Are we all just gambling?

[jkplay]

The definition of gambling:

1. Money that is risked for possible monetary gain
2. Take a risk in the hope of a favorable outcome.

Do those two statements define most of your trading activity? Just as somebody would study sport as a hobby and back their views, are traders not just learning about and studying the markets and ''taking a risk in the hope of a favorable outcome''

However we access the markets, whatever we trade or buy we are all taking ''risk in the hope of possible monetary gain''

I know a guy whose life has gone downhill since he secretly started gambling heavily on the horses and football - he nearly lost his shirt. I bet there are just as many stories of people loosing all their money, wife, car, sanity etc... 'gambling' on the markets.

Trading is without doubt a more intellectually challenging and sophisticated form of gambling - people who do it full time are really just informed gamblers.

This is how I see it

When you start trading every decision is like spinning a roulette wheel with all 36 numbers present as you spin. As you gain more knowledge, discipline and skill - those numbers start to whittle away giving you more chance of being successful.

Is this any different to analyzing premiership football and making your money there? I know it is all very impressive explaining to people your a trader but I wonder if we would get such a positive reaction introducing ourselves as professional gamblers at dinner party's??

What make TA or fundamental analysis any different to studying form when betting on horses????

What do you guy's think?

JK

 

[shadowninja]

"Hope" is probably the key word.

As I see it, here is how I define gambling and trading...

Gambling: I have no knowledge of horses. If I picked a horse, I'd go by colour of jockey and the name of the horse.

Trading: You hear that 10 horses are running. 8 of them have three legs. Of the two four-legged ones, one of them has a tendency to win races.

 

[jkplay]

Gambling: I have no knowledge of horses. If I picked a horse, I'd go by colour of jockey and the name of the horse.

Trading: You hear that 10 horses are running. 8 of them have three legs. Of the two four-legged ones, one of them has a tendency to win races.

Good post.

I put it to you that if you spent as much time studying and learning as much about a particular sport as you do about trading - you wouldn't think of it as such a blind punt.

I am a trader by the way

JK

 

[Glenn]

The definition of gambling:

1. Money that is risked for possible monetary gain
2. Take a risk in the hope of a favorable outcome.

Do those two statements define most of your trading activity? Just as somebody would study sport as a hobby and back their views, are traders not just learning about and studying the markets and ''taking a risk in the hope of a favorable outcome''

However we access the markets, whatever we trade or buy we are all taking ''risk in the hope of possible monetary gain''

I know a guy whose life has gone downhill since he secretly started gambling heavily on the horses and football - he nearly lost his shirt. I bet there are just as many stories of people loosing all their money, wife, car, sanity etc... 'gambling' on the markets.

Trading is without doubt a more intellectually challenging and sophisticated form of gambling - people who do it full time are really just informed gamblers.

This is how I see it

When you start trading every decision is like spinning a roulette wheel with all 36 numbers present as you spin. As you gain more knowledge, discipline and skill - those numbers start to whittle away giving you more chance of being successful.

Is this any different to analyzing premiership football and making your money there? I know it is all very impressive explaining to people your a trader but I wonder if we would get such a positive reaction introducing ourselves as professional gamblers at dinner party's??

What make TA or fundamental analysis any different to studying form when betting on horses????

What do you guy's think?

JK

As Grey1 put it (I trust he doesn't mind me quoting him) :-
"There are three kind of players in the market

1) Those who want to achieve MORE with MORE risk (Brave Gamblers.. This Guy just wants to buy that Porsh or get some of his losses back )

2) Those who want to achieve LESS with LESS RISK ( Scared Gambler .. LOL This guy just wants to pay his bills )

3) Those who want to achieve MORE with LESS RISK ( professional Traders .. They treat this game as a business )

WHEN RISK BECOMES PROPORTIONAL TO REWARD THEN YOU ARE GAMBLING
A gambler's reward is equal to his risk .
A trader's reward is greater than his risk.. "

In other words if you do not use Risk Management then you are a gambler.

Glenn

 

[new_trader]

My 2¢

In terms of probability represented by a real number in the range from 0 to 1, where an impossible event has a probability of 0, and a certain event has a probability of 1. I would say the further you are from 1 (or the closer you are to 0) the more you are gambling. With fixed odds events, no amount of study, practice, money or experience will alter this number. With trading however, you should be able to bring the degree of certainty (with trades) closer to 1 with some or all of these and some other things I probably haven't mentioned.

