FAQ Is Trading the Same as Gambling?

[forker]

Trading is more on the lines of speculating on market psychology which is similar to poker which began solely as a game of chance and evolved into a hybrid of chance and psychological speculation. Other gambling games are generally pure chance without any collaborative psychological factors involved. The psychological factor involved when playing a slot machine for example only involves yourself and cannot be based on others

There are many overlaps but it isn't exactly comparing apples with apples. Equality requires all properties on opposite sides are the same.Clearly there are games that don't correspond with the psychology element making the properties only equal in some games.

The topic question is incomplete yet the answer is as such that the fact that the question is being asked represents a lack of this fundamental understanding.

 

[Sigma-D]

Whenever trading and gambling are mentioned in the same sentence the intention is typically pejorative. Why would that be? Trading seems to get singled out for this treatment when you could effectively substitute almost anything into the same sentence. Is getting married gambling? Is starting a business gambling? Is betting on cricket match gambling? Is taking any trade gambling? Yes, of course it is.

Anything where you utilise your resource (time, money, effort, potential) on the outcome of an event or process which has less than 100% certainty of success, is a gamble. Which means that there are very few things that are not a gamble.

 

[tar]

Nice try mate but no cigar. You need to find a website that includes all traders not just quote something concerning one specific investment.

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To gamble: to stake or risk money, or anything of value, on the outcome of something involving chance.
Dictionary.com

BTW i found the thread , check it out :

"You're right that only 30 were able to be profitable more than 4 straight quarters."

The research was done on 8500 FX accounts 2009-2012 .

http://theessentialsoftrading.com/B.../starting-to-detail-forex-profitability-data/

http://www.trade2win.com/boards/forex/164594-forex-trader-success-rates-some-real-data.html

 

[J'ai]

Sigma-D & Foker

I've lump your answer into one so as not to repeat myself, Tars on me straight away for repeating stuff.

I believe the problem lies in how most traders consider what trading is. They assume, wrongly in my opinion, that trade analysis and trading are the same thing. Of course they are not! They are not symbiotic, they are separate entities thus enabling the trader to perform one without the other.

Trade analysis is the science, for lack of a better word, that most traders employ prior to placing a trade. Whereas trading is the effect of placing the results of that analysis with a broker, this is the act of gambling.

Fred

-----------------------------------------------------------------------------------------------------Trade analysis without the trade will win nothing but dreams!
Me

 

[J'ai]

Tar, did you read this blog???

http://theessentialsoftrading.com/Blog/index.php/2013/01/08/starting-to-detail-forex-profitability-data/[/url]

It clearly states that broker reported figures of active accounts was between 26% to 34% from 2009 to 2012. While the authors figures where even higher at 31% to 46% over the same period.

No-one is arguing whether all these traders have consecutive winning quarters or even whether it's the same traders winning again. The point I made was that the number of winning traders each year in the forex market was around 25% to 30%.

And you have furnished the proof for me, cheers mate :clap:

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Tar, he shoots, he scores, arrrrrrggggggghhhhhh it's an own goal!!!

 

[Sigma-D]

Sigma-D & Foker

I've lump your answer into one so as not to repeat myself, Tars on me straight away for repeating stuff.

I believe the problem lies in how most traders consider what trading is. They assume, wrongly in my opinion, that trade analysis and trading are the same thing. Of course they are not! They are not symbiotic, they are separate entities thus enabling the trader to perform one without the other.

Trade analysis is the science, for lack of a better word, that most traders employ prior to placing a trade. Whereas trading is the effect of placing the results of that analysis with a broker, this is the act of gambling.

Fred

-----------------------------------------------------------------------------------------------------Trade analysis without the trade will win nothing but dreams!
Me

Dunno about lumping answers into one as your response wasn't anything to do with my response.

Doesn't matter whether trade analysis and trading are separate or not - nothing to do with addressing the question.

I don't think you've got the faintest idea what you're talking about.

 

[tar]

Tar, did you read this blog???

http://theessentialsoftrading.com/Blog/index.php/2013/01/08/starting-to-detail-forex-profitability-data/[/url]

It clearly states that broker reported figures of active accounts was between 26% to 34% from 2009 to 2012. While the authors figures where even higher at 31% to 46% over the same period.

