How do you guys deal with this?....Intraday trading = gambling
I am a developing trader who is still in sim mode. So in other words, I love the idea of becoming a consistant and skilled trader, but I am still really insecure about it since I have not yet developed my "edge".
I will occationally come across someone who, when I tell them I am working on becoming a trader, will look down their nose at me and say, "well, professional gamblers win at first too.... before they lose everything because eventually the numbers catch up to them and their luck runs out". Then sometimes you will see write ups like this......
Yes, it is Investopedia. So not the most sophisticated source. However, why would people feel the need to put sentiment like that out there if they did not see some truth in it.
For myself, I like to remember that everything is on the spectrum of "gambling" from crossing the street to playing roulette. The difference of where you are on that spectrum, I think, is based on information available and the ability to apply skill. With roulette there is no information to base a decision on and skill cannot be applied. With poker and black jack (ahead of roulette on the spectrum). You still have very limited information but skill can start to come into play. However, you are still at the mercy of what hand is dealt to you and the fact that once you are in, you cannot walk away. Trading is much further up the spectrum in my opinion. Information is somewhat limited (information risk vs. price risk) BUT unlike gambling, you don't have to play every hand that is dealt to you. You can wait and play the ones that you recognize to have the highest probability of success. In this way, we inject a much higher amount of skill in comparison to typical "gambling".
All, that being said, trading is still highly based in chance. Sometimes I'm scared I'm just deluding myself by thinking I will be able to develop or recognize a process that give me a positive expectancy. How do you all deal with this nagging question????
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Let's assume for a moment that you are dealing in actual assets (stocks, bonds, currencies, etc) rather than options or non-deliverable futures. The biggest difference at the end of the day is that you own the asset, not the 'right' to make a bet with a possible payout.
If I put a bet on a roulette table, the value of the bet expires the moment the wheel stops and the bet is over. However, regardless of if Apple stock goes up or down from the moment I buy it, I still own Apple stock. Owning Apple stock doesn't ever catch up with you in a law of large numbers situation unless Apple goes bankrupt or starts to lose money.
Your job then, is to A) not over trade and over pay commissions, and B) properly value when the stock is under valued (buy) or over valued (sell)
The key skill set remains the same, which is assessing the future value of what you are putting your money behind. However, a gambler has to be right in a very short time window, plays by the casino's static odds, and doesn't own any assets.
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Once day you will realise that you know what you don't know which is a great feeling. Thats when you may get really irritated or defensive with people who in trying to help, make your burden heavier.
I stopped telling people what I did when I was learning. When asked socially I'd say I make icecream or not mention I had changed from my old career. Seemed to end the conversation and everyone likes icecream I can make it so its not a major lie.
Not everyone makes it to pro but as people have said, money management is key though you can't be too timid. Setbacks which will happen should not become disasters when leverage is respected.
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I think you have just described why longer term trades or investing is less considered to be gambling. That sort of market participation is also NOT a zero sum game. Intraday trading IS a zero sum game. That point is the reason day trading is so contraversal. Why do I think I can win against big money and those with possible material advantages?
I actually take comfort in this image.....
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The big sharks can compete with each other all they want. I'm one of those scavenger fish going after the scraps with my 1 or 2 lots! If you think more deeply about it, perhaps there IS a symbiotic relationship between small retail traders and the big guys.
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I believe intraday trading is less of a gamble than holding positions overnight. This is particularly true in my case where I would not be comfortable sleeping at night knowing I had open positions.
Note this is an assessment of someone that right now is playing with limited capital and less than two years experience in the markets. It may be that my mindset will change with time.
But for now, thinking about a trader who is just starting, my view is that intraday trading yields less risk because of the limited understanding they have of the markets. This is especially true around sensitive times when the market could gap down or up which could see them being on the wrong side fairly easily.
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I used to get this question a lot.
Mostly from my business associates.
But not much anymore...
The reason is because of the way I handled the question:
One day at lunch, the head of the company was sitting at my table at lunch.
The table had 12 of the top people in the company.
This was in February when in the last 12 months, the S&P was down about +45%.
After lunch, the question came from the president toward me.
"I hear you are a trader. In my opinion, that is nothing but gambling."
This was my reply:
"Yes I am a trader. But may I ask you a question?"
"I know you have corporate 401K."
"Can you tell me how much profit your 401K made in the last year?"
"I really don't know, I don't follow it that closely."
"Let me tell you how much... Your 401K is down 47% in the last 12 months"
"However, my trading / gambling account is up 28% during that same period."
"So if trading is gambling, I would rather be a gambler."
After that, no one in the company has ever said my trading was gambling.
(and no, I did not loose my job)
Rejoice in the Thunderstorms of Life . . .
Knowing it's not about Clouds or Wind. . .
But Learning to Dance in the Rain ! ! !
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@KatieD Many have asked this question on this forum, yet I think that you have phrased your questions well and intelligently. I will attempt to answer it with a broad view as I perceive the behavior of the retail trader.
First, the psychology that is associated with trading is very complex and in fact I call it dark psychology, because you or anyone else for that mater, can not always interpret his/her behavior and the motivation behind it. Some things are just DNA. Nevertheless, a belief system that you have about trading will be reflected in your actions. If you think after each trade you place ,whether it is a gamble or a methodical move, I assure you that you will end up gambling.
The market has a random component. Those who don't have a method meet this randomness more frequently(in my opinion). Namely, those who have a "feel" about what will happen typically get stopped out and blame the market being a gambling place. Losses are always interpret as gamble, and wins as good interpretations of chart formations, order flow, etc.
When you use words like "consistent", be very careful. The way you define success in this business will have (again in my opinion) direct affect how long you stay in this business. I suggest that you look at some successful traders with long term record. There are many CTAs (Commodity Trading Advisers who run Managed Futures accounts) who have a 5-10 year track record, and it will allow you to see the strategies they use along with the month to month fluctuations.
I believe this will give you a different perspective, albeit realistic, as far as what defines success or lack of.
I wish you well.
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