When it comes to trading, people often equate trading with gambling. Some believe that whether engaging in cryptocurrency trading or gambling, there is a certain degree of randomness and uncertainty, hence the similarities between the two.
First, let's clarify the difference between gambling and trading. In gambling, the outcome is entirely determined by luck, and you cannot influence the result through any techniques or strategies. However, in trading, although there are risks, you can formulate strategies through technical analysis and use probability to assess risks and rewards.
Technical analysis is the process of predicting future market trends by studying historical market data and price movements. By identifying patterns in price charts and indicators, traders can formulate buy and sell strategies. It is similar to how ancient people, when scientific technology was underdeveloped, derived a weather prediction method, 'Red sky in the morning, sailors take warning; Red sky at night, sailors' delight,' which is essentially based on probability and experience.
This is also why some say technical analysis is not science at all; it is merely a vague correctness based on historical data under high probability, which makes a certain amount of sense.
Probability also plays a crucial role in trading. By using probabilistic methods, traders can evaluate the success probability of trading strategies and determine appropriate stop-loss points and profit targets. Thus, even if a single trade fails, you can control losses and maintain profitability over the long term.
Conclusion
So, overall, trading is different from gambling because it is based on data and strategies. Through technical analysis and probability, you can better understand the market and make informed decisions, thereby reducing risk and achieving profit.
Why do some people say trading is gambling?
So why do some people say that trading is gambling? It is because during the actual execution of trades, there is always unpredictability in the market and emotional factors affecting us traders.
Unpredictability
Let's first talk about the former, unpredictability: Although technical analysis and probability can help reduce risks, market changes are still diverse and complex. Sometimes, even based on the best analysis, the market may deviate from expectations, leading to trading failures. Therefore, technical analysis cannot predict market trends with 100% accuracy, and it is this unpredictability that makes one associate it with gambling, as the results are not entirely determined by trading.
The easy one controls.
How to cope? It is to view each trade independently. A common mistake among traders is to judge the correctness of trading decisions based on the results of the trades. All profitable trades are considered correct, and all losing trades are considered incorrect. Now, let me ask, if I bet with you, tossing a coin and guessing heads or tails, I'm willing to pay 1 to 2 (if I win, I earn 1 yuan, if I lose, I pay 2 yuan), would you like to play with me?
The answer is: you must play because the one who will ultimately lose money is definitely me! Because if you place a bet to participate, although you might lose in a certain instance, for you, the decision made each time you bet is still correct. Because in the long run, continually betting and participating in such 'games' is extremely beneficial for you. You know deep down that as long as you play enough times, the probabilities on both sides will approach 50% infinitely.
Similarly, a losing trade, if its decision-making is correct and follows a profitable trading strategy, then even though that trade loses money, it is still a good trade for you because, based on that decision, repeating the operation will lead to profit in the long run on average.
For a single trade, regardless of the probability of profit or loss and the risk-reward ratio, traders cannot predict the outcome of profit or loss in advance. Some good trades can lose money, and traders must accept this. They must stick to correct decisions and continue to make such trades because, in the long run, the average result will be profitable. As long as a profitable trading strategy is executed consistently over time, a loss in a single trade does not imply a wrong trading decision.
On the contrary, if you happen to make money by shorting in a bullish trend during a bull market, even if the result is profitable, I do not consider it a correct trade.
The reason you are able to make money might precisely be because a certain cycle/level of increase has reached its peak, and indeed a correction should occur. You are just 'making money shorting in a bull market by luck.'
But we all know that any money made by luck will ultimately be lost through skill. Here 'skill' refers to: you might believe you have the 'talent for contrarian trades,' which leads you to stubbornly keep shorting - holding positions - getting liquidated, shorting - holding positions - exploding. This is also why I often say in class that 'compared to the losses generated within our trading system, those occasional profits made outside the system.'
It can be much scarier. There are some opportunities that we know may lead to losses, but we still have to engage because they are opportunities within our trading system; there are some trading opportunities that may lead to gains, but we cannot engage because they are not opportunities within our trading system.
These days I am preparing for the launch of an amazing trading plan!!!
Comment 168, get on board!!!
Impermanence brings impermanence brings impermanence!!!
Important things said three times!!!
