Pet Peeves

Everybody has their pet peeves. I would imagine that for most traders it is the fact that they are equated to gamblers. I can understand where the traders come from. Most gambling is done without an edge. In fact in most gambling games, the edge is with the casino or the house and that is the reason why over the long run the casino always makes money and the majority of gamblers always lose theirs. Even blackjack, where the next hand is not independent of the previous hand, the house has an advantage which can be beaten by only some intricate card counting strategies. In trading, on the other hand, most traders either have found some strategies that give them the edge or believe they have found one. This is the key reason traders do not like to be equated to gamblers.

However, in two key ways, trading is worse than gambling....far far worse. In gambling you know exactly how much you can lose. If you sit on the table with Rs 5000 then that is what you can eventually lose. In trading one can lose much more than one expected due to either leverage or slippage. Secondly in gambling one has to do nothing to stop losing. You just dont play the next hand or bet the next round. In trading one has to actively cut the trade or get out of a losing position to stop losing. This difference is not insignificant. As long as the trade is on, the trader has the hope of recovering his losses and therefore the potential to make much more. This hope of waiting to recover losses can lead to even bigger losses. 

Thus while an addiction to gambling can lead to ruin, trading can lead to ruin even faster if the activity is not carried out as a business and with a lot of discipline. So the next time somebody compares trading to gambling maybe one should be actually happy.

Now to come back to the markets itself, the US in all probability will pass the debt deal tonight. But the ISM numbers,released yesterday, have played spoil sport and the expected party in the markets was stopped even before it began in earnest. Maybe, just maybe, it is time for me to party!

Current Position: STT Short LTT Short

Probable trades: STT Cut short and go long above 5711

LTT Cut short above 5761.