It is not rare to come across definitions of trading as gambling. Although this is intended to show trading as a kind of fool's errand with little benefit to a reasonable person, in fact, gambling does resemble trading in some respects, with hardly the scandalous results claimed by the loud critics of the practice. Both gambling and trading are about risk controls, and both of them are not for all kinds of people. If you're an impulsive person who doesn't like analysis, and if you don't appreciate the value of patience and self-control, it's unlikely that you'll perform well in either gambling or trading. On the other hand, many great traders and investors are also great card players (in bridge or poker, for example), and there's every indication that the same qualities lead to success in both types of activity.
1. Analysis is mostly useful for establishing entry/exit points
In gambling you can never have complete confidence in your decisions. There are always unknowns, and you need to make educated guesses about different aspects of every game in order to be successful. The same is the case in trading. Analysis provides guidelines, but no outcome is certain, and you have to carefully consider the various option available, and weight the benefits of each one if you want to be successful.
2. Risk management is key to success
As a consequence of the above, in both trading and gambling, careful control of risks is crucial for success. It is impossible to eliminate uncertainty about the decisions of others, so we behave in such a way that our own behavior places us in the most advantageous position. We do not take too high risks while trading or gambling, well aware that doing so will quickly decimate our fortunes in both.
3. Emotional Control is paramount
It's impossible to be a good gambler without calm nerves, and emotional control. Similarly, it is not possible to do well in trading without excluding emotions as much as possible from our trade decisions.
4. Understanding probabilities and chance are crucial
Since both gambling and trading are dependent on various unknown variables beyond the trader's control, an understanding of probability and chance is crucial to tilt the scales in our favor.
5. Cut losses short, let profits run
Finally, the most important rule. Gamblers have their days when they are most alert, physically and mentally in top form, with great reflexes and confidence, when they can intimidate opponents, leading them to irrational decisions, while they make the most of the circumstances. Traders have their good and bad days, when they apply their strategies most efficiently, and are least influenced by emotional extremes. A successful person in either activity will try to intensify his activity when the conditions are most favorable to him, and will refuse to risk anything when he's in less than optimal shape.
Trading is all examining the odds, and trading when they are in your favor. It is not about controlling them. The most that you can control about the market is the broker. By receiving the services of a competent firm, you can minimize the headaches related to faulty beginnings. It doesn't matter, in the end whether you're a gambler or a trader, since a successful career in either one will catalyze your success in the other.
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