating.

 

[forker]

This debate pops is face from time to time and in every occurrence there are 2 opposing offensives.

1) the I don't really care if it's considered gambling, I am making money so call it what you like. Typically these sort (myself included) get a kick out it teasing the other side of the fence.

2) the i am no gambler i invest or trade. I personally think it's a mixture of religious people and\or people that want to be looked upon as intelligent businessmen who have decoded the enigma of the financial global markets

 

[Shanghai]

Just looking at some random internet definitions of gambling i.e.
- To bet on an uncertain outcome, as of a contest.
- To play a game of chance for stakes.

Whatever terminology you prefer to use then most trading is gambling by those definitions as the outcome of a single trade is almost always uncertain at the outset. However the successful traders are those that have the knowledge / skill / experience to know that over a series of trades the odds are in their favour. Casino owners are gamblers in that they take the opposite side of every bet that is placed but even though they are gambling they have a very successful business model.

 

[megamuel]

I'd say it is a form of gambling as the outcome cannot be known. It's not as if we are buying a load of fruit, putting a mark up on it and selling it for profit. Although I so like how Beginner Joe puts it.....

If you want to be pedantic, then crossing the road is a gamble. Since a lot of us are very proficient at it, we know we are not gambling. I am of the view that the difference between trading and gambling is risk control and profit performance. If you are consistently profitable, then you are doing trading rather than gambling.

The only difference really is that with trading you choose your own odds in the form of risk:reward, although this will obviously affect your hit rate.

Kimo, are you coaching now? If so what are you coaching and how much are you charging? Do you have a website?

Sam.

 

[hoodoo man]

The only difference really is that with trading you choose your own odds in the form of risk:reward

See? This sacred cow again from people unwilling to do their own thinking.

I'll try one last time. "Choosing" your risk reward at 2:1 for example. You enter a trade, place a stop x from your entry, and a limit 2x from your entry. This tells you nothing about the probability, p of
i) your stop being hit
ii) your limit being filled
iii) your stop being hit before your limit
iv) your limit being filled before your stop

Perhaps the true odds on the trade are 90% that your "risk" gets hit, and 10% that you are "rewarded". Over a hundred trades, your results will be
(-x * 90) + (2x * 10) - which is a negative number for x > 0

I guess as long as you in in control by choosing your own odds...

 

[megamuel]

I'm not saying that it can improve your trading, I'm just saying that it is decided by the trader/gambler unlike say horse racing odds. I always trade with 1:1 now

 

[hoodoo man]

I'm not saying that it can improve your trading, I'm just saying that it is decided by the trader/gambler unlike say horse racing odds. I always trade with 1:1 now

This is like pulling teeth. The odds are set by the market. What you are talking about is your bet size, same as the horse gambler or roulette punter.

Lets make it very simple. You bet £10pp that the market will rise. If you are wrong, you will stop your loss at 10 points, or £100. If you are right, you will take your winnings at 10 points, or £100. This has absolutely nothing to do with the probability of the market going up, down, or sideways. Or anything to do with the probability of whether the market trades through your stop or target first.

You could take a trade in a market which had a 70% chance of going up ten points before it went down 10 points. You could either buy or sell, with a 10 point stop and target, eg 1:1.

Do you now see the difference between where you choose to place your orders, and the probability of one of your orders being filled before the other?

I should add that the horse racing odds are determined by the betting patterns of the public, and the gambler chooses which odds to bet on, and how much to bet.

 

[kimo'sabby]

I'd say it is a form of gambling as the outcome cannot be known. It's not as if we are buying a load of fruit, putting a mark up on it and selling it for profit. Although I so like how Beginner Joe puts it.....



The only difference really is that with trading you choose your own odds in the form of risk:reward, although this will obviously affect your hit rate.

Kimo, are you coaching now? If so what are you coaching and how much are you charging? Do you have a website?

Sam.

I wouldn't charge a penny, everything you need is on T2W (you need to go back a few years). I blame spot forex for the demise.

 

[megamuel]

Ok well don't pull your teeth out - I'm in agreement with everything you have said. I just wrongly described risk:reward as odds. I understand that they have no bearing on the market going up or down and that someones edge comes from knowing where to enter and exit, risk:reward should fit around that.

Sam.

 

[megamuel]

I wouldn't charge a penny, everything you need is on T2W (you need to go back a few years). I blame spot forex for the demise.

But it says you only registered in April 2010, did you have another username before this one?

Sam.

 

[kimo'sabby]

But it says you only registered in April 2010, did you have another username before this one?

Sam.

You'll have to explain, you've lost me. Are you saying that for me to have read posts from the past i would have had to have been around when they were originally posted?

 

[megamuel]

I thought you were coaching because you have a vendor badge, when I asked you about it you said you wouldn't charge, its all on here. I assumed you meant your mentoring/coaching posts but as you said a few years back and you only registered last year I thought you might have another username. Were you not referring to posts by yourself? Sorry for the confusion!

Sam.