Trading... gambling!

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Old Dec 14, 2002, 12:28pm   #1
BeM
 
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Trading... gambling!

Don't get mad... just a thread
What is the real difference between gambling and trading, or speculation?
We have terribly rich people in both cases, however speculators, including trader and investors alike, are much richer. You must agree with me that even prosperous investors are concerned with the psychology of the whole market, which is a speculative approach.
What are the real differences and similarities as you think?
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Old Dec 14, 2002, 1:56pm   #2
 
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To quote a wise man (well me )
Quote:
The difference between Gambling and Trading/Speculating is that Gamblers do not know what they’re doing. Someone who makes money backing horses is not a gambler, just a speculator based on the knowledge that they have acquired over time.
It’s the same in trading, a gambler will blindly throw money at a share where as a trader/speculator will use his knowledge to gain the best possible risk/reward ration.
I still stick to this and probably always will.
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Old Dec 14, 2002, 2:46pm   #3
 
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Hi BeM,

I can't recall the number of spats we've had on TMF over this!! My tack on it is that it depends on the gambling.
Roulette/lottery - a game of chance hence gambling
Poker/Backgammon - games of skill/strategy and more like trading. To me it's about a need for skill. In gambling you don't need to have any skills.
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Old Dec 14, 2002, 3:55pm   #4
 
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Gambling: It is either impossible or extremely hard to stack the odds in your favour. Therefore winning is based almost entirely on luck.

Bad Trading: See Gambling (>90%+ of traders do this).

Good Trading: Done in the appropriate pschological manner which is backed up with good money management skills and educated entries into trades thereby making every effort to stack the odds in ones favour to ensure a win. (<10%- of traders do this).

Oh well, it's all very easy to write this, but alas I am still a gambler...
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Old Dec 14, 2002, 4:28pm   #5
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lol

How about something in between gambling and business which can easily switch to gambling once you lose discipline, self-conrol, etc and get too emotional...

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Old Dec 14, 2002, 5:32pm   #6
 
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It's very easy for people who don't understand trading to believe it is just gambling. It is because they are ignorant about how you protect your risk (if you are trading properly, that is).
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Old Dec 14, 2002, 6:41pm   #7
 
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Skim is precisely correct.
Trading is about understanding probability based on previous experience, knowledge and extensive research - and testing those concepts live over a sufficient period of time to develop statistically significant results.
Although unforeseeable events will by their nature introduce apparently random changes, your trading model and pattern must allow for those.
This approach is much closer to making a conscious decision to risk flying, driving, crossing a road carefully, planning and running a business etc., and no-one would call those activities gambling. Only those unaware of how to trade in a controlled and consistently successful way would call it gambling.
My family know how I earn our living and support me to the hilt, as do our non-trader friends.
We have an old family friend who is about to retire as a stockbroker and I am teaching him how to trade the US markets.
He knows from seeing my own trading records that he is going to do very well trading my way - in fact he should do better!
Is he a gambler?
Trading is a business, run it as such.
There is no shame in being successful.
By the way, I must be one of the few people to have visited Las Vegas and not gambled a cent.
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Old Dec 14, 2002, 7:35pm   #8
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BeM started this thread Thanks for the thoughts!
I believe the major difference between gambling and doing any other type of business, as commonly understood, is that when you gamble you purely depend upon luck. However there is risk in anything, no matter trading or any other type of business, and as far as one does not take into consideration other factors aside pure randomness, then he/she is gambling, no matter the business which involves any financial investment.
I see some common features both successful traders and gamblers have, and that is although they are conscious of the randomness, they do not rely upon it.
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Old Dec 14, 2002, 9:34pm   #9
 
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Some "gamblers " are very astute. Take BlackJack. If you can 'count the cards' you will increase to odds of winning considerably.The gamble comes in placing your bet before any cards go down. If you have the chance of winning, i.e. the dealer shows a five or six, then you can "manage your bet " by perhaps drawing a card, thus increasing your chances of beating the dealer.Maybe.......At the other end of the scale, there are those that just throw money at anything for a bet and a thrill, thus emptying their bank account in a flash. No doubt there are people that are overloaded with cash and think they can increase their fortune by investing in the stockmarket using blind faith. Their bank account is also taken for a ride. I was one of those once.....
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Old Dec 15, 2002, 2:49pm   #10
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Trading is not gambling- even when I lose money at it. That's because I study how I am going to lose my money.

Yesterday I bought a state lottery ticket and got the last two digits right. Since I did not think twice about selecting the ticket, that was gambling.

There is a subtle difference but I do not think that my wife can see it, she just asks how our investments are doing for Christmas.

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Old Dec 15, 2002, 6:49pm   #11
 
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... and you ask her "which Christmas?"
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Old Dec 16, 2002, 1:20am   #12
 
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Investors are gamblers......

There you go, I've said it.

They gamble that the company they invest in will be successfull usually on a belief in the products, financials or management.

They gamble that they have been told the truth by the management. Big gamble.

They gamble that they have been told the whole truth. An even bigger gamble.

They gamble that the industry or economy will not turn against them.

They gamble that a competing company or product will not undermine or disadvantage 'their' company or product.

Trading is the art of turning a sum of money into a larger sum of money.

If you are consistently making the pot bigger then you must be trading and so are a trader. If you think you are a gambler but consistently win and grow the capital base then you are in fact a trader.

If you are consistently making the pot smaller then you are a gambler whether you consider yourself a gambler, a trader or an investor.

Then again I could be wrong :-)
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Old Dec 22, 2002, 10:24am   #13
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Er... what's wrong with gambling ?

I think it's just that some people refuse to believe that they are gambling, that's all.
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