A gambler is always looking for action all the time, never satisfied to sit things out unless they are forced to do so.  At that point of course, they are out of cash and can no longer make a bet.  Well, investing/trading is really not like gambling, because if you think it through carefully you can create an edge – better odds than the gaming outcome.

Yet, there are times when it is just not right to be involved in markets, especially during choppy/sloppy price action.  That time may be now.  But that begs the questions, ‘If I step aside, when should I get back in?  Further, how will I know when to get back in?  And If I do step out, what if I miss out on a rally’?  I’m sure you have asked yourself these questions at some point, the market conditions constantly changing as the targets move. 

What we forget is we control our accounts, and even have a hand in controlling the outcome.  This is the clear difference between trading and gambling.  At the blackjack tables, you can be on a bad streak of losing hands, get wiped out and you will never know if you would have started a long streak of wins.  As an investor/trader, we can step back and wait for our moment, that is if we understand conditions are not ideal.  At the gaming tables, we cannot decipher the conditions, the tables are not different at 4pm than they are at 3 am.

I will often take a step back if conditions are not right, and given the fact we are in choppy waters now, this a perfect time for me to slow it down.  I can recognize when my edge is decreased, and it is in these moments I prefer to preserve capital rather than push on a string.  I know there will always be a time to re-engage, and even press it.  At the tables, there is no such advantage, only luck – which won’t take you to the Promised Land.

 

Learn more at Explosive Options.