Do Good Traders Make Good Gamblers?

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Published : August 22nd, 2019
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Category : Market Analysis

Without breaking the rules, have you ever made a trade that was guaranteed to make you money? A trade that was literally guaranteed to succeed.

If you’re struggling to come up with an answer, we’ll give you a helping hand, the word you’re searching for is likely no. Every financial trade ever made – no matter how sound and well researched using technical analysis – carries with it an element of risk.

Outside factors beyond your control always have the possibility of turning profits into losses and ecstasy into agony. In many ways, trading is similar to gambling. For instance, you may think you know how to play poker like a pro, but there is no sure-fire guarantee of consistently winning money.

With so many similarities between gambling and trading, is it safe to say that good traders make for good gamblers? Or put in another way, a technical trader using proven technical trading strategies becomes the “house” or the “casino” with winning-edge.

In fact, I love playing poker and blackjack because with some quick calculations and a strong emotional control you can become a winning gambler.

There are more bad gamblers than good ones
Just like in the world of trading, there are more bad traders and gamblers than there are profitable ones. It is the bad, sporadic, casual, and high emotion traders and gamblers that actually fund the industries.

Sports betting companies make most of their profits from ‘hunch gamblers’, those that place bets on a whim or the fabled ‘feeling’. One thing that gambling companies certainly do not like is informed betters or gamblers.

Of the countless tales of problem gamblers spending thousands on ridiculous bets, there are similar amounts of experienced successful gamblers having their accounts shut down because they are too good. At least this does not happen in the trading or investment word.

A good gambler costs the big companies money, therefore they market themselves to the casual gamblers. But if you put in your research, develop strategies and stick to them you can make plenty of money from gambling if you treat it like technical trading.


What makes a good gambler?

Just as in trading there are ways to make money and beat the odds to boost your chances of success. Because of the sheer breadth of gambling options available there is no ‘one-size fits all’ strategy to boost your bankroll. Each game or bet requires players to adopt specific tactics;

Poker: The classic card game is one of the most popular gambling pursuits in the world because it combines high-stakes wins with ability and skill. Many amateurs think that poker is a game of psychology – where those who can hold their nerve prosper against everyone else.

Yes, this is true but poker is very much a numbers/odds game as well. Every two cards dealt is like a technical trade chart pattern with odds. The odds change as the hand matures with more or fewer players betting against you and the number of cards on the table with the flop, turn, and river card. You must measure your odds and risk just like a technical trader would if you want to succeed long-term.

Again, there is an element of psychological shenanigans in poker, it is, in essence, a game of probabilities. Players are betting on the turn of the card, but they aren’t doing so blind. They are betting on that outcome armed with the knowledge of everything that has come previously.

In order to be successful at poker, you need to have full, working knowledge of all the possible hands so that you can work out your probabilities of winning or losing. If you’re armed with this knowledge you will win more than you lose at poker, forget the bluster about poker faces and just focus on probabilities, be a technical gambler!

Roulette: In gambling terms, the spinning wheel is the equivalent of investing in junk bonds – the rewards may be big but the risk of loss is very real. There are ways to mitigate your losses and protect your wager in a game of roulette but this is more of a pure gamble with no real edge/advantage.

This diversification might help you to limit the amount of money you lose but in the long-term, it’s not a viable tactic to consistently win money. Roulette is the glamorous game that draws players in with the promise of long odds and huge wins.

Experienced professional gamblers know to steer clear of games like this, instead opting for other casino activities that allow a higher level of autonomy from the player.

Sports Betting: No other strand of gambling is more lucrative to the well-researched and knowledgeable punter than sports betting. Here’s a perfect example of how a little bit of research can help you to make a solid bet;

In 2016 Huddersfield Town were 500-1 to achieve promotion to the English Premier League, in fact, most bookmakers and pundits had them down as favorites to be relegated to League One. The Terriers had lost their last two games of the previous season 5-1 and 4-0 and their new foreign manager David Wagner was ‘out of his depth’ according to the experts.

People love to bet and gamble when there are huge potential wins. This is why CFD, spread betting, options, and trading futures are so popular. Anyone with a small amount of money can make thousands in a very short time frame. Most of those who trade these asset classes have smaller accounts, are highly emotional traders, and trade based on hopes and dreams of making easy big wins, which can happen, but you typically lose more than you win with these types of trades.

For example, over the course of the summer, one of the football clubs brought in 13 signings to fit into their new coach’s style. Pre-season was encouraging and fans were salivating at their team’s new high-pressing, full-throttle style.

Yet their odds remained long with the bookmakers and social media was full of angry betters every weekend, fuming that Huddersfield had busted their accumulator. Ultimately the team finished in the play-offs and sealed promotion to the Premier League in a penalty shoot-out against Reading.

The moral of the story is to do your research. It may surprise you to know that most pundits and experts spend little to no time on making their sporting predictions, instead, sticking to traditional wisdom.

If you read local paper reports, scroll through fan forums or simply search a team’s hashtag on Twitter you will stumble across a wealth of information that will help you make an informed and profitable bet.


Summary
Technical trading and gambling share many similarities, namely that making and losing money depends squarely on analysis, strategies, and emotional control. If you have had success gambling or trading the markets in the past, then you now know these two activities share many of the same skills and personality traits.

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Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and author of the book: 7 Steps to Win With Logic Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change your trading results for the better. His mission is to help his clients boost their trading performance while reducing market exposure and portfolio volatility. He has also been on the cover of AmalgaTrader Magazine, and featured in Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites.
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