 

[jkplay]

As Grey1 put it (I trust he doesn't mind me quoting him) :-
"There are three kind of players in the market

1) Those who want to achieve MORE with MORE risk (Brave Gamblers.. This Guy just wants to buy that Porsh or get some of his losses back )

2) Those who want to achieve LESS with LESS RISK ( Scared Gambler .. LOL This guy just wants to pay his bills )

3) Those who want to achieve MORE with LESS RISK ( professional Traders .. They treat this game as a business )

WHEN RISK BECOMES PROPORTIONAL TO REWARD THEN YOU ARE GAMBLING
A gambler's reward is equal to his risk .
A trader's reward is greater than his risk.. "

In other words if you do not use Risk Management then you are a gambler.

Glenn

You can change that from ''Three players in the market'' to ''Three types of gamblers''

There are those that know their market both in trading and gambling. There are people taking blind punts in both. There a those that study the art of probability and apply those factors when both trading or gambling.

Discipline is the thin line between success and failure. This applies to gambling as much as trading - if there is any difference?.

The thing that separates the two is the potentially unlimited upside trading compared with the limited reward when gambling - that reward is defined of course by how much you risk when taking your 'market' view.

JK

 

[Paul71]

Taking 20k of your retirement lump sum and trading with it is very high risk.

So how do you reduce risk?

Well, first of all you need money that isn't yours. That's reducing your risk to zero. But, you better have some good marketing method, and legal small print, understand?

The next best method, is playing against the interest rate, but you are open to risk.

After that, you decide how much you want to lose!

So, where the markets are concerned, you better know your stuff.

The markets do not allow part-time money.

 

[Trader333]

Are we all just gambling?

This question has been previously discussed and the one thing that came out of it all, (which surprised me), was just how heated the views were by those who refused to accept that trading could also be classed as gambling.

Personally, I have no issue at all with being called a Professional Gambler.

In my view, any activity that has a less than certain outcome and which you place money on that uncertain outcome cannot be exempt from being classed as gambling.


Paul

 

[graemenash]

Good trading comes from acting in a certain way when you feel that the probabilities are in your favour; I wouldn't class that as gambling. Gambling to me is wagering on an event where the outcome is purely defined by chance.

What it then comes down to is whether or not you are in fact putting the probabilities in your favour. That's why we all spend so much time developing and back-testing trading systems.

A quick look through historic premiership tables would show that Manchester Utd have won more than 50% of their league games every season. If I could find a bookie who'd pay me £100 every time they won a game and take £50 off me every time they lost I wouldn't call that gambling. I'd call it the process of playing the probabilities based on empirical historical evidence and good risk/reward, which is exactly what I do when I'm trading.

 

[Paul71]

Good trading comes from acting in a certain way when you feel that the probabilities are in your favour; I wouldn't class that as gambling.



Now you are taking the p*ss.

 

[Paul71]

Good trading? Is it based on days, weeks,.......decades?

There is no absolute to 'good trading'.

 

[shadowninja]

T
In my view, any activity that has a less than certain outcome and which you place money on that uncertain outcome cannot be exempt from being classed as gambling.

Then setting up a business, which is probably the most scary thing most people do with their money (having to quit full-time work) is definitely gambling... shame they don't get the tax benefits that gamblers get.

 

[jkplay]

Good trading comes from acting in a certain way when you feel that the probabilities are in your favour; I wouldn't class that as gambling. Gambling to me is wagering on an event where the outcome is purely defined by chance.

Good gambling ( /trading) comes from acting a certain way when you feel probabilities are in your favor. You would be gambling if Barcelona where playing Brighton - when both teams are fully fit and wanting to win the game. Is that event purely defined by chance or is their an element of statistics, history and class making one particular outcome more likely???

What it then comes down to is whether or not you are in fact putting the probabilities in your favour. That's why we all spend so much time developing and back-testing trading systems.

You are still placing money on an event that isn't certain to take place AKA gambling.

A quick look through historic premiership tables would show that Manchester Utd have won more than 50% of their league games every season. If I could find a bookie who'd pay me £100 every time they won a game and take £50 off me every time they lost I wouldn't call that gambling.

Place a £50 bet on every game Manchester United play and you will make money over the season - try it.

I'd call it the process of playing the probabilities based on empirical historical evidence and good risk/reward, which is exactly what I do when I'm trading.

That is exactly what ''professional'' gamblers do. They do it on sport and we do it on the markets.

