Trading with "Nervous Money" versus "Vegas Money"

I know a group of guys that used to travel to Las Vegas every year. They would save money throughout the year (perhaps stash incremental sums of money away in their employer's stock purchase plan) then cash it all in for the yearly pilgrimage to Vegas to high-roll for a week.

I'm not sure what their winnings were, but the odds certainly weren't in their favor.

It amazes me that year after year the casinos manage to draw millions of people to Vegas to gamble, even though statistically, the odds of winning at a Casino are unfairly weighted against the player. Although considering that something like 80% of new Forex trading accounts go bust within the first year, there is a common factor in the draw and the outcome of untrained masses trying their luck. I'm not sure what the success percentage is for gamblers but it has to be much less. Traders (even those who are untrained) are expected to use every tool at their disposal to affect the outcome of a trade... Can you imagine what would happen if someone walked up to a Casino poker table with a computer in hand to calculate their chances for each hand? They'd be thrown out on the street! :-)

Most traders are "speculators", meaning that they attempt to speculate the directional change in the market. Although trading is generally perceived to be more reputable than gambling; they do share a few things in common:

• both can be exhilarating


• both employ statistics,


• experts in both disciplines realize that no one's winning streak can last forever so good money management is essential,


• for any given transaction someone wins and someone else loses.

There are major advantages that trading has over Vegas.

• Legality - gambling online is illegal in the United States.
  
• Prestige - a career trader is held in much higher regard than a gambler. After all, people who gamble all the time are said to have "gambling problems".
  
• Statistical probability - Traders have the advantage of tools (news and computers) to tilt the odds in their favor. Think about going to Vegas but instead of playing as any poor schmo at a table, you could play with the dealers advantage ("house odds"). This term in trading is called "statistical arbitrage", which is just a fancy, 10 dollar way of saying "house odds".
  *** With that said, keep in mind that if anyone ever tells you that they know with absolute certainty what the market is going to do... They are lying. Run away!
  

With all of the differences and commanalities between the Vegas lifestyle and trading, a term that I like which extends to both is, "Vegas Money".

Vegas money simply means money that one can afford to lose. Its money that isn't tied to paying the mortgage or putting food on the table or anything like that.

"Nervous Money" is the opposite of Vegas Money. These are funds that are tied to a mortgage payment, bills, putting food on the table, etc.
You get the idea - if the loss of trading capital will impact your ability to keep you or your family fed, clothed, basic survivability then this is nervous money. When people trade with nervous money they can get so anxious about losing it, that they let emotions rule their trading which makes it nearly impossible to be successful and enjoy the trading experience.

Never trade with nervous money. Only trade the maximum amount of "Vegas money" that you have available.

Thats it for now. Good bye and good trading,
Kenley

How I spent my Winter Holiday - Creating a new signal service for MetaTrader EAs

I took the month of December off from working at "the world's largest software company" (will remain unnamed but its easy to guess), and decided that it was time to take one of my passions main stream.



Some background - I have been a MetaTrader developer for many years and I have been trading currencies in the forex market even longer. The combination of trading, economics and developing artificial intelligence software is pretty cool... Although admittedly, in a geeky kinda way.



I used to give a lot of thought to making my trading algorithms public; however, I didn't like the idea that there are people on the internet who reverse engineer MetaTrader EAs for profit. The thought of spending thousands of hours and multiple years to develop and refine an algorithm, just to have someone steal all that work in just a few seconds was very discouraging.



So last December I took the month off to embark on a new venture. I wrote a lot of code and started a company - TradeForexSoftware.com. It is a signal service for MetaTrader EAs that allows developers to secure their code and sell their market proven EAs so that individuals all over the world can benefit from them.



My goal is to keep the quality bar high for this service. If you are a developer who is interested in publishing your EA as a signal, visit our developer page @ http://www.tradeforexsoftware.com/fordevs.html to learn more about substantiating your results and becoming a signal publisher.


Bye for now and good trading,
Kenley