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I was at a breakfast meeting the other day in Birmingham city centre which was held in the Casino.
The meeting started at 08'00am and finished about 10'30 and after the meeting was over, I couldn't help walking round with my business partner to find out what all the fuss was about gambling. You see, the place was quite busy, even at that time of day with people throwing away their hard earned cash. The thing is, I can nearly understand people going on a night out to the casino with a few friends and making a fun night out of it but I still cannot get my head round why people do it at all, especially when we all know that there is eventually only one winner...
What I noticed though was peoples different ways of playing the tables and it made me think how this related so closely to some peoples approach to trading on the stock market. We got talking to a small group of gamblers who didn't mind my inquisitive questioning. I wanted to find out what strategy they were using to gamble and most of all, WHY were they gambling.
One of the guys we spoke to said that he did it for the buzz factor and that when he was at the roulette wheel he felt a sensation of excitement as he placed his bets. He didn't really have a strategy at all apart from alternating the colours he chose on an add hock basis. Some times he won and some times he lost and to quote him he said "sometimes I get wiped out in under an hour and have to be happy watching my mates gamble" All the time he was playing, it was the possibility of winning the "big one" that kept him going though and that was his motivation. He figured that if he kept on doing it for long enough that he would eventually get lucky one day... I wonder if he ever will.
This reminds me of people that trade on the stock market for the fun of it. They have no strategy at all but are just enjoying the fun of it all even though they are losing money on a regular basis. Believe me, this is a very dangerous strategy. You have got to remember that you are competing with serious, cold and calculated professionals and they are more than willing to help you empty your trading account. I cannot see the fun of trading for the fun of it knowing that you are losing money. Trading is a serious business and you should be in it for one reason alone and that is to make money on a regular basis. Now don't get me wrong, you should enjoy it as well. I love the buzz of regularly placing profitable trades and I don't like losing money to be honest but when I do, I lose it gracefully because I know that I have stuck to my risk management system and that my losses are never greater than 1% of my trading fund.
Another of the guys we spoke to only took a limited amount of money with him and when he had lost it all, he would stop gambling. Sometimes it would take him just a few minutes and sometimes he could "play and have fun for hours" until he blew his money. I mean, this guy at least had a strategy. Even though it was a strategy to losing, it was at least a strategy that he stuck to so that he didn't lose too much. But the thing is, he knew he was eventually going to lose and he just kept on going and wasn't even that bothered if he won or not, he just wanted to be with his friends and have fun. I asked him how much he lost on a regular basis and he knew exactly to the penny how much he was prepared to lose every month gambling. Not to mention the money he was spending on drinks and food while he was there.
So how does this one compare to some unprofessional traders? Easy, is my answer. He had a strategy that allowed him to play and enjoy himself and was "disciplined" enough to have a limit on what he was throwing away. In my eyes, this is still a lousy strategy to handle money even if you are enjoying the process. I cannot understand how anyone can be prepared to lose regular amounts of money and actually enjoy it. Unfortunately there are traders that do just that. They are prepared to put aside a regular amount of money each month and then just stop once they have lost it all. AS I mentioned before, you should only be interested in trading for one reason and that should be to make money. Actually you should be learning as you go along as well so that you become a better trader, so when you place a trade you should be looking to make money AND gain knowledge from the trade. You will not always make money on a trade but you should ALWAYS gain knowledge from it.
The cleverest one we spoke to was the one I got to talk to for the longest. He had a strategy which was slightly different from the others which although I don't agree with, it did make a lot of sense to me and related to trading even more. He, like his friend would still only take an amount with him that he was prepared to lose but he had a different approach. He would not gamble all the time, he said he had followed his gut instinct and only played when he felt right. I asked him if the gut feeling was wind which made him smile as I explained that in trading there is no such thing as a gut feeling and that you should be cold and calculated with your technical analysis before even considering placing a trade. he went on to say that his initial aim was to make a profit and bank it as he went along until he could eventually put his initial fund back in his wallet and play with his winnings. He said that this way he could never lose. I actually had to agree with that as it was the cleverest strategy I had heard from the group. He went on to say that once he had put his money safe, he was not allowed to touch it again which sounded OK to me.
He would then carry on playing until he got a set amount and would put that amount in his wallet and never touch it again and would carry on playing with his winnings. His aim was to double up as quick as possible which was quite smart. He kept up this plan of action all the while he was winning and pocketing his profits and would carry on playing until he spent the money he had on the table. He would never touch his money one he had put it into his pocket.
He would not answer my question on how many times did he come away a winner though...
So whats my pint of all this you may ask? You see when I talk to people about what I do, some people relate to trading as gambling and I have to put them straight and tell them that trading and gambling are no where near the same thing. The only thing they have in common is that you have a possibility to win or lose with one massive differnce.
When you are trading, you should study your charts very carefully before even considering placing the trade. If you have been to one on my workshops you will know that I have a series of rules that I run my trades through once I have found a stock that interests me. It is a very simple system that either gives me a green light or a red light on four specific trading rules. The idea is simple. If I get all green lights, I place the trade but If I get one red light, I simply do not place the trade it is as simple as that. To me, trading is a cold and calculated art and you must have a strict trading plan in place that you stick to no matter what. there should be no gut feelings, no hunches and certainly no gambling. You must work out your trades carefully and then run them through your trading rules to see if you get all green lights, and then and only then, you shoudl consider placing your trade.
I am in the trading business because I enjoy it. I love the personal challenge and all the emotions that go with it but most of all, I love having a system that works and sticking to it. I know for a fact that I am going to make some mistakes but the art is to limit them so that when you do lose money you only lose a controlled amount. That way you lose money gracefully and you can give yourself a pat on the back because you have stuck to your risk management plan.
If you have any questions about my trading and risk management systems, please feel free to drop me an email on This e-mail address is being protected from spambots. You need JavaScript enabled to view it
I highly recommend that you come to one of my trading courses to learn how to trade properly and learn all about managing your risk properly. Please do not fall into the trap of gambling. There is a time and place for gambling and the stock market is not one of those places.
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