FAQ Is Trading the Same as Gambling?

[VictoriaAlgo]

Hi Fellas,

Trading can be the same as gambling, but it is not necessarily the case.

The key differentiator is the expected value. The expected value (EV) is an anticipated value of risk adjusted total returns of a trading system at some point in the future. In statistics and probability analysis, the expected value is calculated by multiplying each of the possible outcomes by the likelihood each outcome will occur and then summing all of those values.

The expected value of gambling is always negative/minus/losing. The expected value of trading need not be a minus. The expected value is determined by the trading strategy and other intangibles. The point being: it is possible to calculate a probability distribution of returns when assessing a trading strategy, the distribution allows us to calculate risk. The probability distribution of a gambling scheme always looks the same and the risk always out weights the return.

💖
Vicky

 

[postman]

Hi Fellas,

Trading can be the same as gambling, but it is not necessarily the case.

The key differentiator is the expected value. The expected value (EV) is an anticipated value of risk adjusted total returns of a trading system at some point in the future. In statistics and probability analysis, the expected value is calculated by multiplying each of the possible outcomes by the likelihood each outcome will occur and then summing all of those values.

The expected value of gambling is always negative/minus/losing. The expected value of trading need not be a minus. The expected value is determined by the trading strategy and other intangibles. The point being: it is possible to calculate a probability distribution of returns when assessing a trading strategy, the distribution allows us to calculate risk. The probability distribution of a gambling scheme always looks the same and the risk always out weights the return.

💖
Vicky

Unless you have a trading strategy that produces 100% guaranteed profits you are gambling.
Do you have a system that produces guaranteed profits?

 

[VictoriaAlgo]

gamble
/ˈɡamb(ə)l/
Learn to pronounce
verb
gambling
1. play games of chance for money; bet.
2. take risky action in the hope of a desired result.
---------------------------------------------------------

If the outcome is not a 100% certainty it contains risk and is by definition Gambling!

Unless you have a trading strategy that produces 100% guaranteed profits you are gambling.
Do you have a system that produces guaranteed profits?

Gambling deals with a random variable with a 50/50 outcome (game of chance) before the dealer takes his cut. A good trading system is not a game of chance. I am approaching risk and chance from the place where they are born - academically at least - and that place is statistics and probability finance theory. I cannot compete with definitions found on google.

Using your definition of gambling just about everything except death and taxes would be considered gambling and I believe we all know that would be absurd. What separates the two is the capacity to calculate an expected value, the expected value can then be compared against other expected values to assess the attractiveness of the risk. To trade a system with a 99% winning percentage and a profit factor of 2 would be a gambling as far as you're concerned, but literature doesn't agree with you.

Anyway, I am very grateful for your reply.

p.s. I know of strategies that produce guaranteed profits over the medium to long term. PM if you are interest.

 

[MacroBeat]

As an Institutional trader for almost 40 years i can tell you that Trading is NOT gambling as one thing is clear.. a bank would never give me money to trade if it were gambling... a combination of risk management and true understanding of the markets (macro ) makes it possibly the skew the probabilities and that is what we traders do.... we digest the news, we know the narrative and that gives us the odds to move away form 50-50 and hopefully skew it 60 40 or 70 30 thanks to our knowledge.. and if we get the odd trde wrong... Risk management protects us to keep the account in sync... that is real trading... BUT i agree, that many Retail Traders do gamble because their overall knowledge is too low to actually try and create that skew and they sit in front of their MT4 and might well just roll the dice up or down.. buy or sell BUT as i said.. an Institutional trader doesnt gamble, he enters the market if he thinks that the narrative gives him the skew... that means those that want to be successful in trading, have a lot to learn

 

[wmram]

I doubt that you can get a bank to give you money to trade because in their eyes trading is gambling.
Go to any mainstream retail bank and tell them you want to borrow money to speculate in the financial markets let's see how much they will give you(that's not directed to you specifically, but generally speaking banks are not going to bring that kind of debt onto their books).
What we traders do is make a bet hopefully as a result of a reasonably well thought out narrative, time market entries ,exits and manage risk.

