If you will be patient and choose the "A" version you will become a confident trader with low losses.
You can lose $ 200 and start again later, again, and again till you succeed!
You will recover all your losses later, your knowledge and skills stay with you so, in the future, you can choose trading as your main profession.
If you will choose the "B" version you will get a crushed nervous system, large debts, and loathing of traders and markets.
Be smart and patient! Don't repeat the mistakes of most people!
If you need growing profits TODAY it's better to start learning with a small account, but your main capital assets to entrust to the management of an experienced trader.
How To Trade Like A Casino
If you ever wondered
how a casino “prints money” consistently, then this post is for you.
You’ll discover:
Then let’s get
started…
The most powerful thing a casino has at
its disposal
Imagine:
There’s a special
coin in your hands.
Every time it comes
up heads, you win $2. And every time it comes up tails, I win $1.
Now in the long run,
who will win?
You, of course!
Because you have a mathematical edge over me.
And it doesn’t matter
whether you’re gambling at a casino, betting on horses, or trading the
financial markets.
If you want to make
money from speculation, you must have an edge over the other players (or the
house).
But what about risk
management and trading psychology?
It matters, but not
as much as you think.
Because without an
edge in the markets, even the best risk management or trading psychology won’t
save your account.
And this brings me to
my next point…
You must know your numbers (it’s so
easy that even a 10-year old can compute it)
Now, your edge can be
expressed using this formula…
(Average gain x
winning rate) – (Average loss x losing rate) – Transaction cost
And if you get a
positive number, it means you have an edge in the markets (otherwise known as a
positive expectancy).
Here’s an example,
let’s say you have a trading system with the following metrics…
·
Winning rate = 60%
·
Losing rate = 40%
·
Average gain = $500
·
Average loss = $400
·
Transaction cost = $10
So, plug in the
numbers into the formula and you get…
(500 * 0.6) – (400 *
0.4) – $10 = $130
In other words, you
can expect to make an average of $130 per trade (in the long run).
Does it make sense?
Great!
Because once you have
a well-defined edge, it puts you ahead of 99% of retail traders — and that
gives you the confidence to take things to the next level.
Why Warren Buffet can never bankrupt a
casino (even if he wants to)
Warren Buffet, the
greatest investor of all time, is worth USD 67.7 billion (as of this writing).
Now, let’s assume
that Warren Buffet has turned evil and wants to bankrupt all casinos.
He plans to play
Blackjack with the casinos and bet $5 billion on each hand. If he wins, he can
easily bankrupt all casinos.
But that will never
happen.
Why?
Because every casino
in the world has a table limit. This means there’s a maximum amount to how much
a player can wager on every bet.
You’re probably
thinking:
“Isn’t it better to
let the players bet as much as they want since the house has an edge over the
players?”
Yes, in the long run,
the house always wins. But, in the short run, anything can happen (it’s not
surprising to see a casino lose 5, 10, or 20 bets in a row).
That’s why every
casino sets a table limit to how much a player can bet. That’s their risk
management put in place so that a losing streak will not end their business.
And this is the same
for trading!
You must manage your
risk like a casino so that even a losing streak doesn’t blow up your trading
account.
The secret to generating consistent
profits like a casino
Here’s the thing:
Every casino in the
world has an edge over the players.
But, why are some
casinos more profitable than others? And why do some casinos even go bankrupt?
On the surface, it
seems like all you need is a statistical advantage over the players for you to
mint money.
But, that’s only one
small part of the equation.
You must also figure
out how to…
·
Attract
new customers from competitors
·
Retain
existing customers
·
Incentivize
customers to spend more
·
Keep
your customers happy
·
Etc.
Clearly, there are a
lot of moving parts and one person can’t manage everything.
So, how does a casino
do it?
The secret is this…
A casino has systems for
everything they do.
For example:
#1: A casino has a
system in place to incentivize their best customers to come back often by
offering perks like free accommodations, transport, etc.
#2: All dealers
follow a systematic way of playing Blackjack so the casino can consistently
increase their revenue (and not leave it to the discretion of a dealer).
Now you might not be
running a casino but, you’re managing your own trading business.
So, how do you manage
it like a casino?
Well, you must have
systems in place.
For example…
Risk management to ensure you don’t lose
everything on a single trade.
Source of funds so you can pump in more money to
your account and scale up your trading business.
Trading strategy so you have a fixed
approach to enter & exit your trades — which improves your consistency.
Research & development so you can build new
trading strategies and profit in different market conditions.
In other words, if
you want a sustainable trading business that generates consistent profits, then
you must have systems in
place so your actions are consistent.
How casinos adapt to changing market
conditions
Back in the 80s, it
was easy to make money as a casino because there’s little to no competition.
Then, competition
stepped in as more casinos entered the business. And the players got “smarter”.
At this point, market
conditions have changed.
And if a casino
refuses to adapt to changing market conditions, it’ll go out of business.
So what happened?
Casinos “levelled-up”
and offered better services — free accommodation, free transport, VIP
treatment, etc. Those that didn’t adapt went out of business.
And this is the same
for trading.
Market
conditions change and you must adapt to it.
For example…
If your trading
strategy only makes money in an uptrend, then do you have a plan when it goes
into a bear market?
If your trading
strategy only makes money in a range market, then what happens when it breaks
out and starts trending?
Pro Tip:
Before you trade any
strategy, backtest it to make sure it can survive different market conditions
(like uptrend, downtrend, recession, etc.)
This gives you confidence
that your trading strategy is robust and able to withstand different market
conditions.
Anticipate the worst and prepare for
it, here’s how…
According to a study
by Cesilla Horváth and Richard Paap, they found that casinos’ revenue was
correlated with economic growth.
This means during a
recession, a casino’s business will be negatively affected as fewer people
visit the casinos.
So, what do they do?
Well, they could…
Reduce the number of staff to reduce their expense since
they have fewer customers to serve.
Offer free rooms to attract customers back to the
gambling tables so they can increase their revenue.
Improve the efficiency of their operation so they can
lower expense and still maintain or even increase revenue.
Now if a casino can
anticipate the worst and have contingency plans ready, they are likely to
survive whatever comes their way.
Now what about
your trading
business, do you have contingency plans for it?
Here are some real
issues you must consider…
·
If
you’re in a losing streak, can you still meet your day to day expenses?
·
What
if your broker goes belly up, how will that affect you?
·
If
your trading system goes into a drawdown, how do you know if you should
continue trading it or stop altogether?
·
If
the markets suddenly collapse 10%, can you survive?
If you can answer
these questions, then you have a sound trading business.
Conclusion
So here’s what you’ve
learned today:
·
Just
like a casino, you must have an edge in the markets or else even having the
best risk management can’t save you
·
Once
you have an edge, then your risk management comes into play because you don’t
want to blow up your account over a few losing trades
·
If
you want to grow and scale your trading business, you must have systems in
place (e.g. to source for new funds, research new strategies, etc.)
·
The
markets are always changing so be willing to adapt accordingly (or risk going
out of business)
·
Always
be prepared for the worst scenarios (like broker going bankrupt, losing
streaks, etc.) so you can make contingency plans to overcome them
Now over to you…
How else can you
trade like a casino?