Trader333 explained so much in so few words.

JK

 

[DDI]

1) you make an interesting point. my dad (a little old fashioned) calls my trading gambling.

2) however I just think in trading the odds are more in your favour. you take a position by entering into a strong trend with a R/R of 2:1 and the chances are it will go your way as you are going with the trend. In sport if you want to get 2:1 odds you need to bet on the underdog.

So if you find it logical equating trend trading with betting on favourite horse/football team and reversal trading with betting on the underdog, then you would agree that the R:R in trading is far better than sport betting.

I think it is possible to make consistent profits in trading but I think it is far far more difficult to produce consistent results in sports betting

3) Also this analogy would call people who buy properties hoping to sell them a few years later are gamblers too.

 

[jkplay]

Now we are getting into probability which is a force that only concerns those that gamble (in my view trading falls into that bracket). People buy a house not only for monetary gain but to live in it and raise a family - if somebody buys property only as an investment then yes they are taking a risk with the aim of making a financial gain.

If there is anybody out there who makes money on every trade then I want a copy of your crystal ball.

We are all speculating on the outcome of future events

If you are a short term trader long on the FTSE and plan to close that position at 16.30 then you are no different to somebody speculating on a fixed odds basis - you just have to ride the volatility wave

JK

 

[Paul71]

1) you make an interesting point. my dad (a little old fashioned) calls my trading gambling.

2) however I just think in trading the odds are more in your favour. you take a position by entering into a strong trend with a R/R of 2:1 and the chances are it will go your way as you are going with the trend. In sport if you want to get 2:1 odds you need to bet on the underdog.

So if you find it logical equating trend trading with betting on favourite horse/football team and reversal trading with betting on the underdog, then you would agree that the R:R in trading is far better than sport betting.

I think it is possible to make consistent profits in trading but I think it is far far more difficult to produce consistent results in sports betting

3) Also this analogy would call people who buy properties hoping to sell them a few years later are gamblers too.

Forget personal ratios, they only exist in your mind, and the laws of probability can prove you wrong.

 

[fibonelli]

With trading you can stop the outcome of an "event" at any time. Stop loss if you're wrong and take profits if you're winning.

With gambling, eg football, horses etc you are predicting the outcome of an event unless your bookie offers "in running" betting.

 

[DDI]

Now we are getting into probability which is a force that only concerns those that gamble (in my view trading falls into that bracket). People buy a house not only for monetary gain but to live in it and raise a family - if somebody buys property only as an investment then yes they are taking a risk with the aim of making a financial gain.

If there is anybody out there who makes money on every trade then I want a copy of your crystal ball.

We are all speculating on the outcome of future events

If you are a short term trader long on the FTSE and plan to close that position at 16.30 then you are no different to somebody speculating on a fixed odds basis - you just have to ride the volatility wave

JK

Very true but end of the day you stand a better chance in trading.

Nobody can literally prove this but I'm certain the number of successful traders by far exceeds the number of successful spreadbetters.

 

[graemenash]

If there's one thing that this thread shows is that we are probably all right in a way; it just comes down to semantics :cheesy:

Indeed, technically every activity you enter in to with an uncertain outcome is gambling; but people will always draw the line in a different place between between random choice and probability-based decisions.

In black and white terms, is crossing a motorway on foot technically any more or less of a gamble than crossing a quiet residential street? Probably not, but given the choice people would always cross the empty street rather than the motorway, as in their own minds at the very least the probability of making it to the other side intact is higher.

Most of my friends think I sit at home all day gambling; but I see it as something intrinsically different. I make decisions based on empirical historical evidence which shows that by acting in a certain way at a certain time, the probability of success is greater than the probability of failure.

It's entirely possible that I may be wrong, and if I am then the market will prove it to me in no uncertain terms. But until that day I have to at the very least believe that I am not gambling; believing that I am not wagering my own money on a random outcome is the only way I would ever have the bottle to commit capital to a trade.

I guess it just comes down to personal definitions of what a gamble is!

 

[jkplay]

With trading you can stop the outcome of an "event" at any time. Stop loss if you're wrong and take profits if you're winning.

With gambling, eg football, horses etc you are predicting the outcome of an event unless your bookie offers "in running" betting.

Betting exchanges have very much changed the sport betting industry. There are sophisticated API's and software packages displaying market depth, statistics.. etc... They really are like the LSE now!!

This is what made me think about the gambling/trading argument.

JK