FAQ Is Trading the Same as Gambling?

[J'ai]

Hi Tar, I trade hourly diversion with CCI. I also employ hourly correlation to increase my profits.

Fred

 

[J'ai]

Tim wrote

On the basis of your definition, one could argue that the owners and shareholders of the casinos and betting firms are just as much gamblers as the punters who frequent them. After all, they have no more control over the number or colour that the roulette ball lands on or which horse wins the next race than those placing the bets. Yet the casinos and betting shops manage to make money consistently - week in and week out.

They win by taking a mathematically-determined odds (commission) from every gamble the punters make, plus every penny of every losing bet. They have no need to gamble the odds are stacked in their favour. In poker they have a special name for this, it's called the Rake and is the amount of 'house' money taken out of every hand before winnings are paid out. This is exactly how trading the Forex works, traders also have a special name for it, we call it the Spread.

This is in stark contrast to the average 'gambler' (their customers) - who do the exact opposite. I may be wrong, but I suspect that most members will argue that the owners and shareholders are no more gamblers than anyone else in any other business, on the grounds that they have found an 'edge' and are able to exploit it repeatedly. Some T2W members believe that it is possible to do the same as traders, so that whilst every trader incurs some losses, over time they manage to come out ahead and their equity curve rises steadily and consistently.

I never said traders can't win over the short/long term, in-fact around 25% of all traders regularly make money trading, this means 75% are actual losers. This figure is sometimes misquoted as being 90-95% however this misrepresentation was spread by dodgy guru's who use it to attract noobs. The 90-95% figure actually came from a statement made on how many retail people could reasonably be expected to become rich from trading the markets.

What you are doing is taking an educated gamble, you have studied the markets and you hope the market follows your train of thought. If anyone had a true edge over the market they would be a billionaire in no time at all.

Hopefully this answers you question Tim, even if you disagree with me.

Fred

-------------------------------------------------------------------------------------------------
Taking risks is essential; gambling is foolhardy.” German general Erwin Rommel

 

[tar]

I never said traders can't win over the short/long term, in-fact around 25% of all traders regularly make money trading, this means 75% are actual losers. This figure is sometimes misquoted as being 90-95% however this misrepresentation was spread by dodgy guru's who use it to attract noobs. The 90-95% figure actually came from a statement made on how many retail people could reasonably be expected to become rich from trading the markets.

l

Any proof re the 25% figure ?
If you are talking about the US retail forex Q profitability report , then that's not a proof , it just means 25-30% of forex traders are profitable in a quarter , that's it , doesn't mean they are consistent or making living form it .

 

[tar]

What you are doing is taking an educated gamble, you have studied the markets and you hope the market follows your train of thought. If anyone had a true edge over the market they would be a billionaire in no time at all.

As i said it depends on what you are trading and how you trade , for example someone is systematically bidding and offering on some markets aiming to catch the spread , that's not gambling that's trading , and its not necessarily for this trader to become a billionaire in no time as you put it even if he has an edge , that's because of liquidity limitations , volume ... etc , not all strategies are compoundable .
Another example is someone with an IG account randomly betting on prices up or down , then yes that's gambling .

 

[J'ai]

There have been many studies into this area, that prove conclusively that the figure is nearer 25% to 30%. In fact some studies show a massive 41% of traders are regularly successful.

http://www.learntotradethemarket.co...are-your-chances-of-success-as-a-forex-trader
http://www.travismorien.com/FAQ/trading/futradersuccess.htm

Albeit you could claim they are not conclusive. In fact I doubt any report could ever be considered conclusive as the forex is to unregulated. However, they do support my position that the 90-95% figure is just an urban myth. But I'm not to proud to read any reports suggesting the figures are nearer your implied position.

Fred

 

[J'ai]

Hi Tar,

As i said it depends on what you are trading and how you trade , for example someone is systematically bidding and offering on some markets aiming to catch the spread , that's not gambling that's trading.

No it's gambling. The moment you or those on the opposite side of your trade have given over all control of the outcome leaving the result solely to chance, then that is the definition of "taking a gamble".

And its not necessarily for this trader to become a billionaire in no time as you put it even if he has an edge , that's because of liquidity limitations , volume ... etc , not all strategies are compoundable.

It doesn't have to be compoundable. If you really have an edge you simply increase your wager (trade) by using increased volume (leverage) and A viola you're rich!

Fred

-----------------------------------------------------------------------------------------------------
'Prop trading' is just a fancy term for banks gambling in the market for their own profit.

