Explain to a 5 year old, how is trading different from gambling?

Quote from BSAM:

When you risk money on any uncertain outcome, it constitutes a gamble.
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As long as your edge is still valid then the outcome over many trades is certain (or at least approaches very close to 100%).
You will make a net profit for sure.

ie When looked at over a long enough period a profitable trader is not gambling. But over short periods (low number of trades) it does look like gambling.
 
Quote from Millionaire:

As long as your edge is still valid then the outcome over many trades is certain (or at least approaches very close to 100%).
You will make a net profit for sure.

ie When looked at over a long enough period a profitable trader is not gambling.
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Too funny. Each trade constitutes a gamble. Some people are successful at blackjack. Does this mean they are not gambling?
 
Quote from BSAM:

Too funny. Each trade constitutes a gamble. Some people are successful at blackjack. Does this mean they are not gambling?
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But looking at each trade individually might not be accurate, it might be better to consider the overall operation before deciding if something is gambling or not.

Placing one trade might be gambling, but placing 1000 small trades if you have a valid edge is not gambling because a profitable outcome is pretty much certain.
 
Quote from Millionaire:

But looking at each trade individually might not be accurate, it might be better to consider the overall operation before deciding if something is gambling or not.

Placing one trade might be gambling, but placing 1000 small trades if you have a valid edge is not gambling because a profitable outcome is pretty much certain.
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Well, my friend, you're wrong about this.

Now, here's what I would like for you to do.

Look up the definition of gambling and post it right here for all to see.

Don't squirm, don't twist, don't spin, don't jive...Just post the definition of gambling. It's the type of word that can't be redefined. It isn't subjective. Okay?...So, just post it.
 
Quote from BSAM:

Well, my friend, you're wrong about this.

Now, here's what I would like for you to do.

Look up the definition of gambling and post it right here for all to see.
More...


The dictionary definition of gambling is incomplete, it doesn't differentiate between positive expectancy outcomes and negative ones.

Lets say i offered you a bet, 99 times out of hundred if you accepted the bet, you will make £1 and 1 times out of hundred you would lose £1.

By the dictionary definition if you accepted the bet then you are gambling.. but most people in the real world would not see it as gambling.
 
Quote from Millionaire:

The dictionary definition of gambling is incomplete, it doesn't differentiate between positive expectancy outcomes and negative ones.

Lets say i offered you a bet, 99 times out of hundred if you accepted the bet, you will make £1 and 1 times out of hundred you would lose £1.

By the dictionary definition if you accepted the bet then you are gambling.. but most people in the real world would not see it as gambling.
More...

Oh my. I tried.
 
Quote from Debaser82:
Both deal with odds and probabilities, don't they?
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In trading, the "house" is the global market place for capital ("the capital markets") via which money is ultimately directed efficiently towards funding good ideas and businesses, and starving the bad ones of capital resources. Traders oil the wheels of this great machine of human progress, by providing funds and liquidity.

In gambling, the house is the mafia owned casino via which capital is ultimately directed efficiently towards funding other mafia directed businesses, and the mafiosi lifestyles of the owners. Gamblers oil the wheels of this great machine of human vice and misery.

But hold on ... aren't traders funding the mafiosi lifestyles of the robber baron VC and hedgefund managers? And aren't the capital markets run by the Goldman alumni mafia?

Perhaps there is no difference? Even a 5-year old can see that ...
 
I just looked up Investing and Gambling, these were the first two definitions i got:


Definition of Investing
=======================
Expend money with the expectation of achieving a profit or material result by putting it into financial schemes,
shares, or property, or by using it to develop a commercial venture


Definition of Gambling
======================
Play games of chance for money; bet
- she was fond of gambling on cards and horses
 
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