A proper attitude and developing a trader’s psychology are essential for successful trading. But what exactly is trading psychology? In a nutshell, this is the mindset that traders adopt to manage their emotions, thought processes, and decision-making.
Though trading psychology can be subjective depending on individual traders, there are still some universal traits that influence how people trade. These include self-control, discipline, cognitive biases, and the mental states of trading outcomes. Now, the interesting thing about these traits is that they are closely associated with a gambler’s psychology.
From the strategic gameplay and anxiety as you wait for the outcome to the excitement around the potential wins, betting has many similarities to trading. The problem with this is some people tend to blur the lines between the two activities and end up gamble-trading. That’s why below, we explain how gambling and trading work, their similarity, and how you can tell when you’re using a gamer’s psychology when trading.
How Trading and Gambling Work
With online gambling, players stake on the occurrence of an event that doesn’t have a specific outcome for winning or losing. A successful gamble entails three aspects: the wager, the risk involved, and the winnings you can get when a particular result occurs. Over the years, gambling has adopted many forms, with the main ones involving casino betting, lottery, and sports betting.
On the other hand, trading involves buying and selling financial assets like stocks, bonds, and crypto. There are different types of trading, including day trading, swing trading, and high-frequency trading, each with its benefits, strategies, and disadvantages. Historically, trading started in the 17th century when merchants formed joint-stock companies before spreading to the rest of the world, leading to the creation of exchanges.
Odds – The Major Similarity Between Gambling and Trading
There are many core similarities between the idea behind gambling and trading. One of the most apparent ones is the role that odds play in the outcome of both activities. Odds refer to the probability of a specific event, and for both traders and gamblers, this plays a key role in their decisions.
Gamblers and traders often exhibit psychological biases, which may lead them to overestimate the odds of a positive outcome. As a trader, this could lead to overtrading, impulsive decisions, lack of technical strategies, and chasing losses. The same applies in gambling, where players use strategies like Martingale, which entails doubling the wager in the next round to recover losses. The problem with this mindset is you have a high chance of running out of money before recovering losses.
Are you Gambling or Trading?
Given the striking similarity between gambling and trading, it’s easy for traders to exhibit the traits of a gambler. One of the main reasons gambling psychology is so prevalent among traders is because the media portrays trading as a game. That’s why assets with high volatility, like crypto, have seen traders resort to buying and selling impulsively for quick profits.
That being said, there are clear signs that indicate whether you’re gambling or trading. Firstly, entering a trade without paying attention to technical analysis and strategies is an indicator of gamble-trading. Another sign is when trades are made with the sole intention of always getting profits, which could cloud your judgment, leading you to chase losses.
Maintain a Trader’s Psychology for Profits
While there’s a significant overlap in how trading and gambling work, there are distinctions to help you set them apart. In gambling, the house always wins, so you must learn to quit while you’re ahead to avoid losses in the long run. On the other hand, trading with a solid strategy and sticking with the plan will provide a positive outcome even in the long run. As a trader, if you keep making significant losses, it could indicate that you’re gamble-trading, and you need to reevaluate your approach to trading.
A proper attitude and developing a trader’s psychology are essential for successful trading. But what exactly is trading psychology? In a nutshell, this is the mindset that traders adopt to manage their emotions, thought processes, and decision-making.
Though trading psychology can be subjective depending on individual traders, there are still some universal traits that influence how people trade. These include self-control, discipline, cognitive biases, and the mental states of trading outcomes. Now, the interesting thing about these traits is that they are closely associated with a gambler’s psychology.
From the strategic gameplay and anxiety as you wait for the outcome to the excitement around the potential wins, betting has many similarities to trading. The problem with this is some people tend to blur the lines between the two activities and end up gamble-trading. That’s why below, we explain how gambling and trading work, their similarity, and how you can tell when you’re using a gamer’s psychology when trading.
How Trading and Gambling Work
With online gambling, players stake on the occurrence of an event that doesn’t have a specific outcome for winning or losing. A successful gamble entails three aspects: the wager, the risk involved, and the winnings you can get when a particular result occurs. Over the years, gambling has adopted many forms, with the main ones involving casino betting, lottery, and sports betting.
On the other hand, trading involves buying and selling financial assets like stocks, bonds, and crypto. There are different types of trading, including day trading, swing trading, and high-frequency trading, each with its benefits, strategies, and disadvantages. Historically, trading started in the 17th century when merchants formed joint-stock companies before spreading to the rest of the world, leading to the creation of exchanges.
Odds – The Major Similarity Between Gambling and Trading
There are many core similarities between the idea behind gambling and trading. One of the most apparent ones is the role that odds play in the outcome of both activities. Odds refer to the probability of a specific event, and for both traders and gamblers, this plays a key role in their decisions.
Gamblers and traders often exhibit psychological biases, which may lead them to overestimate the odds of a positive outcome. As a trader, this could lead to overtrading, impulsive decisions, lack of technical strategies, and chasing losses. The same applies in gambling, where players use strategies like Martingale, which entails doubling the wager in the next round to recover losses. The problem with this mindset is you have a high chance of running out of money before recovering losses.
Are you Gambling or Trading?
Given the striking similarity between gambling and trading, it’s easy for traders to exhibit the traits of a gambler. One of the main reasons gambling psychology is so prevalent among traders is because the media portrays trading as a game. That’s why assets with high volatility, like crypto, have seen traders resort to buying and selling impulsively for quick profits.
That being said, there are clear signs that indicate whether you’re gambling or trading. Firstly, entering a trade without paying attention to technical analysis and strategies is an indicator of gamble-trading. Another sign is when trades are made with the sole intention of always getting profits, which could cloud your judgment, leading you to chase losses.
Maintain a Trader’s Psychology for Profits
While there’s a significant overlap in how trading and gambling work, there are distinctions to help you set them apart. In gambling, the house always wins, so you must learn to quit while you’re ahead to avoid losses in the long run. On the other hand, trading with a solid strategy and sticking with the plan will provide a positive outcome even in the long run. As a trader, if you keep making significant losses, it could indicate that you’re gamble-trading, and you need to reevaluate your approach to trading.