Trading vs Gambling and the thin line they share 📈🎲

Hey Pip Surfers! We aim to help you get smarter about your trading in 5-minute reads.

What’s on the roll today:

• Trading vs gambling and the thin line they share 📈🎲

• Advanced journaling techniques for traders 📖

Trading vs Gambling 📈🎲

Trading and gambling have a thin line between them, it can be as simple as violating one of your rules and now you are a gambler as there is no edge or skill required when breaking one of your rules. The dive into this is deeper though, and we are going to take a look at some of the main differences found between real traders (the 5%) and gamblers (the 95%), you may find some of these points may resonate with you more than you would like.
Let’s first have a look at what the aspects of a gambler are. A gambler has very little to no rules when looking at the financial markets, he thinks in the next 3 months he can turn $100 into a couple million through over-risking and compounding his account. A gambler does not have any form of risk management strategy, they take risks and are comfortable risking 70% in one trade. If you look at a gambler’s equity curve the dips taken when losses occur are great and are much larger than the wins, one day he makes $2000.00 the next trade he loses $5000…. clearly there is something wrong with this type of trading practice. 9/10 times a gambler won’t have an actual trading strategy and she will say that she trades based off of intuition, though they have only been in the markets for a year, if that. This leads to maybe some short-term gains seen in the account but ultimately the account will blow and all those hard-earned savings gone.
Getting closer to the line, gambling may also be the trader who has a plan, but regularly does not stick to it, forcing trades that aren’t there or bending his perception to think there is an opportunity when in fact there is nada….. A gambler generally has very little emotional discipline and lets losses get to their head and then he tries to get into the market after the loss but doubles the position size of the previous losing trade.. this seldom works out. These types of personalities are all over the internet these days, and be warned of them, they usually try to push you into a course that doesn’t work or an investment scheme with fake backtested results or photoshopped equity curves.

Now, let’s take a look at what a trader looks like. A trader is an individual who first and foremost has an edge, she acquired this edge via a backtested proven strategy or developed an edge through her own strategy that has been forward tested, backtested, and has a winning formula to it. A trader follows a plan, from start to finish of the trade, knowing why he entered, where he is getting out of it, and what he needs to see to make the trade invalid. All are very basic but sometimes overlooked by traders. A trader follows a steady risk management plan that works with the strategy, whether he is risking 10% of a trade or 1% per trade it doesn’t matter, the risk is planned and accepted by him and he knows that it works with the particular strategy. Fyi, there are lots of successful traders that risk between 5% and 10% per trade and are highly profitable. Another characteristic found in successful traders is journaling, they keep track of their results and use this data to see how successful they are and if they are making the most out of their trades so they can improve their edge based on that data. If anything, traders have high emotional control and don’t get bothered by losses as they know and trust their strategy, they stick to their rules… doing this they focus on the long game, and losing trades are nothing compared to their winning trades. Loses are seen as necessary, what do we mean by this? To put it simply a loss should be viewed as a business expense, a necessity to allow for winning trades to follow.
Let us know what category you fall into! 👀

Advanced Journaling Techniques 📝

Journaling is one of the most useful aspects in trading when it comes to wanting to improve your edge in the markets, it acts as much like a road map.
Today we are only sharing one journaling technique, if you would like to read about more let us know!
This technique is used by a number of professional traders and at Pip Surfer we have tried and tested out this method for a number of months and have found it to be pretty useful!
So what is it??
It involves meticulously documenting every trade you take and being honest in the process of doing it too. First off you need to find your next trade, the journaling is done before and after. Once you have found your trade take a screenshot of the setup and paste it into your journal. Next, you need to rate your set-up, you should have a playbook and have different setup rankings when it comes to finding trades. You need to journal this in, is it an A+, A, B, or C setup??
Next is to jot down your technical reasons for being in this trade, is it a fib level, key level, trendline etc. The next step is to determine your target and find an area in the chart that invalidates your trade ie your stop loss position. Now jot down what an entry signal would be for your trade, is it a candle formation, volume indication, really whatever your entry signal is, write it down. The next step which I am sure most ignore is writing down what the current fundamental environment is and is it congruent to my trade. This can help you determine the size of the move you can possibly expect. Now you are ready to take the trade, let’s say it activates and it is a winner! Now you follow up your process by writing down the size of the move at the end of the session and the results of the trade. Make sure you note your R multiple, total pips, and adjusted win rate after taking the trade. The last step in this process is writing down what the total move was at the end of the week and if it played into the fundamental narrative.

We hope this gives some inspiration to your journaling and if you would like a template of this one either Xcel, Notion or Google docs, let us know and we will send you one free of charge! Just reply to this email with: JOURNAL.

Also, be sure to check out TradeZella, they have some awesome journaling software that is hard to beat! Link: https://www.tradezella.com/