Trading, Gambling & Las Vegas Part 1

by: Jeffey Wilde

I was recently taking a little R&R with my parents in Las Vegas. While I am not a big gambler, I thought I would do an experiment.

I decided to use the same rules that are essential for profitable trading and apply them to gambling.

Rule 1: Choose the right game. In gambling you need focus on a particular game that that is easy to play and understand. The same is true in trading. You should never trade markets that you don\'t understand and are difficult to trade real-time. I think alot of traders trade something just because it is popular. That is very foolish as you can have your head handed to you if you don\'t know what you are doing.

Rule 2: Choose a bet size that is within your comfort level. I decided on a bet(unit) size of $1. To some of you that may be small, but I chose this amount simply because it is nothing to me and I know that my emotions would not affect the game over this small amount of money.

Many traders’ downfall lies in betting too big!

Take forex traders for example, when they trade a regular sized forex contract each point(pip) is worth $10.00. If they lose just 20 pips on a trade, that is $200 and that may be way too big both financially and psychologically for the trader to stomach. As a result they start trading out of fear and anxiety and make a lot of mistakes.

If this sounds like you, then by simply switching to the smaller mini forex contract where each point(pip) is worth just $1.00 you may find that all your anxiety is gone and that you trade easily and confidently.

If you are a stock trader, you may found that trading 500 shares is way too stressful, but dropping down to 100 shares makes all the difference in the world.

Rule 3: Choose your \"windows of opportunity\" wisely. In every casino there are hundreds of slot and poker machines all trying to grab your attention to get you to play.

When I look for a machine that can give me a \"window of opportunity\" I have 2 criteria.

First, I only look for video poker machines because you can apply certain strategies that can increase your odds. Second, I always look for ones near the casino entrance area as these machines are often programmed to pay out more frequently so that they attract attention and lure gamblers into the casino.

Now in contrast, let’s look at how my Father picked a game. He had no rules and was sucked into the first machine that grabbed his attention. In addition, he would choose regular slot machines which didn’t allow for any strategies and would play machines that were in the middle of nowhere. Time after time he would lose all his money on these machines.

In trading you must pick your market wisely too. How do you do this? Only trade markets you can afford to trade and also make sure you understand all the rules and nuances of it.