 

[postman]

I doubt that you can get a bank to give you money to trade because in their eyes trading is gambling.
Go to any mainstream retail bank and tell them you want to borrow money to speculate in the financial markets let's see how much they will give you(that's not directed to you specifically, but generally speaking banks are not going to bring that kind of debt onto their books).
What we traders do is make a bet hopefully as a result of a reasonably well thought out narrative, time market entries ,exits and manage risk.

I keep saying the same thing, but they just cant get past the definition of the word gambling.
ANY risk in a financial venture classes it as gambling whether you like it, agree with it or not, it is still a fact.
It must be a pride thing.

 

[wmram]

I guess we're just spittin in the wind postman.

 

[VictoriaAlgo]

I keep saying the same thing, but they just cant get past the definition of the word gambling.
ANY risk in a financial venture classes it as gambling whether you like it, agree with it or not, it is still a fact.
It must be a pride thing.

Oh! Come on? A pride thing? It is an academic thing, a stylized fact thing. Macro hit the nail right on the head.

Anyway, we have all heard of the extremely famous Quantitative trader, theorist and expert of experts called Paul Wilmott, right? The guy who has been hired by the largest hedge funds in the world etc. Like I wrote above, I can't compete with Google; I prefer academic and professional journals.

Here is a quote from "The Best of Wilmott. Vol II" from Chapter 5: Take a Chance: "What then is the difference between investing and gambling? In investing one buys some item, be it a stock, a bar of platinum or a waterfront house, pays the commission to the seller, and goes off possibly for a long time. Nothing prevents all participants from gaining. In fact, they usually do. The essence of an investment is this: it is possible for every person buying the item to gain and it is generally expected that most people will in fact reap profits. More interesting and profitable is the construction of hedges involving combinations of long and short risky situations where one makes a moderate profit most of the time with little risk. This is the basis of some successful hedge fund and bank trading department strategies.

The situation is different with a gambling game. There is usually a house or some type of negative or zero-sum game, be it a casino, racetrack management or provincial lottery that takes a predetermined (minimum or average) commission. On the surface, it seems that the house cannot lose except in rare instances and certainly not in the aggregate. Surprisingly, lottery organizations around the world make many conceptual mistakes in game design that lead to situations in which winning player strategies exist. How about the players? On average, they must lose since the house always makes its commission. So all players cannot win."

Those two paragraph capture the exact points Macro and I made. Now if you still disagree and prefer google definitions for knowledge, that is your business but please no more 'spitting in the wind' or 'pride' comments, it cheapens the dialogue.

 

[postman]

Oh! Come on? A pride thing? It is an academic thing, a stylized fact thing. Macro hit the nail right on the head.

Anyway, we have all heard of the extremely famous Quantitative trader, theorist and expert of experts called Paul Wilmott, right? The guy who has been hired by the largest hedge funds in the world etc. Like I wrote above, I can't compete with Google; I prefer academic and professional journals.

Here is a quote from "The Best of Wilmott. Vol II" from Chapter 5: Take a Chance: "What then is the difference between investing and gambling? In investing one buys some item, be it a stock, a bar of platinum or a waterfront house, pays the commission to the seller, and goes off possibly for a long time. Nothing prevents all participants from gaining. In fact, they usually do. The essence of an investment is this: it is possible for every person buying the item to gain and it is generally expected that most people will in fact reap profits. More interesting and profitable is the construction of hedges involving combinations of long and short risky situations where one makes a moderate profit most of the time with little risk. This is the basis of some successful hedge fund and bank trading department strategies.

The situation is different with a gambling game. There is usually a house or some type of negative or zero-sum game, be it a casino, racetrack management or provincial lottery that takes a predetermined (minimum or average) commission. On the surface, it seems that the house cannot lose except in rare instances and certainly not in the aggregate. Surprisingly, lottery organizations around the world make many conceptual mistakes in game design that lead to situations in which winning player strategies exist. How about the players? On average, they must lose since the house always makes its commission. So all players cannot win."

Those two paragraph capture the exact points Macro and I made. Now if you still disagree and prefer google definitions for knowledge, that is your business but please no more 'spitting in the wind' or 'pride' comments, it cheapens the dialogue.