No-one is arguing whether all these traders have consecutive winning quarters or even whether it's the same traders winning again. The point I made was that the number of winning traders each year in the forex market was around 25% to 30%.

And you have furnished the proof for me, cheers mate :clap:

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Tar, he shoots, he scores, arrrrrrggggggghhhhhh it's an own goal!!!

ROFL , nearly 100% of traders are profitable for a short period of time whether its one day one week one year , so what ? We already have verified reports from brokers that winning traders in each Q - not in each year as you say - is on average around 35% we already know this , but are they consistent ? You surely are not profitable if you made it for a year or 2 then lost for 10 years , or if you made 1K one month and lost 10K the next .

 

[SpreadDoctor]

Is trading gambling? does it matter? I suppose it would if we were all academics and we were paid to sit around musing over how to classify stuff. The only thing that matters in trading is does it make money. Going off on tangents seems to be par for the course in trading, that's just the way we are built, it's actually the brains way of protecting itself. The other day I was on another trading forum and there was a trader there who announced that none of the trading platforms he used were good enough for him. So he was going to program his own. Now kudos to him for trying to do that and having skills that he is able to do that but what a tangent to go on......

 

[Sonicscooter]

Whenever trading and gambling are mentioned in the same sentence the intention is typically pejorative. Why would that be? Trading seems to get singled out for this treatment when you could effectively substitute almost anything into the same sentence. Is getting married gambling? Is starting a business gambling? Is betting on cricket match gambling? Is taking any trade gambling? Yes, of course it is.

Anything where you utilise your resource (time, money, effort, potential) on the outcome of an event or process which has less than 100% certainty of success, is a gamble. Which means that there are very few things that are not a gamble.

Quick answer, most take gambling as an event that once started is then out of ones control, ie the toss of a coin, where for example playing poker is part gambling, the chance of which cards one is dealt and then the skill to use them, separating the different subjects see's a clear divide, card games, sport, trading, compared to coin games, roulette. Old fruit machines would possibly be classed as a skill as reel counting worked but on modern machines it's impossible.

 

[Jason101]

Listen to this and see how comfortable or discomforted you feel.
That should give you your personal viewpoint.

http://www.bbc.co.uk/programmes/b0128q83

Incidentally at the end of the podcast after the gardening bit there is an interesting bit abut how the words you choose t speak can influence your actions, a la Ed Seykota and his deliberate words.

 

[Pat494]

Don't bring the fact that trading is not gambling to the attention of the politicians or they will tax it.

 

[lawrence-lugar]

Only an idiot :| , or amateur, would say that Trading and Gambling are the same thing.

Gambling is...well...gambling.
Trading has more or less some controllable variables; know your options.

 

[Alliance01]

Only an idiot :| , or amateur, would say that Trading and Gambling are the same thing.

Gambling is...well...gambling.
Trading has more or less some controllable variables; know your options.

hmmm. I think you should be a bit careful here. People define and interpret words like 'trading' and 'gambling' in a way that is quite personal to them. I'm not so sure I would be so quick to say they are totally different - you can after all have very, very high risk speculative positions - why is that not gambling, it is in fact almost the very definition of a gamble, yet at the same time you could say the architect of that position is 'trading' a market.

You need to look at the substance of an exposure to determine whether it is a high risk speculative position/gamble or not. You can't define it by instrument, market, scale, tenor or whether it has some/lots of controls around it.

 

[Jason101]

Only an idiot :| , or amateur, would say that Trading and Gambling are the same thing.

Gambling is...well...gambling.
Trading has more or less some controllable variables; know your options.

Listen to this.- http://www.bbc.co.uk/programmes/b0128q83

Listening to the above link I would say that a poor trader is just a gambler.
If you listen to this and feel uncomfortable it could mean you are a poor trader and just a gambler.

 

[Alliance01]

Listen to this.- http://www.bbc.co.uk/programmes/b0128q83

Listening to the above link I would say that a poor trader is just infinite above you listen to this and feel uncomfortable it could mean you are a poor trader and just a gambler.

