Is Day Trading a gamble or a skill?
Interestingly, many people who get into day trading often come from a gambling background. More specifically, gamblers who have a history of betting on the horses seem to end trying to make a living being a day trader.
Why is this?
Well, making a living at the racetrack can be a hard thing to do, so these gamblers look for something that is a bit more stable and predictable.
Day trading is far from being the most stable profession in the world, but there are elements of trading that are more predictable than horse racing. For example, stocks don’t fall at a fence or break a leg.
In reality, there are not many people who make a full time living as a gambler. Sure, they might experience success for a short period of time, but usually that is followed by a massive streak of losses.
Put simply, in the world of gambling, the bookie or casino always ends up winning.
So why is Day Trading different?
In the world of day trading this is not the case, and you have a far better chance of being a successful trader over the long term. There are many day traders all around the world that make an above average income, and enjoy a lifestyle that most other people can only dream about.
The main problem with moving from the gambling world to the day trading world, is that many ex-gamblers still keep a lot of the bad habits that is common amongst gamblers.
These bad habits cause the gambler to be always looking for the next big win, which means they start chasing it. The main problem with this way of thinking, is that when you start chasing something, it tends to run further away.
If you approach day trading with this kind of mindset there is no doubt you will eventually lose money. Throwing good money after bad is not the golden path to being a successful day trader, and it will quickly leave you broke and frustrated.
To successfully transition from gambler to day trader, there are a few simple “tweaks” that you need to apply to your way of thinking. Here are a couple of them.
Winning small is the key
This is the complete opposite to how most people approach gambling. When looking for bets, a gambler is always on the lookout for a big score. That underdog that will make them thousands.
In day trading this is not a winning strategy. Instead, the key to being profitable is to win small on a consistent basis.
Losing is okay
Gamblers hate to lose. They were sure that horse was going to win, and when it didn’t they are devastated. In order to gain their money back, they place more money on the next race, which sets in place a vicious cycle of losses and failure.
This is a very bad strategy in day trading, and is one of the main reasons why many ex-gamblers will never make the transition.
Understand that the majority of day traders are not overly concerned with their losses. They look at the bigger picture and stick to their strategy.