You might be treating the forex market like your own personal casino right now and not even know it. In fact, if you are like many people trading the forex market, you are probably more of a gambler than a trader. Traders who fail at making money consistently in the market have a gamblers mindset; they do not have the professional mindset and habits that consistently profitable traders have. How do you know if you are approaching the market like it is a casino or like it is a business? This article will answer this question for you and it will give you some insight into how professional traders think and act, it will also discuss how price action trading can foster a professional trading mindset.
• Are YOU a forex gambler?
There are basically two types of people trading the forex market at any given time; people who are gambling with their money, and professional traders who treat forex trading like a business. As you probably could guess, the gambling traders are the ones who lose money; the professional traders are the ones who make money.
In order to determine whether or not you are a gambler in the forex market, let’s discuss some of the most common characteristics of gamblers, if you are shocked at how many apply to you there is no need to worry; this article is the first step in changing your mindset from that of a gambler to that of a professional trader.
• Characteristics of gamblers…
Gamblers are addicts; they are people who do the same thing over and over just to get a euphoric “high”, even if it hurts them or loved ones. Gamblers think of a trip to the casino as a non-professional event, they view it as a hobby, or as something to do with their free time. Unfortunately, this “hobby” often turns into an addiction, one that can cost thousands of dollars to sustain. Gamblers become addicted to the “hope” of gambling, this is why they keep losing and don’t change their habits, they put more and more money into their gambling addiction, sometimes even funding it on credit. Gamblers believe they are always “one away” from that next big jackpot or that next lucky card, so they continue to throw more money on the table, convinced that it will all be worth it in the end, because they think they will ultimately just make back everything they have lost and much more. Typically, what happens to most gamblers is that they lose so much money they eventually snap out of their haze and walk away much poorer, or some sort of intervention is required to wake them up to the reality of what they are doing. Now, we aren’t talking about a once a year trip to the casino here, we are talking about a full-fledge gambling addiction.
Unfortunately, many traders treat their forex trading activities exactly like a gambler would. Many forex traders become addicted to the feeling of “hope”, essentially they become addicted to the feeling of getting rich or that the next “big one” is right around the corner. This causes them to behave like they are a gambling addict in a casino; pumping increasing amounts of money into their trading accounts, risking random amounts with no money management plan, meddling in trades after they are live for no good reason, chasing the market, and a whole host of other addictive trading errors.
Traders who are addicted to trading get too much enjoyment out of it. Even when they are losing money they are thinking about ways to “make it back”, or how this is just a temporary set-back and so they immediately begin looking for another setup to trade. For traders who treat the market like a casino, reality becomes a thing of the past, they enter into a sick world of over-trading and over-leveraging their accounts because they are operating purely on greed and hope, all the while ignoring the true reality of the risk involved on every trade. Gambling addicts in a casino think and act exactly like forex trading addicts do while in the comfort of their own homes, it is the habits and mindset of a professional trader that separates him or her from a forex gambler. Let’s now discuss how a professional looks at the market and how you can begin to change your gambling mindset and habits.
• Professional forex traders…
In order to become a professional forex trader, you must begin a transition from gambler to professional, this transition will begin in your mind and it will direct you in creating a different reality which will include positive trading habits that will work to reinforce your professional trader mindset.
In order to begin thinking like a professional trader you must think about trading as a business, and just like any business you must understand there is risk involved, real risk, you must figure out a way to compensate for this risk that doesn’t involve running your costs up so high you cannot operate the business anymore. In the mind of a professional forex trader, money management is the way to manage one’s risk. Correctly understanding and implementing risk reward strategies is the way professional traders compensate for the risk involved in any trade, combined with a refined sense of patience when selecting trades.
Professional traders typically get very little enjoyment out of entering or exiting a trade because they encounter very few, if any, surprising moments in the market like gamblers do, this is because professional traders know what they are going to do in the market before they do it, in other words, they have a forex trading plan. The fact that professional traders have mastered their forex trading strategy, means they don’t lose money and then seek to immediately trade to make it back, they are confident in their trading strategy and they rely on the long-term edge to recover any short-term losses. Professional traders trade only a small basket of major currency pairs and only a few reliable setups. Patience and precision are the tools that a professional trader employs each time they interact with the market, in comparison, gambling traders take random shots in the dark with a very limited supply of ammo; they do this because it makes them feel good, and it gives them their trading “fix”.
• What you can do now…
Here are a few things you can begin doing immediately to begin the transition from being a gambler into thinking and acting like a professional trader:
• Be realistic about how much money you can make given the amount you have at your disposal to trade with. Don’t put unrealistic expectations on yourself and you will be far less likely to over-trade or over-leverage your account. Make sure you can sleep soundly at night with the amount of money you have at risk on a trade.
• Begin thinking about the forex market as an arena for self-improvement. Understand that the degree to which you have limited or no control over your own behavior and emotion, will be the degree to which you lose money in the market. The more you operate on logic and pre-emption, the more likely you are to make consistent money in the market. You will likely notice a shift in your daily behavior and mental state in all your activities and relationships, not just with trading, when you become more emotionally controlled and self-aware.
• Start keeping a trading journal, record all aspects of your trades before and after you enter them. All businesses must track their expenses and manage their daily activities, having a tangible trading journal that you force yourself to keep up-to-date is an excellent way to keep yourself accountable and to keep your mind focused like a business person instead of a gambler.
• Model yourself after successful people…
Following the forex trading strategies and the mindset of a professional trader can help you greatly in making the transition from gambler to professional trader. Professional traders are much simpler than what many beginning or gambling traders might assume; if you walked into a pro trader’s office, you would not find any complex indicator-laden trading systems. The reasoning for this is simple; the industry hype is overrated and does not work, people sell trading systems that don’t work and that are over-complicated because they are not professional traders. I teach plain vanilla price action strategies to my students because it has brought me many years of stress-free profitable trading, and I know that by adopting my professional trading strategies and way of thinking, you too can become a profitable trader. If after reading this article you KNOW that you are stuck in a cycle of gambling and trading for pleasure, then it’s time to make a shift in order to profit, after all, you cannot expect different results if you don’t change what you are doing.