Most traders get really jumpy really fast once words gambling and trading are spoken in the same sentence. Association of unsuccessful, broken down gambler with a trader that suffers devastating loss may hit too close to home for many. It is because not many traders like to be considered perpetual losers that waste capital on impulsive betting, bringing misery to themselves and their families…but regardless of how anyone might feel, how close is gambling to trading, and if there are any differences, what are they?
At first look, trading seems much more sophisticated game than gambling does. Possible patterns of price movements in financial market are truly countless and so are the factors that can influence them (any trader anywhere around the world with sufficient capital can influence price levels – even if that influence lasts only a second). Any casino game is meant to be understood swiftly, so it can attract a lot of people who do not appreciate long learning curves.
Yet, both of these activities work with uncertain outcomes. When you place a bet in both activities, anything can and does happen. So, there is no guarantee that you will be able to make money. Any system that says it is 100 percent accurate and never losses a trade should be severely scrutinized.
Both of these activities also share similar emotional reaction, with winning and losing bring out sensations of euphoria and depression. However, since gambling in most cases is considered as an entertaining activity with no big expectations of generating income, the emotional impact it carries is much less sever than the one that trading generates. It is not the same losing lunch money on a slot machine to losing one’s entire mean of feeding oneself and a whole family what can happen when the entire trading account gets wiped out. That is why the proper psychological preparation is essential in trading success.
One of the further biggest differences between the two is that in trading you can make your own rules. That might be a double edge sword, but it permits liberty of actions that strict rules in any gambling activity do not provide.
With ability to make rules, you also have a possibility to limit your actions only to events when you have probability of success on your side, when you have an edge. There are patterns in financial markets that might not occur every single time, but do happen with enough frequency that permits reasonable profit opportunities.
In reality, trading can become gambling, very easy and very fast, if you jump in the markets without considering your odds of success. Yet, disciplined and educated mind can make trading into a very profitable business such as casino house is which we all know makes money on turning odds in their favor. And although that business is related to the game of chance, it certainly does not have to constitute the act of gambling as with someone rolling the dice.
You Might Want To Check These Out:
- Misconception about Forex Trading: Difficulty Level
- What Should I Do to Avoid Losing Trades?
- Emotional Cycle
- A Bit About Trading Psychology
- Forex Tip – a Simple One to Increase Profits Dramatically
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