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Risk Management

The difference between traders and gamblers

This is one of the most important topics that you can study, in my opinion every potential trader must know about it.

It’s really important but, why? We are in the business of making money and we have to learn to manage the risks, in other words, learn how to control our losses in order to be profitable. Unfortunately this is a forgotten matter in the trading Industry, most traders and investors are concerned about doing transactions without even thinking because all they can think about is the size of the accounts and how they can support the highs and lows of their transactions. They only can think of how much money they can bear to lose in a single transaction, this style is what I call “betting”.

When you make a transaction avoiding the rules of money management then you are in “betting mode”, then, you’re not looking for a long term return of your investment, you’re not trying to build a system of dividends return, you just want to catch the big fish and go home.

Accomplishing the rules of money management is a protection for your money and also a way to potentially increase your possibilities to be profitable at long and medium term. Many movies give to the audience the wrong impression that gambling, being lucky or intuition are the only ways to become a millionaire. When I see some of my friends talking about it and being blinded by that illusion I present to them an example, an easy one which I’m going to show you now:

Along the years people have seen casinos as paradise, places for having a good time, fun and the reward they deserve, in fact, there are people who win for real, that’s not a lie, the huge winners do exist. Now this is my question: how do the casinos to continue making money even though there are millions of winners taking the big rewards out of their boxes? The answer is simple as well, although there are a lot of winners, the casinos are more profitable than the gamblers because there are many more losers than winners.

The truth is that casinos are NOT bettors, they are huge and efficient statisticians; they have studied and know that in long term profitability the statistics will overtake the bets profits. They know that if you win in their casino there are also many losers in the other tables, they also know that you’re not going to win always or even constantly by just betting randomly, if you win repeatedly they’ll start to suspect that you’re cheating and they’ll interfere in the game immediately.

Simple but clear, statisticians make money through bettors, and although both of them lose, the statisticians (casinos) have learned to control their money and bettors don’t know how to do that. The secret is to learn how to make the best use of your money and loses, if you learn how to control it you will have a real chance of being a profitable trader or investor.

So, a second question comes to my mind: do you want to be an eternal gambler or a long term efficient statistician? Do you know which of them you want to be? I hope you don’t want to be the gambler which would be a shame. Instead of that you can explore your potential and become the best trader you can be.

Business Development Manager Tradeview Ltd.

Tradeview Ltd. is not a portfolio manager or an investment advisor. This Market Report is for informational purposes only. Any statements made or opinions voiced in this Market Report do not constitute investment advice. The Tradeview Ltd. Market Report does not constitute a solicitation to buy or sell in the financial markets. Although the information contained in the Market Report comes from trusted sources, Tradeview Ltd. is not responsible for guaranteeing the accuracy, timeliness, completeness, or fitness of such sources. Tradeview Ltd. shall not be responsible for and disclaims all liability for any losses which may be suffered from access and use of the contents of the Tradeview Ltd. Market Report. Trading any financial instrument on margin, using leverage or otherwise involves considerable risk. Therefore, before deciding to participate in any style of trading, you should carefully consider your investment objectives, level of experience and risk appetite. Most importantly, do not invest money you cannot afford to lose. Consulting with your investment counselor, attorney, accountant or other professional upon whom you rely for guidance as to the appropriateness of an investment in any style of trading is recommended.

Tradeview Ltd.

Is licensed to carry on securities investment business and is regulated by the Cayman Islands Monetary Authority (CIMA) as a full securities broker-dealer. Tradeview conducts business pursuant to the Cayman Islands Securities Investment Business Law (SIBL) and its activities fall under the direct supervision of the Investments and Securities Division of CIMA.
Headquarters: 5th Floor Anderson Square, 64 Shedden Road, Georgetown, Grand Cayman, Cayman Islands KY1-1002, BWI.

Tradeview Asia Ltd.

Is licensed and regulated by the Labuan Financial Services Authority (FSA) as a Money Broker, registration number LL15870 licensed to facilitate transactions in foreign exchange pursuant to Labuan Financial Services and Securities Act 2010, the Labuan Companies Act 1990 and the Labuan Business Activity Tax Act 1990.
Headquarters: International Business Financial Centre at Office 5, Jamie Business Center I, Unit F10, First Floor, Paragon Labuan, Jalan Mustapha, 87000 Labuan F.T.

Tradeview Europe Ltd.

Is licensed as a Category 2 Investment Service Company and is regulated by the Malta Financial Services Authority (MFSA). The Malta Financial Services Authority (MFSA) is the single regulator for financial services in Malta. MFSA is a fully autonomous public institution and reports to Parliament on an annual basis. The MFSA is a member of the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the International Organization of Securities Commissions (IOSCO) and is a signatory of the Multilateral Memorandum of Understanding with other European regulatory Institutions. Tradeview is authorized to provide financial services across multiple asset classes and is passported in the EU/EEA under MiFID II (EU Markets in Financial Instruments Directive).
Headquarters: 157 Archbishops Street, Valletta VLT Malta 1440.

Tradeview Financial Markets S.A.C Global

Is authorized to conduct business pursuant to and in compliance with the General Law of Companies (LGS) promulgated by the government of Peru. Tradeview Financial Markets S.A.C is registered with the National Superintendence of Public Registries (SUNARP), company number 13089531. Tradeview Financial Markets S.A.C provides financial services in selected OTC derivative markets in compliance with all applicable government regulations.
Headquarters: Los Mirtos 239 Urb. San Eugenio, Lince, Lima, Perú.