E-Mini Trading: Are You Gambling or Trading Consistently?

The success statistics in e-mini are just plain startling. The vast majority of e-mini traders are not consistently successful, and the ratio is not even close to positive. The question has to be asked “Why is there a wide disparity in the number of consistently successful traders and traders who are inconsistent and just plain fail?”

The numbers on success/failure vary widely from author to author, but some round figures that I feel confident in quoting are:

15% of active traders are successful and profitable
35% of active survive in a “boom and bust” cycle, alternating between very profitable, and then losing their profits.
50% of trading enter the business and exit within three months, usually without a balance in their futures account trading balance.

I learned a trade the “old school” way; I started with a Wall Street institution and 50 other traders. We received several weeks of instruction and then all 50 of us were sent to a bullpen for a few weeks of trading, and they kept the five traders they thought had the best potential. Incidentally, as they announced the traders they were going to keep, mine was the last name called. There were no online traders in those days, but the odds of making it as a trading room trader were considered slim. I was either too stupid or too stubborn to quit, and eventually I made it. That’s enough about me.

Now we have online traders, and very few institutionally trained educators. The methods I see being taught are sometimes quite sound and often times bizarre. In my mind, I often wonder about the quality of training many new traders are receiving, but I can only speak for my room and the quality exhibited there. What bothers me most is the fact that only 15% of new traders seem to be able to learn to trade consistently; something is terribly wrong either in the method we teach new traders to trade or the quality of traders we are attracting. I have no empirical evidence to support either supposition, nor do I have an opinion which option is true. But there is a reason that 15% of the active traders can consistently make enough money to earn a great living.

Gambling is a game of chance and probability. Some gamblers understand probability better than others and gamble in games and venues that probability gives them an even or better than even chance of winning. Still, if the gambler is too good, or has a memory that allows him to remember all the cards that are thrown, is generally banned from that particular casino and finally from all casinos. We have no such restrictions in e-mini trading. The very best trader’s job is to take money out of the pockets of the very worst traders.

With proper training and flawless technique, learning to trade consistently it really isn’t such a difficult feat. It’s not gambling when the probability weighs heavily in your favor. This is the same principle casinos use to ban superior gamblers, these gamblers have superior abilities and the probability favors the gambler not the casino.

Yet so many people losing money on such a consistent basis, it stands to reason that the 15% of active traders are, by and large, the recipients of that lost money. I think this is, to a certain degree, a true statement.

The challenge of new traders is to approach the e-mini trading business as a business, not a roll of the dice. Successful traders have a rigid emotional standards they hold themselves to, and a tried and true trading system that, day after day, puts money in their pockets. Gamblers can’t do that. Traders do that. Find an e-mini trading system that works, one that is based on price action chart reading, one that is based on support and resistance, and you’ll find yourself a profitable trader. On the other hand, if you’re taking trades based on an indicator-based system, or your gut feeling, you are little better than a gambler. Gamblers don’t stay in business long; the cards are stacked against you.

In summary, I have tried to make a distinction between gambling and trading. In doing so, I have also pointed out some similarities in these two professions. But trading is an unrestricted marketplace and those who are willing to learn the proper emotional considerations and trading technique can become consistent money earners. I know; I watch well-trained traders come and go for my room on a consistent basis, because they can read charts and understand price action. They aren’t gambling, they’re playing a game of probability. And when the odds are in your favor on a consistent basis you will make money consistently.

Real Live Trading Doesn’t Lie. Spend 3 days with me, in my trading room

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