I let it go last time when you said "I cant compete with google" but I feel now you have raised it a second time to point out your erroneous point. It is not Googles definition of the word gambling its the whole English speaking worlds definition.
-Cambridge dictionary - "the activity of risking money on the result of something,"
-For those US traders out there heres the Merriam Webster definition. "to bet on an uncertain outcome"

Definition of GAMBLE

to play a game for money or property; to bet on an uncertain outcome; to stake something on a contingency : take a chance… See the full definition

www.merriam-webster.com

You quote Wilmott "What then is the difference between investing and gambling?" and your error here is your comparing Investing to Gambling which is not the point we are debating. We are talking about trading. The clue is in the thread title.

"Investing and trading are two very different methods of attempting to profit in the financial markets. Both investors and traders seek profits through market participation. In general, investors seek larger returns over an extended period through buying and holding. Traders, by contrast, take advantage of both rising and falling markets to enter and exit positions over a shorter timeframe, taking smaller, more frequent profits."

Investing vs. Trading: What's the Difference?

Investing refers to long-term buy-and-hold strategies that earn returns as the investment grows. Trading refers to the buying and selling of securities seeking short-term profit.

www.investopedia.com

You remember when your teacher at school told you to READ THE QUESTION before answering , thats because it saves a lot of embarrassment when you fail the test because you answered the wrong question.

You are posting on a TRADING website 'TRADE2win' not 'INVEST2win'.

If anyone has made a trade which lost money they GAMBLED!
And to be clear if you purchased a stock and hedged with an option to prevent 'excessive loss' then your option lost money and you GAMBLED when you purchased the option!

If you want to become a trader then the FIRST thing you have to realise is that you WILL lose money and therefore you are GAMBLING. And, thats not a BAD thing!

 

[cantagril]

I let it go last time when you said "I cant compete with google" but I feel now you have raised it a second time to point out your erroneous point. It is not Googles definition of the word gambling its the whole English speaking worlds definition.
-Cambridge dictionary - "the activity of risking money on the result of something,"
-For those US traders out there heres the Merriam Webster definition. "to bet on an uncertain outcome"

Definition of GAMBLE

to play a game for money or property; to bet on an uncertain outcome; to stake something on a contingency : take a chance… See the full definition

www.merriam-webster.com

"When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’
’The question is,’ said Alice, ‘whether you can make words mean so many different things.’
’The question is,’ said Humpty Dumpty, ‘which is to be master — that’s all.”

Poisonally, I don't have a problem with words meaning different things depending on context with the proviso that one defines that context and the term before launching into any thesis. Expecting others to have the same understanding without clear definition or context in advance is (imho) somewhat irrational.

 

[MasterOfCoin]

"When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’
’The question is,’ said Alice, ‘whether you can make words mean so many different things.’
’The question is,’ said Humpty Dumpty, ‘which is to be master — that’s all.”

ought it to read

"When I use a chart,’ Batty Whatty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’
’The question is,’ said Posty, ‘whether you can make charts mean so many different things.’
’The question is,’ said Batty Whatty, ‘which is to be master — that’s all.”

?

 

[cantagril]

ought it to read

?

Curiouser and curiouser!

 

[VictoriaAlgo]

"When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’
’The question is,’ said Alice, ‘whether you can make words mean so many different things.’
’The question is,’ said Humpty Dumpty, ‘which is to be master — that’s all.”

Poisonally, I don't have a problem with words meaning different things depending on context with the proviso that one defines that context and the term before launching into any thesis. Expecting others to have the same understanding without clear definition or context in advance is (imho) somewhat irrational.

Hilarious!!!

Now, it will be good to read a few posts about the thread title rather than these deflections! 😂

 

[BigDeal]

Of course trading is a form of gambling, in the same way as betting on the horses, a football match, playing poker etc. etc. Different participants have different outcomes because of the way they approach it, but it's still the same thing.

 

[postman]

Hilarious!!!

Now, it will be good to read a few posts about the thread title rather than these deflections! 😂

It would also be good if real traders didnt have to contend with automated posting software.
The day these things start making sense is the day I quit trading.

 

[VictoriaAlgo]

It would also be good if real traders didnt have to contend with automated posting software.
The day these things start making sense is the day I quit trading.

If I was a man, I doubt you'd be so brave instead you'd probably address the topic at hand.

 

[postman]

If I was a man, I doubt you'd be so brave instead you'd probably address the topic at hand.

Your not saying your a woman though are you!
I did address the topic at hand and your programming missed it.

