Difference between trading and gambling

people often compare trading to gambling, they are not the same!

Except for some table games like blackjack the biggest difference between trading and gambling is that previous results have NO effect, unlike in trading.

for instance, on a roulette wheel..no matter what has happened in the past it has no physical effect on where the ball will land, it is always the same fixed odds. In trading previous results DO effect the outcome of the market.

but if you dont know what the outcome of an event will be, even if you have an edge, it is still gambling - just a good gamble

im comparing the technical differences, not the theory of what gambling is

N Rothschild said:

people often compare trading to gambling, they are not the same!

Except for some table games like blackjack the biggest difference between trading and gambling is that previous results have NO effect, unlike in trading.

for instance, on a roulette wheel..no matter what has happened in the past it has no physical effect on where the ball will land, it is always the same fixed odds. In trading previous results DO effect the outcome of the market.

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Agreed. But we're never going to resolve the differences between trading and gambling when we don't have a widely accepted definition of what gambling on its own is.

tomorton said:

Agreed. But we're never going to resolve the differences between trading and gambling when we don't have a widely accepted definition of what gambling on its own is.

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indeed, it mainly struck me last week when i was doing well at the casino and was still thinking up ways 2 the "beat" the wheel, when it dawned on me it cant be done!

Except for some table games like blackjack the biggest difference between trading and gambling is that previous results have NO effect, unlike in trading.

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What about horse racing ?


Paul

In trading you're playing against people, in gambling you're playing against machines, balls, random cards, computer generated numbers, generally unknowable events.

Hence why casinos only host poker games.

Trading is about people and ultimately how much you are in control of yourself.

Emini-mouse said:

but if you dont know what the outcome of an event will be, even if you have an edge, it is still gambling - just a good gamble

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well in that case business is a gamble too you never know wht the outcome will be end of year, a recession might just po-up, and your bank stops lending you and you go bust. or some competitor might turn up and eat up all your margins and you re liquidated.

life is then a gamble too, you dont know the outcome of tomorrow

but in trading, chart patterns repeat themselves

I agree totally. Another thing to keep in mind, which is slightly similar to the whole independent next event theory, is that most successful traders are able to trade successfully because they can put the odds in their favor. Obviously, no one can trade with the odds totally in their favor, but it is possible to increase the odds of a trading working out. In gambling, there is no way to do this, and therefore, "the house always wins".

This topic reminds me off a couple of traders I read about in Trader Monthly's edition of "Top 30 Under 30" who, before trading, were professional blackjack players. They've now opened one of the most successful prop shops and are doing really well. In fact, they mentioned that when they look to recruit new traders, they prefer traders with good arithmetic skills and a knack for gambling. Not because gambling and trading are alike, but because the skills required to be a successful & professional trader are very similar to the skills required to be a successful and professional gambler.

Amit

N Rothschild said:

people often compare trading to gambling, they are not the same!

Except for some table games like blackjack the biggest difference between trading and gambling is that previous results have NO effect, unlike in trading.

for instance, on a roulette wheel..no matter what has happened in the past it has no physical effect on where the ball will land, it is always the same fixed odds. In trading previous results DO effect the outcome of the market.

Click to expand...

gam·ble (gmbl)
v. gam·bled, gam·bling, gam·bles
v.intr.
1.
a. To bet on an uncertain outcome, as of a contest.
b. To play a game of chance for stakes.
2. To take a risk in the hope of gaining an advantage or a benefit.
3. To engage in reckless or hazardous behavior: You are gambling with your health by continuing to smoke.
v.tr.
1. To put up as a stake in gambling; wager.
2. To expose to hazard; risk: gambled their lives in a dangerous rescue mission.
n.
1. A bet, wager, or other gambling venture.
2. An act or undertaking of uncertain outcome; a risk: I took a gamble that stock prices would rise.

the word gambling has become subjective in its meaning. starting a business has its risks therefore may be defined as a gamble as can anything which is not seen as a safe bet.

Most people that see trading as gambling believe that it has a negative expectancy and that any success is down to luck, hence the comparison.

If your comparing trading to gambling in a casino specifically, then no they are nothing like each other.

However there are people out there that make a living out of sports gambling but i'm sure their approach is somewhat different to a regular punter, they prob have a system (based on fundamentals) discipline and knowledge in their chosen field.

So I would say that trading is more simmiler to sports betting then a casino with most participants not really knowing wht they are doing and a few that do.

Gambling generally has a negative expectancy and a good trader with a good system will have a positive expectancy. That's the difference.

Of course for many traders they don't really know what their game is and therefore their trading will be akin to gambling and also have a negative expectancy.

Trader333 said:

What about horse racing ?


Paul

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why would previous results effect a horse race? unless the horse was still tired!

amit1986 said:

I agree totally. Another thing to keep in mind, which is slightly similar to the whole independent next event theory, is that most successful traders are able to trade successfully because they can put the odds in their favor. Obviously, no one can trade with the odds totally in their favor, but it is possible to increase the odds of a trading working out. In gambling, there is no way to do this, and therefore, "the house always wins".

This topic reminds me off a couple of traders I read about in Trader Monthly's edition of "Top 30 Under 30" who, before trading, were professional blackjack players. They've now opened one of the most successful prop shops and are doing really well. In fact, they mentioned that when they look to recruit new traders, they prefer traders with good arithmetic skills and a knack for gambling. Not because gambling and trading are alike, but because the skills required to be a successful & professional trader are very similar to the skills required to be a successful and professional gambler.

Amit

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disagree for the reasons in my first post

N Rothschild said:

why would previous results effect a horse race? unless the horse was still tired!

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I assume (and i'm no expert) that you would study previous form of horse and rider in conditions expected on the day ie length of course weather etc...

just as you would study a chart to find a trending instrument to back.

surely that would come under statistics as apposed to the odds of it running a good race?

isn't chart reading just looking at the statistics in order to increase the odds of a trade going your way??

hmm no because technical analysis is a self fulfilling proficy isn't it. the fact those statistics exit will determine how people trade at the moment in time. a horse wont run any faster just becuase it is statistically likely to win

i dont believe it is self fulfilling, the sheer no of market participants and the infinate reasons for entering/exiting a trade make the odds of any level holding or not no better then 50/50.

its how you manage your trades and your consistancy in doing it that make the difference, which is where i believe the key difference between trading and gambling lies.

Once the race begins you can not pull your bet for a smaller loss if the horse is running badly, its completely out of your hands.

With trading its how we manage the trade that makes the difference and thats why 2 people can enter at the same price and still have very different outcomes.

The difference as I see it between gambling and trading.

Gambling...we are not able to influence the outcome.
Trading...we can influence the outcome.

tomorton said:

Agreed. But we're never going to resolve the differences between trading and gambling when we don't have a widely accepted definition of what gambling on its own is.

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An excellent point made there tomorton.
I would like to add a point to ponder.

With gambling on each bet you take, you have one hit.
there is no leeway, you cannot say Shergar will win at the next attempt.
You have to place a new bet.

In trading with the use of stop losses and time factor, your trade might break the resistance/support at the next attempt.You can have multiple attempts with the same bet.
This is a scenario not open in gambling you have one attempt and thats it.