The comparison between trading and gambling is not a new one. Where there is money and risk involved, the correlation is bound to sneak into the conversation. A Forex trader can develop an addiction to trading as easily as a gambler can develop an addcition to gambling.
Has your trading devolved into gambling? See if you recognize any of these traits in yourself.
Non-Stop Monitoring of Forex Market
The Forex currency market is a 24-hour operation. The ups and downs of the market can change at the drop of a dime, leading to significant fluctuations in the earnings and losses of the trader. There is no start and stop time to regulate the workday for traders, which creates a temptation for constant monitoring and review.
The trader can develop an addiction to watching the market, sometimes letting other responsibilities and duties fall by the wayside. This manifests itself in reduced time with family and no accommodation for down time or relaxation. Much like a gambler who is addicted to monitoring the spread, the addicted Forex trader is constantly engrossed in the condition of the market.
Focusing on Potential Market and Disregarding the Potential Risk
Gambling addicts always believe that the next bet will be the winning bet. This false sense of optimism keeps them pouring money into their chosen method of gambling, even when they cannot afford to do so.
An addicted trader works in a similar matter. It is true that every trade is an opportunity to make money, but it is an opportunity to lose money as well. When a trader is working from a place of addiction, the potential for loss is repeatedly ignored. The behavior may be reinforced by a long streak of substantial gains, but a good trader should always work from the perspective of possible loss when making a trade.
Treating a Successful Trade Like the Winning Lottery Ticket
You're standing in line at the convenience store check out when you decide to buy a lottery ticket on a whim. Two hours later, you are a million dollars richer because the numbers you picked happened to be pulled by the pretty lottery woman on TV.
Compare that story with this one. A Forex trader decides to invest $3,000 based on a hunch. Sixty days later, that $3,000 investment has grown into a $60,000 return. What's the difference?
Though the trader would like to explain his success with algorithms and indicators, the plain truth is that the Forex market is extremely volatile, and experiences constant changes. While preparation and research are vital tools in the toolbox of a successful trader, sometimes it all comes down to simple good fortune, just like in the case of the lottery winner. A trader understands this truth.
Looking for a Quick Payday
Gamblers are looking to make the most money possible, as quickly as possible. Many of them have no interest in a mundane 9-5. Though any good Forex trader will tell you that the road to success takes patience and longevity, it would be altogether delusional to believe that there is never any hope for instant profit when trading decisions are made.
The internet is filled with Forex trading courses and instructors. The main marketing tool for these resources is the promise of quick money in a relatively small amount of time. These techniques are no difference from the ones that lure wannabe millionaires to Vegas and Atlantic City. They create a false expectation of quick money, and judging from the abundance of these courses, wannabe traders are taking the bait.
Learn more about Winsor Hoang’s trading philosophy from his book: The Bull, The Bear, The Baboon – FX Lessons Learned the Hard Way