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Breaking A Myth

Luke Ridger's picture
May 26, 2016

Hands up who still gambles…. me too. Whether you are a new trader cutting your teeth, or someone who has multiple years of experience, there seems to be a taboo about gambling. I realised pretty soon after starting my trading journey, that gambling/betting was seen as too risky, or in other terms, not sustainable - is that true?

I don’t think the problem stems from gambling, it comes from psychology. If we were to take the mug punter, he/she is seen as happy go lucky, they may win a nice juicy accumulator or have a win on the national, but the mentality is completely different to us as traders. We are trying to hardwire ourselves not to take a punt, but here is the strange thing, why do we as traders still take a punt on markets where we have no intelligence or clear plan? It happens to us all and it happened to me very recently, this frustrated me as I didn’t follow my own rules and filters - how do you even get to a point where you have rules or filters?

Let’s try to understand a few things about our mentality first; we are restricted in our lives, there is a majority who go to work, have families and other commitments, we need to understand what that does to us as a person. If I could take all the strains from your life and you could approach trading with a clearer mind-set, would that help? Of course it would. We get suppressed by our discipline in our day to day life, we go to work, perhaps work in an unfulfilling job that requires mental capacity to keep you stimulated, this in turn will lead to fatigue. What has this got to do with trading? Stay with me on this.

Let’s say we are suppressed mentally by the rigours of life, we get home and all of sudden when we turn on the computer there is a field of green grass in front of you, ahead of you are many different and peculiar items, I’m going to regard them as markets, sports and strategies. We want to go and try every single one, every sport and watch every market - it isn’t feasible. You have to visit one at a time, but you can slowly but surely see which market, sport and strategy you enjoy most. We’ve all been to a zoo and seen that Lion pacing up and down the enclosure, it’s anxiety, stress and lack of stimulation. I’m going to swiftly move it back to trading now - if we start to make bad calls on trades through taking a chance more than normal, then we get called gamblers… Is it a bad thing? No it isn’t.

For me, my portfolio has gone full circle; I’ve gone back to establishing a betting bank, alongside my trading bank. One is 20x smaller than the other but what creating a betting bank has done, is killed my gambling inhibition whilst trading. Let’s take a pre trade on football, I find some info that suggests the away team is going to be missing players, I take my position to lay the away side. The trade doesn’t move out and starts going the other way, well quite often or not I will also have a value bet on the outcome. All of sudden I’m 100% focused on the trade, and the need for gambling has gone, I’m trading prices now, there is no need to leave anything inplay, or gamble my red on the outcome. The trading bank stays a trading bank. No gambling is allowed but more importantly, I don’t need to gamble anymore.

If you are struggling as a trader, I think it is a great idea to set up a small betting bank and try managing it, not only will give you clarity on what you are doing, but perhaps instil some discipline into your trading, most guys don’t actually trade. If you touch anything in play you are betting! Let’s accept it, there is nothing wrong with it but I feel lay the draw etc, belongs in a betting bank and not a trading bank.

Having two different banks has improved my trading portfolio and has made me a better trader, but I also bet smarter. Therefore the myth is busted, you can gamble/bet.

Is it any surprise my betting bank out performs my trading bank?