Are You Giving It All Away? Stop Now!

So you’ve won a nice amount of profit and it’s sitting there in your trading account quietly minding its own business. Now, you could withdraw it – or most of it – and let it live out its days in your current account, in your savings account, paying off an extra chunk of mortgage or a bit of a credit card. It could, in other words, be of use. Or you could immediately sink the lot directly into your next trade and be absolutely no better off than you were before – in fact, if you experience a loss, you’ll be in a worse state.  So before giving it all away, make sure you have your strategy and facts in place!

But Isn’t That The Point?

Yes. It is. Sort of. The point of trading is to make money, and then use that money to make more money. But not all of it. And not all of it on a trade that makes no sense, a trade in which you are basically just giving it all away without thinking. For many traders, there is a core amount of money that they are never going to see again. Whatever it is, be it £200, £500, £2,000, or more or less, it’s there in their trading account forever from now on. That’s what they trade with. But the profit off the top of that, now that’s what they take home with them. So winning a chunk of change and then throwing it all back into the next trade that comes along won’t help you. At all. Not in the least.

It Doesn’t Seem Real

That’s one of the reasons (excuses?) traders give for spending too much of their winnings – or stake – and giving it all away. It’s just numbers on a screen, it doesn’t mean anything. Only these are not just numbers. Click the pay out links and you’ll have that money in your account and it’s as real as anything else. But until that happens it feel as though it’s just play money. Or it can do. And if that’s the case then traders are more likely to ‘play’ with it. It’s like using a credit card rather than cash. Cash feels real and people spend less when it’s there in their hands. The money on a credit card feels like nothing at all – it’s easy to spend it and not even miss it. Until the bill comes in. Then it becomes all too real. And that’s the same with online trading. Once that bill comes in (once you’ve run out of credit) the game is over.

It Can Lead To Addiction

When it’s done the wrong way with no plan, no strategy and no forethought, trading can be an addiction as dangerous as gambling. Traders with an addiction to the market might not realise it, they might not believe it, but it can most definitely happen, especially when they have been giving it all away. The problem is – one of many problems – that the worse the addiction gets, the more and more money is needed to sustain the ‘high’. Winning a small amount just won’t cut it anymore. It has to be big, bigger, biggest. And that’s the big, bigger, biggest problem – those profits start to get used up quickly.  Especially when the strategy is abandoned and any trade will do. All the money, stake and profits and extra money too, will be spent and lost in this way, and that original stake will need to be ‘topped up’ more and more frequently.

But If We’re Making Money…

If you could guarantee that you would make money each and every time you made a trade there would be no problem. You could put as much money on any trade you found and come away smiling thanks to a nice, fat win. But that’s not how it works. Everyone loses, it’s just how probabilities and statistics work. Even though losing can be tempered somewhat by having an excellent strategy, this won’t account for sudden losses within the market – and a loss will occur. And that’s why you don’t rush to trade, that’s why you don’t use all of your money (or any more than you can afford to lose), and that’s why you pay attention to what is happening and don’t dive in feet first. Do this and you’ll be giving it all away.

Rob Colville

The Lazy Trader

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