I read the secret of the Gamboni 25 years ago, in the excellent book Trader Vic Methods of a Wall Street Master it made me smile then and still does, although its simple it's very true. Lets look at the secret of the Gamboni and some other words of wisdom from a true trading great Victor Sperandeo.  

Victor Sperandeo "Trader Vic" is a true trading legend and In 2008 he became an Inductee into the Trader Hall of Fame by Traders Magazine and has been called the “Ultimate Wall Street Pro” He is frequently featured in media and has authored several best selling books including – Trader Vic Methods of a Wall Street Master which should be read by anyone looking to trade financial markets successfully.

Patience and Trading Long Term

“The key to building wealth is to preserve capital and wait patiently for the right opportunity to make the extraordinary gains.” Victor Sperandeo

Most traders are not patient and don't follow long term trends and are to busy trying to scalp a few pips here and there which any serious trader knows is doomed to failure. The big profits come from the big trends and you need patience to wait for them and hold them.

On Taking Losses

"To be a successful trader, you have to be able to admit mistakes....In trading, however, the person who can easily admit to being wrong is the one who walks away a winner. Besides trading, there is probably no other profession where you have to admit when you're wrong". Victor Sperandeo

I find it amazing, that most people who enter Forex trading think there going to win 90% of the time, have little or no draw down and follow a sure fire system and win – this is NOT the real world of Forex trading. The real world of trading is learning to take losses and it's much harder than people think. In addition, it has nothing to do with intelligence, in fact intelligence can actually make you more prone to NOT taking losses:

"Assume that you're a brilliant student who graduates from Harvard summa cum laude. You get a job with a top investment house, and within one year, they hand you a $5 million portfolio to manage. What would you believe about yourself? Most likely, you would assume that you're very bright and do everything right. Now, assume you find yourself in a situation where the market is going against your position. What is your reaction likely to be? "I'm right." Why? Because everything you've done in life is right. You'll tend to place your IQ above the market action. Victor Sperandeo

The best traders in the world tend to have strong mental discipline and its a fact that many are not academics or nerds but high school drop outs or have no formal education.

“Think about it. For example, consider a lawyer who, right before a big case, goes out with his girlfriend and stays up half the night. The next day, he’s drowsy and inadequately prepared. He ends up losing the case. Do you think he’s going to tell the client, “I’m sorry, I went out last night and stayed up too long. If I were sharper, I would have won the case. Here’s your money back.” It will never happen. He can always find some excuse. In fact, he’ll probably push the truth so far into his subconscious that he’ll never admit to himself that his own actions caused the loss of me case.” Victor Sperandeo

To win at Forex trading, all you need to do to win is achieve emotional discipline and to learn to trade Forex as a business. Anyone can do this and it simply relies on choosing the right mindset not on how bright or clever you are.

Knowledge and Emotional Discipline

"I discovered that you can’t train people how to trade by just imparting knowledge. The key to trading success is emotional discipline. Making money has nothing to do with intelligence." Victor Sperandeo

The knowledge you need to win in trading is easy to learn. the problem for most traders is they simply lack themental control to trade successfully. There is no beat the market system or one that will not have losses and if you want to win – you need to learn to take the losses and treat your trading as a business.

"One of the mistakes that people make is that they don’t approach trading as a business. I’ve always viewed trading as a business". Victor Sperandeo

Anyone who runs a business knows, they will have losses and of course there the overhead of the the business – office rents, heating, lighting and salaries but the successful business knows that while they have to have losses to run the business, they can make far more profits than losses from sales and services and be long term profitable – so what's wrong with taking losses?

Nothing, if you run a business but contrast this with most Forex traders, who think they can beat the market and not have them and even worse, when they do have them they let them run! In Forex trading as in any other business, the key to winning is actually taking and managing losses.

The Secret of the Gamboni

“The secret of the Gamboni is the secret of how to survive in the financial markets. Understand it…really understand it… and you are on you way to success as a trader, speculator, or investor. So, here it is:

Joe was a card player, a good one. He was so good, in fact, that he had to move from city to city and find games where he wasn’t known in order to play for high stakes. One afternoon, in a bar in the suburb of Chicago, he’s shooting the breeze with the bartender and asks,

”Say, where can I find a good card game around here?”

“What kind of stakes are you talking about?”

“Big,” Joe says, “the biggest game you know about.”

“Well now, I hear there’s a game out in the farm country. It’s a bit of a drive, but these particular farmers play for big money. Let me make a call and see if it’s OK.”
So the bartender makes the call, and then gives Joe direction to the game.

That evening, after a long drive, Joe pulls up to this barn in the middle of nowhere. Tentatively, he walks inside, tiptoeing around the fetid piles on the floor. At the back of the barn, he spots a partially open door, with lights and smoke pouring through the opening. The familiar rush of anticipating and energy sweeps through him as he enters the room and introduces himself.

Farmers in overalls sit around the table, chewing cigars and puffing their pipes. In a quick glance, Joe estimates the current pot to be about $40,000 – perfect. So he sits down. “Ante up,” says the farmer holding the deck of cards. And Joe begins to play.

About an hour later, Joes is holding his own. He is about even when he draws three aces and two queens – a full house. With a large pot already on the table, he raise $15,000. The next two guys fold, but the leather-face farmer across the table calls him and raises another $15,000, without so much as batting an eye. Joe, certain that the guy is bluffing, calls the bet and lays down his aces-high full house. The farmer lays down junk: three clubs and two diamonds of mixed numbered cards. Joe, suppressing a smile, starts to rake in the pot.

“Wait just a damn minute,” says the farmer, a stern and reprimanding tone in his voice.

“Whattaya mean, wait a minute,” says Joe, “you got nothing.”

“Take a look at the sign over your right shoulder,” smiles the farmer.

Joe looks:

THREE CLUBS AND TWO DIAMONDS CONSTITUTE A GAMBONI, THE TOP WINNING HAND IN THIS ESTABLISHMENT

Joe is really angry, but after all, rules are rules, so he continues to play with what is left of his holdings. About an hour later, he draws three clubs and two diamonds… a Gamboni! He bets everything, and on the final round of betting with the same leather-faced farmer he has to throw in his solid gold Rolex to make the call. The farmer turns over his cards of a queen-high spade flush. Joe turns over his Gamboni and starts to rake in the pot.

“Hold it there, fella,” says the farmer, his grin cutting deep lines in his cheeks.

“But I got a Gamboni!” cries an exasperated Joe.

“Sure ‘nough, but look at the sign over there,” and he points over Joe’s left shoulder.

Joe looks:

ONLY ONE GAMBONI WILL BE PERMITTED PER NIGHT IN THIS ESTABLISHMENT

Joe, broke but thankful for the invention of credit cards, leaves the barn with dung on his shoes and the leather-face farmer drives his tractor home feeling the weight of a solid gold Rolex on his wrist.”

“So the secret of the Gamboni is this: if you want to win, you’ve got to know the rules; and also, you can’t win if you’re not at the table....defining the knowledge and rules necessary to stay at the table and make money consistently year after year. All the knowledge in the world is worthless without a plan to put in into practice and rules to give organization to the plan.” Victor Sperandeo

Final Words

So Joe was card player and a good one but he ended up playing a game where he didn't know the rules – the leather faced farmer did and beat him.

This should be lesson for anyone who thinks they can walk into the game of Forex without understanding the rules of the game and understand this – the rules of the game are easy to learn but you need to know them and also, understand being smart won't help you.

Your key to success is have emotional discipline, to preserve your capital and not to be taken out the game to soon. This has always been the way to succeed at Forex trading and always will be – it really is that simple.

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