The market printed a textbook 7:30 reversal trade at S1 and the lows from two days ago. Perfect! It then ground to highs only to then base for the rest of the session. We will tag and bag this trade in the slides.
Commentary:
This is quite a number, if true. Americans lost $119 billion dollars last year gambling. Twice that of any other country. So why is it that Americans are willing to toss 119 bil down the toilet when they know that the game is rigged?
Why?
Why did the entire globe choose to lose around $440 billion last year?
If you were to poll all of these losers, my bet is that most of them will be all working hard to save a buck by shopping online or getting up early for black Friday sales. And none are going to be ok with being short changed 5 bucks.
So let's look at some of the reasons given and see if they make sense. And see how traders fall into the same traps.
1) Escapism, entertainment and boredom: Don't buy it. Boredom won't get you on a plane to Vegas, nor will the great shows. There is more to the grand scheme. But I can say that boredom is a big trading trap that can cause all sorts of losses. If you are engaging the markets out of boredom versus a high odds opportunity, then you join the gamblers and pay your money to the house.
2) Social Activity: Sure betting is part of American culture. But I'm not so sure that this is the biggie reason behind the $440 billion payout to casinos. Not applicable to trading really.
3) Excitement and Thrill: Ah, now we are getting somewhere. Brain chemicals! To my eye (and brain) this is the main culprit. People simply are not self aware enough to understand what's happening to them as they get hijacked by dopamine rushes. And these brain chemicals are so powerful that they are worth $440 billion dollars to chase. No high from brain chemicals, no throwing of $440 billion into the toilet. And the games are rigged to give you so many little wins (dopamine rushing), that it can be addicting.
This is a big reason why trading is so hard too. It's so easy to make feeling good the major priority and not putting on high odds trades. And for some traders, the chemicals are so strong that they will lose it all in search those chemicals. I've had quite a few destructive days myself due to not being able to face losses and wanting good feeling brain chemicals, not the bad ones.
4) Self-Esteem: Casinos rolling out the red carpets and free stuff no doubt helps promotes the desire to gamble. But only the minority ever get to this point. So I don't find this to be a compelling reason. Trader media tries to make trading a glamours get rich game by putting lavish lifestyles on the front page of their publications. But the minority that does win don't get any perks from the brokers.
5) Self-delusion: I believe this one is a big culprit, along with the brain chemicals. Same in trading. You think that you're going to get lucky, or that you know more than you do.
Missing from article: Frustration: I feel as though this article misses one key point; Frustration. After losing 4 hands in a row, 10 pulls of the lever in a row, or 4 trades in a row, frustration can really escalate. Once the brain is frustrated, this fight or flight mode causes blood flows away from the pre-frontal cortex and all executive reason is gone.
And it just may be gone long enough to gamble/trade until broke.
Sobering...
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