One of the most unattractive or attractive things, depending on who you ask, about trading is that it’s a gamble. Although, in the end isn’t everything we do in life a gamble? When you get married you’re placing a bet that it will work out. When I leave for work in the morning I’m taking a risk of getting into a car accident. So why is trading looked at as such an extreme gamble?
- As a trader, you risk money (where the exact amount isn’t even predefined on the start – unlike other games of chance like roulette) on an uncertain event (the movement of a financial instrument which has unlimited uncertain outcomes) with the goal to make more money (how much you don’t even know beforehand).
- An edge is something, a skill or a method, that allows you to tip the odds in your favor – usually just by a tiny bit. An edge makes trading, potentially, less risky because the expectancy is improved.
- Being able to read price to time and manage trades can be a part of an edge; emotional stability, discipline and having a long-term mindset, understanding how to manage risk and deal with variance, being able to work extremely hard, and being passionate are all parts of an edge as well. However, even the best edge will not remove the risk and the uncertainty.
“Traders always want to tell themselves that what they are doing isn’t gambling and that, because you can have an edge, trading is a ‘safer’ way to make a living.”