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Incredible Power Of Running Winners

I’ve been getting a serious case of déjà vu over the last couple of weeks.

You see, I’ve been spending a lot of time on Betfair again.

Now don’t worry, I haven’t had a gambling relapse. It’s just been a handy way to monitor the odds of the UK pulling out of the EU 🙂

Of course, many of you know that I used to be a rabid gambler. But it’s been many years since I looked at Betfair on a regular basis.

(If you want to know more about my history with gambling and Betfair, you can read about it here)

In fact, it’s 10 years almost to the day that I suffered my catastrophic betting loss on a Sweden v England football game. That was 20th June 2006. I’ll remember the knots in my stomach till the day I die.

But watching Betfair over the last few weeks has reminded me, despite the fact that I don’t use it anymore, how much it has taught me about trading in financial markets.

In fact, Betfair (and gambling) had a hand in teaching me one of the most important trading lessons there is to learn.

Traders Can Run Winning Trades

You see, when you bet on a horse race, a football match, or whatever it is, the event always ends.

I’m correct, aren’t I?

Someone crosses the line, a referee blows a whistle after a certain time has elapsed, a score gets reached. Just whatever happens to be the rules of the game or the event.

There is always a point when it comes to a stop.

Image 2-minBut trading on financial markets doesn’t work like that.

For most financial instruments, the y axis stretches out indefinitely to the right. There’s no point where the S&P500 is “finished”. A referee isn’t going to blow a whistle and end trading on EURUSD anytime soon.

(ok, I get you, in the event of a country’s currency disappearing (think EUR!!), or a bankruptcy if you are trading stocks, a market might close for good. But it’s extremely rare in forex markets and stock indices)

This distinction might not seem important, but don’t be fooled.

It’s huge.

It’s a massive advantage that financial traders have over people who gamble.

The gambler can rarely, if ever, skew the odds in his favour.

The trader, if he’s clever, can.

Be Right Once, Get Paid For Weeks

If you’re betting on a horse race, and you pick the winner, you can’t extend the race and get paid more.

Your upside is capped, because the market ends. The horses cross the line, and the bets get settled. The winners get paid, the losers lick their wounds, and everyone moves onto the next event.

But if you are trading on financial markets, there are times when you can extend your participation if you’re winning. There’s no arbitrary deadline that you have to close your trade.

There are times when you can be right one day, but still be getting paid for that weeks, or months, later.

In financial trading, your upside is uncapped.

In fact, it’s potentially infinite.

The trade doesn’t end at the blow of a whistle or when someone crosses the line.

It ends when you decide that it ends.

And that makes a huge difference.

It’s this difference that allows financial traders skew the odds in their favour, where gamblers can’t.

EURJPY Has Been A Beast Lately

I was reminded of this not only as I was spending time on Betfair this week.

But also as I watched my long-held EURJPY trade cross +2,200 pips in profit (it has since retraced a bit).

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This is a trade that I have been documenting on Youtube, right from the very week I entered it in August 2015, till today.

This EUR/JPY trade is still open, but bear in mind that I closed four other long Yen positions earlier in the year.

Guess what would have happened if I hadn’t closed the other four positions?

All of them would be still open and showing thousands of pips in floating profit.

I would have been quids in, wouldn’t I?!

But it’s impossible to catch every pip.

A balance has to be struck between taking profit and running winners.

But if you want to take advantage of the power of running winners, you have to let some of the trades that show promise the freedom to grow and develop.

Most trades won’t work. I’m not suggesting that every trade you take has the potential to turn into a multi-thousand pip winner.

But some will.

And if you can give some of them the freedom to stretch their legs, the ones that work will repay your effort many times over.

A Trading Tragedy

The ability to run winners is a phenomenal weapon to have in your trading arsenal.

The tragedy is that although all traders have access to this powerful technique, very few use it.

It’s up to traders to take advantage of this trump card, and it’s a huge pity that most don’t.

Most traders trade in the same way I used to bet on greyhound races on Betfair.

The trade is over before they know it.

Any potential to grow into a big winner is snuffed out quickly.

A profit, no matter how small, is quickly snatched and pocketed, with no consideration of what that trade might become if given a chance to grow.

And in doing so, most traders are neutralising the one main thing they have going for them, the ability to run winning trades.

It’s short term gain, long term pain.

You don’t have to take my word for it, you can check out the data I got from FXCM in this video. Even just a slight move towards running winners would be enough to transform most retail traders’ results.

The Market Rewards, And The Market Punishes

Look traders, I know running these winners is not particularly easy. There’ll always be a little voice inside us urging to take those juicy profits and run.

It takes patience to establish these trades. It takes time to allow them to mature. It takes discipline and an appreciation of the bigger picture to wait until the time is right to harvest them.

But guess what?

The market rewards patience and discipline.

And it punishes impatience and the trigger-happy.

The market recognises perseverance and hard work.

It also notices foolhardy behaviour and short-term greed.

And it distributes the gains (and losses) accordingly.

The Ultimate Transformation

You’ve seen in the above video how running winners has the power to transform traders’ performance.

But that’s not even the most impressive transformative ability running winners has.

Think about this for a second:

for a long number of years, I couldn’t go a day without making a bet.

A flutter on something, anything. I would gamble on two flies climbing up a wall I could find someone to take the other side of the bet.

But I underwent a transformation.

Since the day I understood the power of running winners, I have not made one bet.

Not one.

Since the day I realised the power of running winners, I haven’t played a round of blackjack, a spin of the roulette wheel, even a line on the lottery.

As a serious ex-gambler, I’ve had Betfair open every day for weeks now, and never once gave a second’s thought to making a deposit.

The reason for that is because I know that in all of those things, you can’t run winners. And if you can’t run winners, you can’t skew the odds in your favour.

But in the financial markets, you can run winners. You can skew the odds in your favour.  You can make profit over the long term.

If running winners has the power to transform a hardened gambler like me into a sensible, thoughtful trader, it has the power to do a lot for you too.

All the best,

 

Nigel

PS – If you’re interested in treating your trading a bit less like gambling on Betfair and more like a real trader, you should consider taking the PAST Video Course. In it, you’ll learn how to use price action and running winners to skew the odds in your favour. And in doing so, you can generate sustainable profits from the forex market.

The PAST Video Course is included in Forex Useful Pro Membership. We limit the numbers of people who join Pro Membership to 10 per month. Click Here to see if there are any spaces left for this month. We’ll be delighted to welcome you aboard and work with you to develop your skills as a trader.

 

DISCLAIMER & COPYRIGHT

This update is based on my analysis on my charting package. It may differ to yours as it can be affected by time, market movements, charting packages and broker prices. I accept no liability for loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on any information in this report or analysis.