Matt Taibbi

 

[Forexmospherian]

Hi J'ai / Fred

There are some of your points that I do agree with - ie 90-95% of all traders are not continual losers - or can never make ongoing monies out of trading. That % is just the normal rubbish posted around the internet etc - and as you say with the FX market not being regulated - true stats and figures will never really be available

I would say for sure over 70% of all traders lose and eventually give up and either lose their account or just never carry on.

The other approx 30% or less - maybe 2-5% end up full time and make money continually every day or week for many years - they have losses for sure - but every year they have good financial returns and are successful traders etc

The others - ie somewhere between say 10 -25% of the total number of retail traders who are not losing and not full time for over say 2 years are the typical "inbetweenies" - ie they have good months - they have bad weeks and months and they are still in the trading game - because they believe they will get there and get to a stage that they will have continual winning weeks and months. They may give themselves another 2- 10 years to make it...

Dont believe the Brokers info of them saying 25 - 40% are winners - they might all be different traders - and many of them might have traded twice in a quarter and had 100% success rate.

Whatever the true stats are - lets say it 12% of all trader are continually successful - then - for these guys - Trading is not classified as gambling - as the daily / weekly / monthly outcome is known - they will win.

But for the 70 - 88% of all traders who are not successful and not consistent at making profits - then for these traders - Trading is gambling

I dont agree with you regarding if you have a real "edge" in trading then you should be able to become a multi millionaire / billionaire and just coin it

I agree with Tar here and its happened to me

I hit my financial trading wall compounding at only 25 lots per pip.

I could not handle the losses and my winners suddenly dried up - as it effected me that bad that it took me 6 months or so to get back to normal and nowadays I don't go over say 12/15 lots maximum . At 3 -8 lots per pip - I trade comfortably with no sweaty palms or palpitations etc etc,

So the idea of a normal retail trader going from say $5 per pip to then 5 lots and then 20 lots and then 50 lots to 500 lots onwards is pure fantasy - especially if they are using there own money.

Its not impossible - but maybe 0 02% of every 1000 retail traders might be able to compound up to real big money per pip and take a $1000k account up to say $5 or 10 million - using their own money.

Remember - your mind controls your limits -

Regards


F

 

[robster970]

Yes. Trading is the same as gambling with one distinct difference. You are in control of the odds.

 

[SpreadDoctor]

Trading & Gambling are very similar imo however for new traders the odds are better at the casino/racetrack than at the trading screen. New traders are very likely to have a negative expectation (lose) either gambling or trading.

 

[Emini-mouse]

Hi F, I understand what your saying mate, yes I agree you can control your future not by gambling but by reducing the risk to yourself.

I think most people confuse risk and probability with gambling but they are different. As you said "you risk your life walking onto a busy road", however you always have the ability negate this risk or the probability of being hit by simply stepping back on the pavement. When gambling you do not have this option you can only wait for the outcome and hope the cars miss you.

Fred

-------------------------------------------------------------------------------------------------
Taking risks is essential; gambling is foolhardy.” German general Erwin Rommel

well i would have thought gambling is all about risk and probability

 

[tar]

Hi Tar,



No it's gambling. The moment you or those on the opposite side of your trade have given over all control of the outcome leaving the result solely to chance, then that is the definition of "taking a gamble".



It doesn't have to be compoundable. If you really have an edge you simply increase your wager (trade) by using increased volume (leverage) and A viola you're rich!

Fred

-----------------------------------------------------------------------------------------------------
'Prop trading' is just a fancy term for banks gambling in the market for their own profit.

Matt Taibbi

Market makers are not gamblers . You are repeating yourself , not all strategies can be scaled up - increase wager - , there are many variables involved .

 

[tar]

There have been many studies into this area, that prove conclusively that the figure is nearer 25% to 30%. In fact some studies show a massive 41% of traders are regularly successful.

http://www.learntotradethemarket.co...are-your-chances-of-success-as-a-forex-trader
http://www.travismorien.com/FAQ/trading/futradersuccess.htm

Albeit you could claim they are not conclusive. In fact I doubt any report could ever be considered conclusive as the forex is to unregulated. However, they do support my position that the 90-95% figure is just an urban myth. But I'm not to proud to read any reports suggesting the figures are nearer your implied position.

Fred

I don't see any documented solid proof that 25% are consistent , on the contrary we have a member here who is writing a book about retail fx based on data provided from many brokers which shows that less than 1% is profitable for 4 consecutive Q - or something like that - .

