Whether or not you think you have a problem with gambling in the Forex market, this article will open your eyes and offer useful advice to improve your trading results.
Some traders fund $500 accounts, blow them up, and repeat the process without changing their routine or strategy. This gambling mentality is financially problematic and unsustainable.
As a trader, you are your own boss and there are few rules except those you create. This lack of structure can lead to addictive and gambling-like behavior. This article will help you recognize if you’re trading like a gambler and guide you to transition to a professional trader’s mindset and routine. This change can help you avoid wasting your time and hard-earned money.
Distinguishing Professional Trading from Gambling
In trading, we have the potential to inflict unlimited financial harm on ourselves. There are few regulations in the trading world, so it’s essentially a battle between you and yourself, and you are the sole victor or victim. Despite thinking you’re competing against other market players, you’re actually competing against yourself, deciding whether to make or lose money in the markets. Given this boundless trading setting, human beings are incredibly susceptible to gambling, which is why we must develop a strategy to overcome the urge. Many traders believe they are “trading,” but they are actually demonstrating the traits of someone with a gambling addiction.
Since becoming a gambling Forex trader can happen easily and inadvertently, it’s crucial to examine the fundamental characteristics of both a gambler and a professional trader to determine which one you embody:
Traits of a gambling Forex trader:
- Lacks an effective trading edge or strategy
- Lacks a trading plan
- Lacks a trading journal
- Pays little attention to risk management
- Focuses mainly on profits and rewards
- Experiences significant emotional swings while trading
- Holds on to trades with unrealistic profit targets
- Overtrades
Traits of a professional Forex trader:
- Mastered an effective trading strategy
- Has a Forex trading plan and follows it
- Has a Forex trading journal and uses it
- Focuses on risk management and controls risk on every trade
- Not overly fixated on profits and rewards
- Trades only when their trading edge is present
- Remains emotionless over a win or loss
- Treats their trading as a business
As we can see from the traits of a gambling Forex trader listed above, most of the concerns pertain to psychological traps and pitfalls that we create for ourselves while trading. If two or more of the above gambling traits apply to you, it’s time to take action.
Unlike traditional gambling addictions, traders can break free from gambling-like behavior by acknowledging the need to change their habits and following a predetermined action plan to think and trade like a professional.
Solutions for the gambling Forex trader…
If you recognize two or more of the traits of Forex gamblers listed above in yourself, it’s time to take action to change. Admitting that you are gambling in the markets is the first step, but the focus should be on improving yourself as a trader and as a person. To help you transition from a gambling trader to a professional trader, here are some essential steps you can take starting today:
A checklist for the gambling Forex trader:
• Stop trading with real money to cut out emotions and regroup effectively.
• Develop a high-probability trading edge, like price action trading strategies, and fully understand and master it through demo trading.
• Create a daily trading routine or Forex trading plan to view your trading more as a business and less as a trip to the casino.
• Have a risk management plan and adhere to it, never assuming any one trade will be a winner and never risking more than you’re comfortable with.
• Track all your trades in a journal and stick to it.
• Limit your time in the market to a maximum of three trades per week until you’re no longer gambling.
• Be confident in your trading strategy and rely on the long-term edge to recover from short-term losses.
• Be aware of your mindset and control your emotions in the market, and read your trading plan every day to maintain the proper Forex trading mindset.
Professional Forex trading is about developing good habits, and the first step to changing your habits from a gambling trader to those of a pro trader is to acknowledge and address the problem. If you can be honest with yourself and commit to following the above steps for at least one month, you may see improvements in your trading, mindset, and overall well-being.
The Traps of Gambling: How Amateurs Fall and Pros Rise Above
It’s common for novice traders to be lured into a false sense of security by a few successful trades. They may hit a big win and then give it all back, and usually more. This pattern of winning and losing traps traders into a cycle of blind hope and slowly depletes their accounts. As humans, we’re wired to fall for the allure of randomly distributed rewards, and it can be self-destructive. Studies show that once we hit a few winners by chance, we tend to view it as a sign of “special trading ability” and continue to gamble our money away in the hopes of winning big. This behavior is akin to playing the lottery or spending hours and dollars at the casino.
Recognizing this gambling behavior is crucial to breaking the cycle. While it’s part of our primitive wiring to trade like a gambler, our highly developed pre-frontal cortex allows us to plan and think long-term. Professional Forex traders are constantly managing their risk and treating trading as a business. They are disciplined and follow a strict routine, staying emotionally neutral regardless of a win or loss. For pro traders, the excitement comes from staying true to their trading and capital preservation plans, knowing that if they manage their bankroll properly, they will ultimately come out ahead.