trading--Gamble or Serious Job

The presence of risk does not make something a gamble, else all of life would be a gamble, and God would be like Donald Trump. It is not so.

How you view the reality of risk (as entertainment or, on the other extreme, as a condition to be mastered) pretty much determines what the odds are of your success. Someone said, 'if you have a positive expectancy, you're like the house, if not, you're the sucker,[paraphrase]' is a great way to say it.

Another way of putting it is this: brain surgery might be risky for you (owing to a presumed lack of experience) but not for your favorite brain surgeon. Your preparation for the risk at hand has a large influence on the probability of a successful outcome. Even for the best prepared, however, there exists the possibility of unforseen or forseen setbacks.

On any single event, there is some element of uncertainty no matter how well prepared you are. The more the event is repeated, assuming you have that positive expectancy, the effect of this uncertainty regarding forseen setbacks diminishes (never to zero though.) The risk of the unforseen is constant.
 
Roumeo, price movements are less random over longer time periods (to an extent). This would indicate that the edge goes in favor of the long term trader, not against.
 
I found a nice quote in Zen and the Art of Poker (pg 30) that I thought summed up the essence of trading. My initial reaction was to replace the word "gambler" in the quote with "risk taker" or "speculator" because of certain negative connotations (in my mind) associate with the word "gamble". But it really doesn't matter because the meaning is the same and having a semantics debate is not really the goal of this thread IMHO.

The winning gambler in any arena is the one who arrives with the idea of laying low, waits to get himself into good position, and then (and only then) makes his strike. He chooses his best spots, waits until the odds are most in his favor, then takes hit-and-run chunks of money, after which he takes disciplined steps to withdraw once again and avoid losing it all back. Players who operate like this are the ones who take home the money over the long run.
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You could also say that all trading is a business, and like all businesses there are cycles of prosperity and famine. So just because we call something a business doesn't make it good business, just as buying a lotto ticket at 40mil to 1 odds when the jackpot is 300mil is actually a good gamble. You could have been a music label trying to sell disco albums during the 80's, but that's just bad business. You could have been a skeptic permabear during the entire nasdaq run from 1500-5000, but that would have been bad business as well -- so too being long the market after the summer of 2000. Intraday trading as a business is gradually getting worse as more and more people blow out or slowly hand over all their money to Don :D, leaving the best in the field trading against each other.

Playing blackjack with a 1% edge, a limited bankroll, with the threat of getting banned if you try to increase that edge (team players, co-operative dealers), having to wear a disguise and the threat of jail time after you do get banned -- its a business, but is it a good business? :confused:
 
I see a connection here. I am amazed when I see a 10,000 trial simulated coin toss. It can resemble the 5 year daily spooz. It teaches me that even a 'random' process can run in streaks. So, the 'gambler' in the quote has to take steps to walk away. And so, business runs in cycles.

The wealthiest man in the world (who had more women or money than Solomon?) is thought to have said, 'time and chance happen to them all.'

"Larry Livingston" said something thought provoking (paraphrase): you can beat a market but not THE market. We all know how he wound up.

Perhaps the only 'good' business is being the house. After all, "Duke and Duke always make the commission "(from 'Trading Places'). But that gets back to 'he who has the gold makes the rules.' (No, this isn't good morally).

Still, all this talk about probabilities ignores the effect of how we deal with them. That is our edge. I believe one can surf the graphs of time and chance and, if his heart is right, it will all work for his good.
 
Real interesting thread this one.

My view is that trading is not gambling for one very basic reason.

In true gambling games like poker or even coin tossing there are only so many variables (albeit lots of them) to an outcome. No matter how you cut it poker is played with a pack of cards that have a finite number to them.

The stock market is a proxy for companies that have infinite variables as long as all the time they are producing something or creating wealth. In many respects, trading an index over time is heavily weighted in your favour on the long side because of dividends, increased earnings, new entrants etc. Even daytrading can be operated, IMO, with a substantial edge that does not resemble gambling if there is an underlying force that is driving the price in one direction.

You can make any business gambling if you just make random decisions based on guesswork. I guess.

Mike
 
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