 

[J'ai]

I don't see any documented solid proof that 25% are consistent.

It's no wonder I'm repeating myself as it seems you are not reading my messages correctly. I informed you in my last reply that there could never be any definitive proof of a 25% figure or any other figure anyone claims as the market is unregulated and unless a majority of Forex brokers give these figures voluntarily we will never know the exact figure.

on the contrary we have a member here who is writing a book about retail fx based on data provided from many brokers which shows that less than 1% is profitable for 4 consecutive Q - or something like that - .

That statement means nothing unless we have the numbers for how many people have 2 and 3 consecutive winning trades. 25% may have 3 winners in a row making them profitable. This is just another tongue-in-cheek statement that means nothing as I said previously, and for the sake of REPEATING myself again, we can't know unless Brokers give us the data!

Adieu.

 

[J'ai]

well i would have thought gambling is all about risk and probability

Hi Mouse, risk and probability are the concepts that describes the outcome and the chances of an occurrence happening during a gamble.

Fred

 

[tar]

Spotting an obvious mispricing in long dates futures options or spit-second arbitrage across exchanges for a given instrument (or even front-running part of a large order that has been routed to multiple exchanges) is not an event for which the outcome is uncertain, quite the opposite as it’s a done deal/sure thing, as so could not be considered gambling.

+1

Thats what i was talking about , surely not all trading strategies are considered gambling , i gave locals making markets as an example . Arbitrage is another example as well . These are just general examples , there may be some extra details for each category .

And here we come to the second part which is not all strategies are scalable or compoundable . The problem here is most who get engaged in these boards are MT4 forex traders , they think that trading is just whether to buy/sell a currency/index using market orders only , and because forex has huge liquidity so everything is compoundable just find a profitable strategy !

 

[xyannix]

Here is a nice exhaustive piece on is trading gambling.

Is Trading Options Gambling by BinaryEX

The argument is ages old, and it depends on if you have made or lost money trading.

 

[tar]

"In other words, 87% of day traders in a given year lose money after fees are taken into account. About .28%--one in 360--is able to make money after fees year over year."

http://traderfeed.blogspot.com/2014/08/what-proportion-of-daytraders-actually.html

 

[J'ai]

Gambling is the staking of capital on an event for which the outcome in uncertain.

So AB, just one question to your message as it may make the rest of my response mute. Are you telling me that not only do you never lose, you are also 100% certain that any trade you place will become a winning trade.

Should you on the other hand believe you are not 100% positive, that the result do not always return in your favour and that you are "uncertain" to some degree, then that would leave one naturally to believe from your own statement above that trading is gambling!!! :whistling

Fred

--------------------------------------------------------------------------------------------------
"There are two great pleasures in gambling: that of winning and that of losing."
anonymous

 

[J'ai]

+1

Thats what i was talking about , surely not all trading strategies are considered gambling , i gave locals making markets as an example . Arbitrage is another example as well . These are just general examples , there may be some extra details for each category .

Stop and think just for a second. If arbitrage or any other trading practice was that successful then every Bank, Hedge Fund, Mutual Fund, and Prop Trading Firm to name a few would be employing it solely as there only trading practice. They would not however, be paying millions every year to top college graduates from business, statistics, maths, computing and even physics to design and develop new strategies.

And here we come to the second part which is not all strategies are scalable or compoundable . The problem here is most who get engaged in these boards are MT4 forex traders , they think that trading is just whether to buy/sell a currency/index using market orders only , and because forex has huge liquidity so everything is compoundable just find a profitable strategy.

Any winning strategy must be compoundable or it's not a winning strategy? It then becomes either a break-even strategy or a losing strategy.

--------------------------------------------------------------------------------------------------
"There are two great pleasures in gambling: that of winning and that of losing."
anonymous

 

[J'ai]

Here is a nice exhaustive piece on is trading gambling.

Is Trading Options Gambling by BinaryEX

The argument is ages old, and it depends on if you have made or lost money trading.

Sorry to disagree Xy, and it's not like me to disagree with anyone . I wouldn't say I was a loser I've been trading since 1999 and have bought a new home and drive a BMW, go on two holidays every year, blah, blah, blah , I know you've heard it all before. I win by trading CCI divergence with market flow. And no I'm not a mentor, a tutor or some forex guru. And I certainly don't have a magical system to sell to anyone.

And I still claim it's gambling, even if Tars out to get me, debatabley speaking of course.