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Is trading gambling?


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View Poll Results: Is Trading Gambling?
Yes 38 34.55%
No 72 65.45%
Voters: 110. You may not vote on this poll

 
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Is trading gambling?

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  #1 (permalink)
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Some months ago I posted this poll on the home page:



So basically 70% believe trading is not gambling, and 30% believe it is.

I am creating this thread for a discussion on the subject. I've also re-created the poll, so you can vote here a second time and we'll see what it looks like this time around.

Is trading gambling?

That is the question. It's interesting to see how trading is perceived by family, friends, strangers... just look at this thread for examples of how negative most people view trading:



I think it is fair to say that in general, most people view gambling negatively as well. I mean as a profession. If you say that your "job" is to gamble, you'll probably get some frowns. But then there are professional poker players, isn't there job to gamble?

What is different about a professional poker player and a trader?

Some would argue that trading is gambling because when you don't know the outcome of something but "place a bet", you are gambling. When you put an order in the market, you don't know the outcome. You are betting the outcome will be in your favor, by playing the odds. Sounds like gambling.

Some would argue that trading is NOT gambling because a lot of people (myself included) hold the view that when someone says "gambling" they mean placing a bet with very little chance of winning or positive outcome. For instance, I don't like to gamble. When I go to Vegas, I am more interested in seeing the sites and bars, clubs, enjoying a good meal or show, etc. I play the tables but not much and when I do it's not something that gives me a lot of joy.

So I think the answer to the question likely has to do with how you interpret the word gambling. If you, like me, interpret it to more or less mean "place a losing bet", then trading isn't gambling if done correctly. Of course the argument can once again be made that poker isn't gambling if done correctly, either.

So which is it?

Mike

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  #3 (permalink)
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my 2 cent's, i say the market obey's it's own rules about 80% of the time,so if you have years of pratice and study more than even me i mean you understand the market and understand that when the market does this it will probally do this not will do this but probally do this then i say the other 20% is call it what you want gut,instinct,luck or gambling...sharky

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  #4 (permalink)
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A person engages in gambling if he stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he or someone else will receive something of value in the event of a certain outcome. Gambling does not include bona fide business transactions valid under the law of contracts, such as the purchase or sale at a future date of securities or commodities, contracts of indemnity or guaranty and life, health or accident insurance.

I underlined and bold the key reason trading is not gambling IMO. My trades are placed based on my experience, education and what I see not by just randomly place a trade on the fly and take a chance that it will win or not.

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  #5 (permalink)
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Trading with a confirmed positive expectancy is not gambling
Trading profitably occurs when you trade with a positive expectancy.
You can limit risk and you can maximise gain.
A loss on the races guarantees 100% Loss of amount risked on that bet
A loss on a trade in a validated positive expectant method will (generally-depending on the methodology) be less than 100% of that risked
A win on most positive expectant methods will be more than 100% of that risked

The trick is to arrive at a positive expectant method and many dont ever validate that - are they the 90%?

A trading method with negative expectancy is indeed gambling.

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  #6 (permalink)
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Interesting responses so far.

Some people on this forum say that your trading career should be finite, I mean that eventually you will lose so you should quit while you are ahead. All part of the zero sum game theory.

I've never been good at math but I really don't subscribe to that. Sitting aside old age and diminished capacity as an individual --- just like a quarterback that gets older on the field is more prone to injuries and isn't as fast as he once was --- I have a hard time believing that in the end, if you trade long enough, you will eventually lose.

I wish I could remember specifically the users that have made this argument on futures.io (formerly BMT) before, but hopefully they will see this thread.

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  #7 (permalink)
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If your trades truly have positive expected value then it can only be argued that if you trade long enough you will win, not lose.
A new bar just recently opened near me and it is not like there are a shortage of bars to go to.
Is the owner gambling with the starting capital that has been put up or is the owner running a business?
Surely, the owner must think they have an edge on other people running bars or they would not have bothered.
The reality though is that you probably would get better odds at a roulette table than being able to run a bar at a profit in the long run. Trading is much harder than running a bar.
To view "legit business" as some kind of ATM machine and not huge gambles is foolish IMO. So to me the question really has no meaning to start with. Running a business is gambling.

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  #8 (permalink)
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dutchbookmaker View Post
If your trades truly have positive expected value then it can only be argued that if you trade long enough you will win, not lose.
A new bar just recently opened near me and it is not like there are a shortage of bars to go to.
Is the owner gambling with the starting capital that has been put up or is the owner running a business?
Surely, the owner must think they have an edge on other people running bars or they would not have bothered.
The reality though is that you probably would get better odds at a roulette table than being able to run a bar at a profit in the long run. Trading is much harder than running a bar.
To view "legit business" as some kind of ATM machine and not huge gambles is foolish IMO. So to me the question really has no meaning to start with. Running a business is gambling.


Running a business is taking on a risk no question about it. I ran a very successful marketing company and then sold it in 2009. Our economic system is built on individuals willing to take risks for the benefit of financial gain. The difference between failure and success in a business entity is a well thought out business or trading plan. In any business trading included, your edge is your experience, education, vision and skills. You can add perseverance and passion to that.

There will always be a difference in opinion with any topic, but what question comes to mind to me regarding this topic is, for those who view trading as gambling. My question is are you admitting that you are a gambler?

For those who are in this business looking to make fast money then yes, I would say they are gambling. But for those who look at trading as their business and who they are then I would say no they are not gambling.

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Everything we do is a gamble or circumstance w/ risk.

gam·ble   
[gam-buhl] Show IPA
verb, -bled, -bling, noun
–verb (used without object)
1. to play at any game of chance for money or other stakes.
2. to stake or risk money, or anything of value, on the outcome of something involving chance: to gamble on a toss of the dice.
–verb (used with object)
3. to lose or squander by betting (usually fol. by away ): He gambled all his hard-earned money away in one night.
4. to wager or risk (money or something else of value): to gamble one's freedom.
5. to take a chance on; venture; risk: I'm gambling that our new store will be a success.
–noun
6. any matter or thing involving risk or hazardous uncertainty.
7. a venture in a game of chance for stakes, esp. for high stakes.

After all this, does it really matter what we call things or what our perception may be?

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  #10 (permalink)
 
 
Posts: 1,081 since May 2010


IMHO the question should be :

Are people who are successfully trading for a living the same as people who are successfully gambling for a living ?



...There are many similarities IMHO.

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