For everyone to see, this is how the argument presented by VictoriaAlgo was rebuked but it has no coherent response.

FAQ - Is Trading the Same as Gambling?

Hi Fellas, Trading can be the same as gambling, but it is not necessarily the case. The key differentiator is the expected value. The expected value (EV) is an anticipated value of risk adjusted total returns of a trading system at some point in the future. In statistics and probability...

www.trade2win.com

Turing fail!

 

[VictoriaAlgo]

Your not saying your a woman though are you!
I did address the topic at hand and your programming missed it.

For everyone to see, this is how the argument presented by VictoriaAlgo was rebuked but it has no coherent response.

FAQ - Is Trading the Same as Gambling?

Hi Fellas, Trading can be the same as gambling, but it is not necessarily the case. The key differentiator is the expected value. The expected value (EV) is an anticipated value of risk adjusted total returns of a trading system at some point in the future. In statistics and probability...

www.trade2win.com

Turing fail!

Come on. Basically, you've only presented insults and sarcasm since I posted. Now I'm being accused of been an A.I. bot, now that is a first.

He has deliberately posted an argument above that displays Marco's argument, an argument with which I agree; an argument that was very coherent. Only when you can be bothered to click the quote do you get to see the insults and deflective bullying.

As I wrote above, if I was a man you wouldn't dare. I've seen your type before!!! It is 2021! Women in forex is a real thing so get used to it!!!

 

[postman]

Come on. Basically, you've only presented insults and sarcasm since I posted. Now I'm being accused of been an A.I. bot, now that is a first.

He has deliberately posted an argument above that displays Marco's argument, an argument with which I agree; an argument that was very coherent. Only when you can be bothered to click the quote do you get to see the insults and deflective bullying.

As I wrote above, if I was a man you wouldn't dare. I've seen your type before!!! It is 2021! Women in forex is a real thing so get used to it!!!

You're too new to the site to realise how wrong that statement is!
Men dont play the 'If I was a woman you wouldn't ... card' so why would you play the 'If I was a man ... card'. That's a woman thing and makes you seem like you deserve some special privilege.

This discussion is ALL about your lack of understanding of the fact trading IS gambling and trading is not investing which I pointed out and you failed to acknowledge.

Lets stick to the ONE point that we are debating and break it down, the question is:

Is Trading the Same as Gambling?​

You quoted "What then is the difference between investing and gambling? " Investing is NOT trading your point is moot.

So what is trading :
"Investing and trading are two very different methods of attempting to profit in the financial markets. Both investors and traders seek profits through market participation. In general, investors seek larger returns over an extended period through buying and holding. Traders, by contrast, take advantage of both rising and falling markets to enter and exit positions over a shorter timeframe, taking smaller, more frequent profits."

What is gambling?
The whole English speaking worlds definition of Gambling is ...
-Cambridge dictionary - "the activity of risking money on the result of something,"
-For those US traders out there here's the Merriam Webster definition. "to bet on an uncertain outcome"

Is the outcome of a short term position certain? NO. So you are RISKING money.
Ergo Trading = Gambling.

Do you agree or disagree just that point?
I bet you would rather just walk away than address the argument or admit you were wrong.

 

[VictoriaAlgo]

You're too new to the site to realise how wrong that statement is!
Men dont play the 'If I was a woman you wouldn't ... card' so why would you play the 'If I was a man ... card'. That's a woman thing and makes you seem like you deserve some special privilege.

This discussion is ALL about your lack of understanding of the fact trading IS gambling and trading is not investing which I pointed out and you failed to acknowledge.

Lets stick to the ONE point that we are debating and break it down, the question is:

Is Trading the Same as Gambling?​

You quoted "What then is the difference between investing and gambling? " Investing is NOT trading your point is moot.

So what is trading :


Is the outcome of a short term position certain? NO. So you are RISKING money.
Ergo Trading = Gambling.

The outcome of a long term position isn't certain either.

You have completely ignored the points raised by the Wilmott book except to compare investing to trading, but you call me out about ignoring investing vs trading. I didn't ignore it but didn't want to get into a debate about the fractal nature of the time series. As Macro stated, even the normal distribution of short term positions can be heavily skewed in the positive direction if you know what you're doing.

Let's just agree to disagree and give others the opportunity to take the floor..