About Pipsychology

Pipsychology Author If you can't keep your emotions in check when trading, you will lose money. Lots of it. Pipsychology was created to help minimze this from happening to you. The most significant action that you can do to improve trading profits is to work on yourself. Really knowing yourself and how you think can give you an edge that others in the market don't have. My goal is to share practical advice to improving your mental side of trading without boring you to death. Hopefully you can develop the mental edge you need to become the best trader you can be.

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May 2007

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Are you a trader or gambler?

Why do you trade?

Let me guess...

Because you want to make a crapload of money and be able to buy anything you wish?

While this is a perfectly valid reason, it will most likely lead to excessive greed and ultimately lead to your trading account's destruction.

You might as well take your money to Vegas instead, and gamble it away.

Once your money is all gone, at least it was entertaining.

Greed is the worst motivation for trading. The market will always punish greed and will always reward moderation.

Never try to make all of your money on one trade.

Never try to make all of your money on one trade.

If you do, you are not trading, you are gambling!

There is a fine line between traders and gamblers. When there is real money on the line, there are always those who take blind chances.

If you want to be a successful, do NOT think like a gambler, do NOT take blind chances and do NOT solely rely on luck.

Luck comes and goes just like the gambler.

It's the trader who remains.

Comments (4)

Dr., Your thoughts come at a great time for me. I have been trading FX for about 6 months now and it is amazing how we can get off track. It is easy to stay the course when you are winning but when ur losing it is tough. Thank you for your words and reminding me that this is a series of ups and downs. I have to remember that this is not gambling and I am the house. Keep up the good work.
I'd like to add that a gambler tends to go for the bit hit (chases the highs and the lows) while a trader tries to catch the in betweens in a trend. To increase profits a trader increases the size of his contracts. A gambler uses small capital (contracts) but hopes to catch the big move--a trader use more capital while chasing the small movements.
I agree wholeheartedly with the good doctor. While gambling-like behavior can manifest in many ways it comes down to this: Gambling is trading without a statistical advantage;trading is the exact opposite.
I would truly like to say that I was a victim of greed in forex, and in the equity markets. While being "Young and Dumb" back in the day, I allowed my emotions to run wild thinking I was going to make all this money which would allow me to "Retire" early. Of course that was almost 8 years ago. But 8 years later, I learned that we need to control our emotions, and especially not to allow our greed to get the best of us in these types of markets. Unfortunately, this system was created for someone who is greedy enough to lose their money so that someone else could profit from their misfortune. My motto now is to "Stay in the game". "Go small, and go long." trading is almost like fighting a war. would you put all of your soliders into a battlefield with the risk of imminent defeat? or your would you weigh your options first before commiting troops onto the field? remember. "Go small and go long. "

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"If you are going to achieve excellence in big things, you develop the habit in little matters. Excellence is not an exception, it is a prevailing attitude."
Colin Powell
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