Why Trade?

Attempting to explore the reasons why traders trade the worldwide forex and stock markets

Posted in Traders' Delusions, Submitted by Trading Critic on Thu, 2006-07-06 14:27.
Why traders trade the worldwide forex and stock markets

I've spent the past week just pondering what to write for my first "real" blog post after posting up my reasons why I set this blog up. I could start off with a "What is trading" post, but you wouldn't be here if you didn't know what trading already was. How about a post about "Where is trading?" Trading is everywhere. Retailers buy off suppliers, hoping to make money on the buy low sell high principle. But the scope of this website is trading the equity markets such as stocks and foreign exchange in markets all over the world. "When can one trade?" With the power of the Internet, there is always a market open for trade anytime for at least 5.5 days of the week. "Who trade the markets?" Financial institutions and private/retail traders like me. "How do you trade?" I'll be delving into the answers of this question throughout the life of this blog. Simply put, traders make money off the difference of the entry price and the exit price when they trade some equity. We've briefly looked at the What, Where, When, Who, How of trading, now we finally come back to the central question, "Why trade?"

Why so much emphasis on the why?

First of all, why am I placing so much emphasis on the why? Your own reasons for trading are important in successful trading. You must always remember the reason why you trade whenever you put forward an order. When you lose sight of your goal, you risk losing yourself in trading. You must be asking... "what the hell do you mean by that mumbo jumbo?"

Trading is sometimes closely linked with gambling, and I’ve argued before that trading is gambling (with a twist). And for this reason, you, the trader, must tread with caution in every trade you make. To ensure that you don't ever turn your trading into pure gambling.

Stating the obvious?

You must think that I’m stating the obvious, but this is extremely important. You may have heard that 9 out of 10 traders fail or lose money in their trading ventures. I don't know where they get this statistic from, but I think there is some element of truth to it. The losers - the people who don’t succeed in trading simply just disappear, embarrassed by their fruitless venture.

The joy of gambling is rooted with greed - beginners and hardened professional traders alike are exposed to this risk. Just like a gambler sitting in front of a slot machine all day like a zombie, hoping for the big win, a trader can become hypnotized by the amount of money they can potentially make on the markets.

What Greed is to Gambling is to Trading

Just like a gambler can lose themselves at a casino, a trader can lose themselves in the markets. Trading can become an addiction and it is important to remember your purpose, your goal, every time you trade.

Why are You here?

So tell me, why are you reading this article? You must be interested in finding ways to trade successfully. People like you are attending free seminars about trading everyday, throughout the world. At these free seminars, where they attempt to sell people their educational DVD series or their trading systems, they may have an introductory section hashing through the reasons why YOU should trade.

To make money

Everybody is in the market to make money. Simple. Nothing more nothing less. You aren't in the market to play, to have fun, to get excited or to get an adrenalin rush.

But in my opinion, you need something else, an alternate reason why you trade. This will keep your trading 'responsible' and rooted towards your goals.

Find another reason to trade

Time is money. Your primary reason for trading is for money. The next reason is time. Trading the forex markets or the stockmarkets frees up time for other things. Other things that you may prefer to be doing besides the 'normal' way of earning a living.

Just to wrap up here's a few ideas to get you started:

Trading Critic: Why do you trade?
Person A: So I can stay at home, to watch my kids grow up.
Person B: I'm a home carer, and trading is a way to get a little bonus cash.
Person C: I'm studying for a degree, and I don't have time for a real job to support myself.
Person D: I love to play golf.
Person E: I want to give my time to charity.
Person F: I love my job, but it doesn't pay enough to pay my bills.

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