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Is Trading like Gambling?
- Thread starter scalpmaster
- Start date
Quote from Bernoulli:
The definition of gambling says nothing about positive or negative expectancy, only that the outcome is uncertain (source: Merriam-Webster).
Some people enter trading or casino gambling or backgammon or poker or bridge with a limited knowledge of associated probabilities (and lose), others have a good idea about the long-term positive expectancy of their strategy, but that doesn't change the fact that each trading or gambling event has an uncertain outcome, regardless of strategy employed.
There are even cases in gambling with positive expectancies: blackjack with card counting (see Ed Thorp), horse racing when the odds get skewed (see William Ziemba) are two that come to mind.
I guess by this definition, investing is also gambling. Your 401k is just a gamble. Driving to work is a gamble. Eating spinach is a gamble.
If you ask 10 people what a gambler is, my opinion is that most of them would associate negative return expectations.
Quote from Rocko1:
Yes I see your point. Though if he wanted semantics he could've just looked up the dictionary.
As Clinton would say "How would you define the term, 'it'"?
Or as our feerless leader dubya says...
Fool me once, shame on â shame on you. Fool me â you can't get fooled again.
Quote from vlst:
There are many other examples of trading that is algorithmic and not chance.
The only example in trading I can think of that is not chance is arbitrage, and I don't mean statistical arbitrage. Ask the guys at LTCM if statistical arbitrage is not a gamble.
I doubt that traditional arbitrage is an opportunity that presents itself to many ETers.
As for the comment about driving being a gamble, by the definition it is but not many people would buy that, nor would I. But on the other hand, with Russian Roulette, you are likely to live (83%) but I could call it a gamble.
writing options has an advantage of winning if market moves in
your favour and sideways...
66% chance of winning?
so is writing naked puts gambling?
Who writes naked put to make consistent income?
What is a good product to write? commodities,stocks or indices?
Any recommendation?
naked calls:
gold@650, oil@70? 3 months range?
naked puts:
gold@550, oil@50 2months range?
Do both?
your favour and sideways...
66% chance of winning?
so is writing naked puts gambling?
Who writes naked put to make consistent income?
What is a good product to write? commodities,stocks or indices?
Any recommendation?
naked calls:
gold@650, oil@70? 3 months range?
naked puts:
gold@550, oil@50 2months range?
Do both?
Quote from Bernoulli:
The only example in trading I can think of that is not chance is arbitrage, and I don't mean statistical arbitrage. Ask the guys at LTCM if statistical arbitrage is not a gamble.
I doubt that traditional arbitrage is an opportunity that presents itself to many ETers.
As for the comment about driving being a gamble, by the definition it is but not many people would buy that, nor would I. But on the other hand, with Russian Roulette, you are likely to live (83%) but I could call it a gamble.
Good point there on the RR. Not much upside to that though.
Quote from Bernoulli:
The definition of gambling says nothing about positive or negative expectancy, only that the outcome is uncertain (source: Merriam-Webster).
Some people enter trading or casino gambling or backgammon or poker or bridge with a limited knowledge of associated probabilities (and lose), others have a good idea about the long-term positive expectancy of their strategy, but that doesn't change the fact that each trading or gambling event has an uncertain outcome, regardless of strategy employed.
There are even cases in gambling with positive expectancies: blackjack with card counting (see Ed Thorp), horse racing when the odds get skewed (see William Ziemba) are two that come to mind.
A definition of certainty is:
The condition of an event in which the probability of occurrence is equal to 1 (eg, death).
www.pti-international.com/index.cfm/Link=279
Soooo, what else is there besides death that isn't gambling. taxes?
Quote from illiquid:
If every trader in the world suffered from anterograde amnesia from one second to the next, then yes, you could probably make the case that each moment is independent from the next. Otherwise it's a pretty useless assumption for the markets.
This is not an assumption...see the charts when bernake speaks,
cpi/ppi, beige book, non farmpayroll,etc data release, not to mention earnings calls from major companys...
The major data are released almost every other day and intraday...which greatly affects your CONTINUITY for trading.
This effect is even greater for swing traders/investors where
every moment in time is in days/weeks, not in minutes and they
don't monitor it like 5 times a day.
Not to mention Breaking news, interest rates concern, oil prices.
VIX, volatility index fluctuating like the indices itself...they probably need a derivative to VIX itself...VIXX
(differentiation one more time,rate of change of volatility/fear).
Look at the LENGTH of the candlesticks and the kind of spikes that trigger all stops both direction when the above Singular events occur... tell me it's not gambling. Have you ever gone to the toilet and come back to see a whole new situation?
Ever heard of Gaps play?
That' not amnesia... that's a mad man playing a video game.
Continuity in markets, discrete in gambling ....my UU
The semantics of this thread are moronic. If you have an equal or negative expectancy you are gambling.
If you play russian roulette you are not gambling, you are just an idiot that doesn't know any better.
I'm definitely done with this assinine thread.
For many of you, I am certain that if you trade YOU ARE GAMBLING!
If you play russian roulette you are not gambling, you are just an idiot that doesn't know any better.
I'm definitely done with this assinine thread.
For many of you, I am certain that if you trade YOU ARE GAMBLING!
It's fascinating to me the emotional response this thread elicits. For me it's a no-brainer that trading and gambling equate because when you reduce them down to their elements the framework used to analyze both is pretty similar. Coming from a statistics background, I never saw gambling with a negative or positive connotation. The early study of statistics grew out of the study of gambling.
That the guy (Ed Thorp) who wrote "Beat the Dealer" also wrote "Beat the Markets," a book on warrants pricing that nearly anticipated the Black-Sholes formula, and ran a very successful arbitrage firm isn't surprising to me. Same with William Ziemba, who wrote "Beat the Racetrack," which is about inefficiencies in horse betting patterns, and also "Security Market Imperfections in Worldwide Equity Markets." What is an edge if not the identification of a inefficiency, whether it be a market inefficiency or a gaming inefficiency.
As for casino gambling, well you are just begging to be taken, but there are certainly exploitable edges in other games such as poker, backgammon, bridge, all kinds of games with elements of chance where money changes hands that present occasional positive opportunities. Hopefully that should sound familiar.
That the guy (Ed Thorp) who wrote "Beat the Dealer" also wrote "Beat the Markets," a book on warrants pricing that nearly anticipated the Black-Sholes formula, and ran a very successful arbitrage firm isn't surprising to me. Same with William Ziemba, who wrote "Beat the Racetrack," which is about inefficiencies in horse betting patterns, and also "Security Market Imperfections in Worldwide Equity Markets." What is an edge if not the identification of a inefficiency, whether it be a market inefficiency or a gaming inefficiency.
As for casino gambling, well you are just begging to be taken, but there are certainly exploitable edges in other games such as poker, backgammon, bridge, all kinds of games with elements of chance where money changes hands that present occasional positive opportunities. Hopefully that should sound familiar.