Trade like a casino.
A guy named Tom was having a winning streak on a gaming table in a casino. His friend advised him you have benefited enough from your initial bet ($50,000), please collect your winnings, let’s leave.
Tom refused, he wanted to stake more. The energy was high around the table, the drinks, the beautiful ladies, the men hailing him. He was feeling them and they were feeling him.
As he rolled the dice, that was bye to the cash he had made. He had lost $500,000.
In attempt to get back what he had lost, he staked $100,000. He rolled the dice for the last time. But the luck that raised his initial bet from $50,000 to $500,000 did not favor him. After Tom realized he had lost everything, he fainted.
There is a lot to learn from the story above. The act of trading is simply the transfer of wealth.
If you sell and price goes up, you have transferred your money to someone who bought.
If you buy in a downtrend you have transferred your money to the ones who sold or are selling.
You cannot beat the market. The market is in control. The house always wins. Maybe you might win first or second time like Tom did. That is only to entice you to stake more. But in the long run it will take your entire money and its money back.
If you cannot beat the market, the only alternative is to join them. This is the concept behind successful trading.
You need to think like the house. You need to think like a casino. You need to trade in harmony with the market makers that is the large financial institutions.
Don’t be the guys on the table gambling their money, become the guy in the office, calculating his cash flow.
Here are the top 5 reasons you lose your money to market makers.
- Not understanding market structure/movements
Many traders make this mistake. It is mostly common amongst beginner traders looking for quick money.
Trading is a skill that is acquired over a period of time with consistent practice.
On your trading chart, price moves in certain patterns. As a trader you must understand these patterns and movements. When you do not understand it, it becomes impossible to profit.
Many think that the more you trade, the more money you will make which is not true.
Rather, the more you trade, the more you are exposed to capital risk. The best traders do not overtrade. Trading too much is bad business. It makes one stressed out. You do not need to trade everything and every time to make money.
What you need is a trading plan. 2- 5 sniper trades per week is good and moderate.
- Strictly indicator based strategy
Pro traders make use of indicators in their analysis. But do not analyze or make trading decisions solely with the use of technical indicators.
Indicators are not certain. Indicators cannot tell the future of price movement. It can be deceitful.
What these pro traders do is to combine price action principles with technical indicators. For example divergence trading.
- Revenge trading
Revenge trading happens when you make a loss and you immediately want to make back what you have lost like Tom from the story above.
This will only lead a trader to another loss because you are not thinking well. You are entering the market again without a plan.
Anytime you lose money trading, accept the loss and log out from your trading platform. It will keep you sane. It will give you the opportunity to retrace back your errors and trade better next time.
- Trading the news
This is one of the riskiest things to do when trading. Too much volatility is not good for trading. News makes the market very volatile.
Very volatile market causes slippage when you place your buy or sell order. A volatile market caused by news is directionless and leads to unreasonable spikes in price.
Too much information gives you analysis paralysis. It is best to look for trade setups after the news impact is reduced, during liquid hours.