In this post

  • Trade: EUR/USD short & CHF/JPY short
  • Insight: Cutting Down Gambling Tendencies in Trading
  • Quote: An Unjustified Sense of Knowing
  • Video: Why You Hesitate to Open Trades (And How to Fix It)

Trade of the Week

In this week’s video we go through two trades:

  • EUR/USD short
  • CHF/JPY short

Cutting Down Gambling Tendencies in Trading

Most traders would never describe their trades as gambling. But if you analyse their behaviour, it’s hard to tell the difference.

They enter trades without estimating probabilities, celebrate when a random entry happens to move into profit, take actions based on feelings rather than reliable logic, and even call profitable trades wins.

Here’s some trading wisdom for you: if that sounds like you, do yourself a favour, cut out the hours at the charts and just book a ticket to Vegas. At least you’ll have the time of your life.

Behavioural neuroscientists Anselme and Robinson explain that “the motivation to gamble is strongly determined by the inability to predict reward occurrence.” Uncertainty itself creates excitement because it fires up the dopamine system.

So the simplest way to reduce gambling tendencies isn’t willpower or discipline. It’s removing uncertainty.

Of course, you can’t do that completely in the markets unless you’re clairvoyant. But you can change the way your brain processes uncertainty.

As I’ve explained many times before, the brain activates different regions depending on whether something is perceived as an uncertainty or a risk. The difference is whether or not you understand the probabilities.

When probabilities are seemingly known, it’s a risk. When they’re unknown, it’s an uncertainty.

So if you want to reduce gambling tendencies, start by estimating the probability of each trade you take. Even if your estimate isn’t perfect, the act of assigning one forces you to think logically instead of emotionally. You’re transforming something uncertain into something measurable, and that changes how your brain processes it.

This also builds a habit of calibration. Over time, you’ll see where your intuition is accurate and where it’s overconfident. That feedback loop strengthens skill and weakens impulsivity.

The second step is understanding expectancy, which is the average outcome you can expect across many trades. If your opportunities have positive expectancy, you’re no longer gambling; you’re following a process that produces profits over time.

That means individual outcomes stop mattering.

You might lose on a perfect trade or profit from a poor one, but what counts is that your overall equation is positive.

When traders obsess over the outcomes of single trades, they’re unknowingly reverting to gambler mode. They want every spin of the wheel to land in their favour.

But real trading isn’t about that. It’s about finding positive expectancy situations and repeating the process until the probabilities play out.

Think of it this way: every trade either adds noise or signal to your long-term results. Probability estimation filters out noise. Expectancy turns chaos into structure.

Together, they turn trading from luck into logic.

The more predictable you make your process, the less exciting it feels, and the more professional your results become.

An Unjustified Sense of Knowing

“Good science is more than the mechanics of research and experimentation. Good science requires that scientists look inward—to contemplate the origin of their thoughts. The failures of science do not begin with flawed evidence or fumbled statistics; they begin with personal self-deception and an unjustified sense of knowing. Once you adopt the position that personal experience is the ‘proof of the pudding,’ reasoned discussion simply isn’t possible. Good science requires distinguishing between ‘felt knowledge’ and knowledge arising out of testable observations. ‘I am sure’ is a mental sensation, not a testable conclusion. Put hunches, gut feelings, and intuitions into the suggestion box. Let empiric methods shake out the good from the bad suggestions.”

— Robert A. Burton, On Being Certain: Believing You Are Right Even When You’re Not

This is one of the biggest issues for traders too.

Almost every trader I speak to holds strong beliefs about how the markets ‘work’ in different situations, based on a few personal experiences or something they’ve heard from others.

These beliefs then shape their actions, or stop them from taking certain ones. They dictate the way they trade.

But just because you’ve seen something happen a handful of times doesn’t make it a market truth. Turn your beliefs into testable hypotheses, and let meaningful data guide you instead.

Why You Hesitate to Open Trades (And How to Fix It)

This is one of our videos from a couple of years ago, but I wanted to share it again because it directly relates to the insight about gambling tendencies. It’s amazing just how many trading issues are resolved by simply estimating probabilities, but so few traders actually focus on doing it.