A game at its root is a set of challenges you go through to receive a prize.
Trading is set up the same way – you go through the challenges of analyzing a market, testing different strategies, and then finding what works.
Trading is supposed to be fun, just like games. But here’s why the majority aren’t finding it fun (and you can probably guess why):
They’re Risking More Than They Can Afford To Lose
Have you played a racing game like Forza or Gran Turismo? Imagine if you won £100 for coming 1st, 2nd, or 3rd in a race but lost £100 if you didn’t reach those ranks. There wouldn’t be many people willing to take that risk, and the fun aspect of gaming will fade away.
Gamers understand that their level of skill dictates the results they achieve. They won’t risk losing money if they don’t possess the talent to win. Plus, their game balance could deplete in 1-3 games if it’s too low.
Only someone that has 100x of £100 or more and is a professional gamer would be confident enough to engage in it and find it fun.
Having £10,000 as a trading balance is like having a 10,000 score in a video game.
Losing 1% isn’t a big deal if you have a long-term strategy that works out in your favour – because that’s where the confidence to continue comes from. However, it becomes difficult to stick with a plan you recently lost with whenever the stakes are too high.
Let’s look at it from another example:
If you watch football, you probably remember Man United beating Arsenal not too long ago. Despite Arsenal playing as the better team that night, they didn’t win, But as of now, Arsenal is top of the league while Man United is 5th. Why? Because they’re confident in their long-term game plan and understand that one loss shouldn’t warrant a change.
A consistent approach and the confidence to carry it on over time are necessary for every numbers game, whether football, trading or gaming.
That brings us to the next point:
You Should Have a Checkpoint-Based Approach to Trading
Have you ever played a game and got close to completing a final level but failed? If you have, chances are you’ll be motivated to try again because you likely have a checkpoint or level saved that allows you to do so.
Checkpoints = more trials to finally win.
Imagine if you got to the final stage of a game, but there were no checkpoints (you start from the beginning if you lose). That would strongly influence the way you play.
Where am I going with this?
The checkpoints in trading are your ability to manage risk well. You wouldn’t put all your capital into one trade because you’ll start over again if it fails. The difference between trading and a video game is that you have 100% control over how you progress or backtrack.
In a game, you can go back down to a level that takes a while to complete. Whereas in trading, the amount you risk determines how further back you go.
Trading can be less stressful if you don’t make it into a self-sabotaging activity.
The more you risk, the more you feel the need to win.
That “need” is a burden strong enough to make you deviate from your trading plan.
Quick Question…Do You Humourously Discuss Your Trading Losses With Friends?
If the losses are too painful to share openly, that’s a sign you risked above your means and were financially affected by it.
Now, if we swing it back to gaming, would you put your finances on the line for a race in a video game? If the answer is no, don’t do it on a trade.
I understand that it’s tempting to change your financial circumstances overnight through one trade. But remember, wealth is built over a series of transactions. Not one transaction.
Trading wealth is built over a series of trades. Not one trade.
Never underestimate the power of risking low and letting your account build over time.
Overleverage your patience in the markets. Not your longs or shorts.
Have a safe trading day. Adios!