RR Phantom
Location : Wasted Space
Job/hobbies : Cayman Islands Actuary
 |  Subject: The odds are against you no matter how clever you are  Sun Jun 07, 2009 2:50 am | |
| PUT A bet on through a bookie and the reality is, if you win, they lose and, more importantly, if you lose, they win.
Work that out and you will realise that behind that flashy smile and flirty comment the bottom line is that they want you to lose. It is in their interests that their customers lose.
An ethic that would doom most businesses to the graveyard yet, after centuries of losing customers money, the bookies are still, somehow, in business.
They stay in business of course because everyone loves to punt, needs to punt even. They stay in business because they provide an "essential service". But if they didn't make money they wouldn't exist so just how do they make money? Why do they make money? Learn that and maybe you too can win. Well it's simple. Two things.
The first is risk management. Not losing money. Bookies succeed because they put structure around risk. They manage risk. It is the same in the stockmarket with the new breed of stockmarket bookie, the CFD providers. They too take the opposite side of your trade.
They will tell you that controlling risk means knowing when to hedge. Who to hedge. You probably have the idea they hedge everything, but they don't. It would cost too much.
Instead they simply identify people who have a habit of winning and when a winner takes a position they hedge the risk and move the price.
With CFD providers it means they spend some time differentiating between the good traders and the bad. That's why they ring you up, to suss you out. Otherwise they just watch what you do. The winners, they hedge. The losers, they don't.
Which brings up the second reason they make money. By taking bets off losers. Off Joe Public. Off the majority. Off the people who don't take their betting seriously. People who fly by the seat of their pants. People who "love having a punt". "Love to Punt" means "Love to Lose". This is where the real money is.
There's no need to hedge losers, all they need to do is encourage loser activity with a host of bait. Like blowing smoke up customer's arses. Glamourising the life of a trader. Telling them how sophisticated they are. By trumpeting winners with hindsight examples. By offering sexy software, free. And, most importantly of all, by making it really easy and terribly tempting to just "click and trade" and place that bet.
But amazingly enough when it comes to making money as a do-it-yourself trader it is not the product you are up against. On the contrary CFDs are a fantastic product for winners. What you are up against is something far more dangerous. Far more damaging.
It is you, or more accurately, your weak and feeble mind that is in no position from a standing start to be trading highly leveraged products against professionals. So what do you do? How do you narrow your odds?
Well it's what you don't do first. You don't trade just because you can. Just because you can trade shares or CFDs from your kitchen doesn't mean you should. What you do do is educate yourself about what it really means to be a "trader".
Ultimately trading is a business activity. It is not glamorous. It is not exciting. It is methodical. It is a routine. It is boring. Fifty per cent of the game is handling risk, 40 per cent is discipline, nine per cent is vigilance and the rest is picking winners. You can't do it part time.
A trader is a title you will only gain through many losses and much experience, through constant effort and an appetite for education and while you elevate yourself from beginner to "trader" you have to try not to get wiped out. Something few achieve.
That means start small, start on paper even and meanwhile get educated. It means doing what the professionals do and learn how to put structure around risk.
Trading is everything you have been told it is. Interesting, fulfilling and challenging. But it is not punting and it's not sexy or and it's not glamorous. It is business. Learn how to do it. Don't just do it.
LNK |
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