Is trading Gambling or not .."What say You" Vote here.

Is Trading Gambling or not

  • Gambling

    Votes: 460 35.0%

  • Not Gambling

    Votes: 854 65.0%
  • Total voters
    1,314
  • This poll will close: .
Trading is gambling. Investing, however, is not.

Investing is the deployment of money into an asset based on an evaluation of micro- and macroeconomic conditions with the expectation of asset growth.

Trading is the purchase and sale of securities based on speculation of market price action, market inefficiencies, arbitrage opportunities and so on. Trading always involves a "bet" on price direction or volatility.

A revealing clue on investing vs. trading as gambling comes with inspecting the tools of the trade. Investors pore over SEC reports, annual reports, market surveys, etc. Traders have colorful screens that blink and light up.

I prefer trading. It's more fun :)
 
Gambling is to a casino.... as trading is to a Good trader.


Some have argued that any outcome which is uncertain is gambling... I disagree...Do casinos gamble.... all their outcomes are certainly not certain...They simply have a slight edge...just like a good trader "should"...

For example, the house has a 1.4 % edge on Pass/Don't pass at the crap table...(MY GAME) this can be further reduced with taking odds depending on the point and odds allowed at the casino. Every individual bet is an uncertain event for the casino and player alike. Just like every individual trade is an uncertain event to a good trader. However all bets (Trades) combined over a given time period are almost certain to show a profit to the one who holds this slight edge. The longer the time period and/or the more bets played the better the odds are for showing a profit.

A good trader trading a model that has a positive expectancy puts himself in the same situation as the house. Will he win them all, no... but he will win more then he loses (not necessarily more times) and should be profitable after enough play time.

A trader trading without a positive expectancy is gambling. He is the customer in the largest casino of them all.


Nick
 
What one be correct to say that in gambling the structure and odds don't change?

In trading systems, the situation is in greater flux. Has anyone experienced a system that used to work go belly up? The market seemed to change and the system does not work anymore. It may even work again one day, 'but you never know'.
 
sorry if anyone mentioned this already but in Canada, gambling winnings are not taxable while investment gains are. The tell, according to the law and upheld by courts is the <b>reasonable expectation of profit</B>

isnt that funny? what if i am a card counter and go to the casino with the expectation of an edge, and fully expecting to win?

for those of you who think trading, gambling and investing are all different things, read some writings of Bill Ziemba, Ed Thorp, or if you are a scientist by education read the original paper by Kelly (1956). Thorp in the guy who first invented card counting for blackjack, then went on to discover the appropriate method for convertible arb, and later short-term mean reversion. The reason you never might heard of him as hedge fund manager is that he never blew up, or perhaps because he only took mathematically calculated gambles and never something the newspapers would write about like betting agaist the british pound, malaysian currency etc.

So to answer your question, yes professional trading and professional gambling are the same. And random, haphazard variety of trading and gambling is also the same.

K
 
Quote from kotika:

sorry if anyone mentioned this already but in Canada, gambling winnings are not taxable while investment gains are. The tell, according to the law and upheld by courts is the <b>reasonable expectation of profit</B>
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So only investors get penalized. :D
 
Quote from kotika:

So to answer your question, yes professional trading and professional gambling are the same. And random, haphazard variety of trading and gambling is also the same.

K
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sums it up perfectly
 
Quote from gnome:

I contend that the common dictionary's definition of gambling is both simplistic and imprecise.

I also make the observation that this question is often asked and much time is devoted to its discussion on ET. However my personal experience among traders who have made signficant money in the markets has been that this question is not pondered at all. In fact, I suspect it's not even considered.
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And yet here we are, pondering and considering it. Personally, I'm not that concerned with what other people do. In any event, I suspect we both largely see it the same way but are using different words to describe it.
 
Quote from Thunderdog:

Your argument does not necessarily distinguish trading from gambling. It simply suggests that trading is a form of gambling with potentially better mathematical outcomes.

Trading actually has a downside in relation to casino gambling in one limited respect. In the casino, you can essentially determine the exact probability of the outcome, although that probability may not be in your favor. On the other hand, there is no such clear probability distribution when trading the markets. The markets are shrouded in uncertainty, that less attractive and numerically indeterminate cousin of probability. I believe that anyone who thinks he is trading the markets with numeric specificity is kidding himself. What some traders view as the probability distribution of possible outcomes on future trades is only a statistical distribution of past trades which may or may not only have a nodding acquaintance with future performance. (Consider overly tight curve fitting as an extreme example in this regard.) While the markets may approximately repeat themselves from time to time and while some trading methods may be fairly reliable, they lack actual numeric certitude in respect of future performance. At best, I think that the trader can go with "the balance of probability," which is more of a bias than anything else.

Please don't misunderstand me, though. I have never been to a casino and I have no desire to visit one any time soon. However, I do trade.
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excellent post. i am impressed, dog.

surfer:)
 
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