Again; I think we should use words quite carefully. I know a few traders who are just poor traders. They took several poor decisions/positions and boom - gone. Similarly I know people who take incredibly high risk positions and come out on top. They were absolutely speculative. The assertion that a gambler is just a rubbish trader is just not right. On that basis, oil exploration is a mugs game vs food production.

For me the distinction people need to make is whether they understand the risk associated with any given position and are happy to assume it. You can assume risk in an infinate number of ways and on a vast sliding scale of controls. In the same way black is the same colour as white but at the other end of the spectrum so too are the range of payoffs. A trader is a trader is a trader; the level of expectation and awareness of risk is what defines them. I get involved in sports bets a lot and I can tell you now I do better than a significant number of people in financial markets; they would call me a gambler but I know my risk and control it far better than they do. I dont define myself or them as traders or gamblers; we are all just assuming or acquiring risk exposures to varying degrees of risk appetite. Whether we all understand that risk level is a different question....

 

[Jason101]

Again; I think we should use words quite carefully. I know a few traders who are just poor traders. They took several poor decisions/positions and boom - gone. Similarly I know people who take incredibly high risk positions and come out on top. They were absolutely speculative. The assertion that a gambler is just a rubbish trader is just not right. On that basis, oil exploration is a mugs game vs food production.

For me the distinction people need to make is whether they understand the risk associated with any given position and are happy to assume it. You can assume risk in an infinate number of ways and on a vast sliding scale of controls. In the same way black is the same colour as white but at the other end of the spectrum so too are the range of payoffs. A trader is a trader is a trader; the level of expectation and awareness of risk is what defines them. I get involved in sports bets a lot and I can tell you now I do better than a significant number of people in financial markets; they would call me a gambler but I know my risk and control it far better than they do. I dont define myself or them as traders or gamblers; we are all just assuming or acquiring risk exposures to varying degrees of risk appetite. Whether we all understand that risk level is a different question....

No, I would say that both these groups are gamblers. "Several poor positions" this is also gambling" If a blow out occurs after only several positions then the risk is definitely gambling.
Don't get me wrong I think a trader can be a trader for years and then suddenly out of the blue risk to much and for those few trades they revert to the gambler. That is why trading is so hard, repressing the natural gambling instincts innate to all humans.

 

[barjon]

gambling = betting money on an outcome in hope
professional gambling = ditto but an informed bet
speculation = a posh term for gambling
trading = gambling with the ring of a profession about it
investing = gambling for rational reasons

 

[Alliance01]

No, I would say that both these groups are gamblers. "Several poor positions" this is also gambling" If a blow out occurs after only several positions then the risk is definitely gambling.
Don't get me wrong I think a trader can be a trader for years and then suddenly out of the blue risk to much and for those few trades they revert to the gambler. That is why trading is so hard, repressing the natural gambling instincts innate to all humans.

I dont think gambling can be identified by position size at all so blowing out after one or one million positions makes no difference. The issue is the risk assumed. What about a merchant who stakes his business on one product or market? Is he a gambler just because his eggs are all in one basket? Poor decisions/judgement also cannot be a defining characteristic; Is WarrenBuffet gambling when he loses on Tesco but a trader when he wins on Goldman?

Like I say; much of this is a personal view, there isnt a right or wrong but when I read statements that imply being called a trader somehow transforms the risk of what they are really doing it drives me nuts. Many a bank 'trading' desk is nowt more than controlled gambling and when people start to believe that labeling an activity a certain way changes its reality well, thats when eff ups happen! There is an element of 'gamble' in every risk position and no pisition iscever, ever risk free. No one can tell the future.

 

[Alliance01]

gambling = betting money on an outcome in hope
professional gambling = ditto but an informed bet
speculation = a posh term for gambling
trading = gambling with the ring of a profession about it
investing = gambling for rational reasons

Well said!

 

[Trader333]

If you engage in any activity where the outcome is uncertain and money can be lost in doing so then why is that different for trading or gambling ? I know of professional gamblers who make a large and consistent income from doing so and I also know of traders who do everything right in terms of risk and money management but consistently lose. To say that one is gambling and the other isn't makes no sense to me as the variables for the ultimate measure of success (ie profit or loss) are no different in my view.