Basic traits of a gambling Forex trader:
• Has no trading edge or effective trading strategy
• Doesn’t have or use a trading plan
• Doesn’t have or use a trading journal to keep records
• Pays little to no attention to risk management
• Spends most of their time focused on profits and rewards
• Often feels intense emotional ups and downs while trading
• Often holds trades in blind hope of unrealistic profit targets
• Trades far more often than they should
Basic traits of a professional Forex trader:
• Mastered an effective trading strategy
• Has a Forex trading plan and uses it
• Has a Forex trading journal and uses it
• Focuses on risk management and on controlling risk on every trade
• Not overly-focused on profits and rewards
• Trades only when their trading edge is present.
• Does not become emotional over a win or a loss
• Treats their trading like a business
As we can see from the traits of a gambling Forex trader listed above, we are mainly dealing with psychological ‘traps’ and pitfalls that we create for ourselves as we interact with the market. I would say that if two or more of the traits of gambling Forex traders we listed above apply to you, then you need to take some action. This is why 90% of traders fail.
Unlike normal gambling addictions, a trader can break a cycle of gambling-like behavior if they will accept that they need to change their habits and then follow a predefined plan of action to start thinking and trading like a pro.
Solutions for the gambling Forex trader…
solutions If you find that two or more of the above traits of Forex gamblers describe you, it’s time to do something to change them. There’s nothing wrong with admitting that you are gambling in the markets, What you should focus on is changing this behavior and on constantly trying to improve yourself both as a trader and as a person. Let’s have a look at some of the most important things you can start doing today to transition yourself from a gambling trader to a professional trader.
The gambling traps that snare amateurs and that pros avoid…
A few winning trades often misleads amateur traders into thinking they are ‘onto something’. But what usually happens is they hit a big winner and then they give it all right back, and usually more. This cycle of winning here and there and then giving all your gains back, works to keep traders in a cycle of gambling in blind hope, and it slowly depletes their accounts until their gone. Humans are wired to fall prey to this trap of randomly distributed rewards. What happens is once we hit a few winners via luck, we sort of view that as some ‘special trading ability’ and then we just end up gambling our money away in a futile attempt to keep winning. There are scientific studies that show that we condition ourselves to repeat self-destructive behavior like this for the allure of a large randomly distributed reward…playing the lottery comes to mind here…or going to the casino and hitting one nice sized jackpot and then spending countless hours and dollars trying to hit another.
You have to recognize this gambling behavior and try to break through it, because it really is a part of our wiring to trade like a gambler. Luckily, we have large brains with highly-developed pre-frontal cortexes that can plan and think long-term amongst other things. This is our primary tool to use in defending against our more primitive brain areas that tend to naturally dominate most of our actions in the markets and cause us to gamble.
A professional forex trader is constantly managing their risk and thinking about it. They are disciplined and they follow a strict routine, they know they are in the business of trading and they treat it as a business. A pro trader is not fazed by a winning trade or even a series of winning trades; they are emotionally neutral on a loser or a winner. Professional traders are more emotionally excited about their ability to stay true to their trading plans and capital preservation plans than they are about the outcome of any one trade…because pro traders know if they can manage their bankroll properly they will end up out front. If you want to learn professional Forex trading strategies and concepts that will help you transition from a gambler to a successful trader, Visit http://www.tradeempowered.com
• First thing is to stop trading with real money. You’re going to have to take a break from trading real money to cut out the emotion and regroup effectively.
• Second, make sure you: A) Have a trading strategy that you know can be a high-probability trading edge, and B) Fully understand how to use this strategy and you’ve demo traded it long enough to feel you have ‘mastered it’.
• Create a daily checklist or Forex trading plan. This should essentially be your daily trading routine…write down your daily trading routine so that you have a guide to follow each day, this way you’ll be far less likely to enter random trades or ‘wing it’. This will help you view your trading more as a business and less as a trip to the casino.
• Have a risk management plan, and make sure you actually adhere to it by being aware that you never know when a losing trade will come up. In other words, your trading edge is randomly distributed across a series of trades, so don’t ever assume any one trade will be a winner and risk more than you are comfortable with.
• Start tracking all your trades in a journal…don’t deviate, if you don’t have a trading journal there are many available online.
• Limit your time in the market by setting a maximum number of trades per week until you feel you are not gambling anymore. This will give you a strict rule to follow and help instill some discipline into your trading routine.
• Be confident in your trading strategy and rely on the long-term edge to recover any short-term losses, rather than trying to get ‘revenge’ on the market and jump right back in after a loser.
• Constantly be aware of your mindset and try to control your emotions in the market by doing the things discussed above. If you feel yourself getting an urge to trade for no reason or to risk more than you should, simply remove yourself from the markets. Also, work in a section on maintaining the proper forex trading mindset into your trading plan and read it every day.