Trading = Gambling?

[d5dude]

Are you serious? Ever heard of luck and survivor bias?

It is not just people who possess an edge who will win - lucky investors will as well.

Luck only matters in the very short run, in the long run luck eventually runs out for everyone.

 

[frozened]

Key is "right" company. How do you know you bought the right company? Can anyone say for sure (100%) what the future holds for any company? Fact is no amount of analysis will prepare anyone for what lies ahead, what investors/traders have is an estimate at best, and we know estimates can be terribly wrong sometimes.

First time I hear someone say BRK is speculative, BRK is one of the bluest blue chips in the US, simply because Warren Buffet has consistently outperformed the broader market index for the last 20 years.

Btw Warren Buffet uses the word "bet" very often too, incidentally his company sold billions worth of derivatives (puts) on the SP500 a few years ago, so he makes bets too, but people call him an "investor" (and not a gambler) because he makes his bets on wall street, and not the casino.

The word Bet makes it why there is never a sure win. I "bet" warren buffet has his fair share of losses too.
thats why all stocks blue chips or not are still speculative in a sense. You never know whats going to happen but you definitely know that some will be more stable and predictable than others. Rendering that stock to be good for "investment". Just like the two sides of a coin, there is "right" and there is "wrong". Pick the right stock for your portfolio and you reap the benefits. Pick the wrong stock and you suffer the consequences. Speculative in nature you're guessing which ones are good and bad.

 

[holysmokes]

Back to the TS qn

My 2cents:

Same, in the sense that

1. Both are conceptually a bet on outcomes in a non-guaranteed, random event.
2. Both are my dream jobs.

Most debates revolves around outcome, or specifically, profitability. The most typical assumption is that gambling=losing money for sure. These assumptions create the wrong impression that they are surely different because one is sure to lose money in the long run.

Different in the sense that

Gambling has a lower chance of being profitable compared to trading.

As far as I know, there are only a small handful of games that a player can have an edge over the house. Blackjack counting is one of them.

Trading on the other hand, has an uncountable number of methods and instrument combos that have a positive edge.

My friend explained to me that trading is not gambling. You must have skills, experience and knowledge about the markets to know your next move.

I told him play blackjack and poker also need skills, experience and knowledge to know your next move. And that is gambling.

Even though I made some small money through trading, I still think it is like gambling in some way, if hold positions overnight, I will think about them de because they can go in my favour or against me tomorrow.

any comments?

 

[Majestic12]

Poker is the only card game that is the closest to trading, largely because you are never playing against the house. The rest are just gravy.

 

[Philodox]

both are also taking risk la so is same. Just is see u are taking calculated risk, or taking risk blindly. Don't mind the words gamble or trading too much, they are.. meaningless.

 

[Emo_Rhino]

market is really crazy today... went down alot, in my mind, i was thinking shld I buy since its so cheap now? or shld i short sell? is the mkt oversold or over reacting?

I realise I don't have the ans. I panic and realise I am gambling.

end of the day i exited based on my max loss i can tahan, and disregarding what news were happening around the world. it was only afterwards then I knew about the greek PM thingy.

Jin moody

 

[strangerjun]

market is really crazy today... went down alot, in my mind, i was thinking shld I buy since its so cheap now? or shld i short sell? is the mkt oversold or over reacting?

I realise I don't have the ans. I panic and realise I am gambling.

end of the day i exited based on my max loss i can tahan, and disregarding what news were happening around the world. it was only afterwards then I knew about the greek PM thingy.

Jin moody

You too emotional liao..

Jin moody... I think you be investor better rather being a trader..

 

[FP_IFA]

market is really crazy today... went down alot, in my mind, i was thinking shld I buy since its so cheap now? or shld i short sell? is the mkt oversold or over reacting?

I realise I don't have the ans. I panic and realise I am gambling.

end of the day i exited based on my max loss i can tahan, and disregarding what news were happening around the world. it was only afterwards then I knew about the greek PM thingy.

Jin moody

You don't have a plan and you don't know what you are doing. You are not prepare for such violatility. Stay out please. It is for your own good. Don't always think people are earning money cause the truth is tons are getting killed today.

 

[Emo_Rhino]

You too emotional liao..

Jin moody... I think you be investor better rather being a trader..

buy and hold is dead la. i also want to be long term investor.

imagine u think the company is gd, u buy and hold, but the mkt make ur valuation drop to 10% loss. will u exit?

ppl who buy at peak before 2008 crash still haven reach break even leh.

 

[Emo_Rhino]

You don't have a plan and you don't know what you are doing. You are not prepare for such violatility. Stay out please. It is for your own good. Don't always think people are earning money cause the truth is tons are getting killed today.

i had a plan, which was to exit at the max loss i had in mind. (a certain % of loss I can bear, in other words, you could say its a stop loss).

just that when it really reached that level, panic came in and made doubt whether I really want to really exit based on that stop loss.

Behavioural Finance at its best

 

[FP_IFA]

i had a plan, which was to exit at the max loss i had in mind. (a certain % of loss I can bear, in other words, you could say its a stop loss).

just that when it really reached that level, panic came in and made doubt whether I really want to really exit based on that stop loss.

Behavioural Finance at its best

Write down your plan and the reason on the stop loss and take profit point so you can remember what you are doing. When in doubt go back to what you have noted down.

Do that for every trade. It will help you.

 

[digitalguy]

trading is gambling. no doubt about it

 

[Forever84]

My 2cents:

Same, in the sense that

1. Both are conceptually a bet on outcomes in a non-guaranteed, random event.
2. Both are my dream jobs.

Trading on the other hand, has an uncountable number of methods and instrument combos that have a positive edge.

Ur dream job is u dun want to work la. Lol.

 

[ronnie]

trading is gambling. no doubt about it

Only when you are losing money.

 

[Majestic12]

Only when you are losing money.

No, it also applies if you are winning. How do you know for sure if your winnings were largely from luck or skill?

 

[icelemontea]

No, it also applies if you are winning. How do you know for sure if your winnings were largely from luck or skill?

good question. you aren't able to answer if u use a discretionary trading method.

 

[peterchan75]

Gambling and trading are similar i.e. the outcome is not certain. Casino operators sink in billions and expected lucrative returns becuase casino operators have an edge. In the long run, cosinos always make money. As long as the investors or punters have an edge, they will come out on top in the long run. In casinos, all the games are in the casinos favour satistically. For example in 4D, if you use $10K to buy from 0 - 9999, you will not get $10K assuming there is no "angji". So, where is the edge in stock trading ?

If you are emotional when you put on a trade, your counter party already have an edge over you.

 

[supratentorium]

End of the day no matter how you skin the cat, you must have a method you know that will work and take you to equity highs or else you will stop pulling the trigger.

A method with 40% win rate even profitable can be expected to have a maximum 9 losing streak over 100 trades.

 

[h.y.o.m]

In my humble opinion, you are gambling when you place bets with odds that are not in your favor. If you trade or invest when the odds are in your favor, you are not gambling. If you are a skilled card player at the casinos like the MIT card-counters, you are not gambling. However, it is very hard to have an edge at the casino. Hence, almost all people who go to the casinos are gamblers. It is easier in the stock market. One can wait patiently for opportunities when the odds are deeply in our favor, then strike. If you can do this, then this is real investing and certainly not gambling.

I wrote an article on gambling at the casino some time ago.

http://help-your-money.blogspot.com/2010/08/gambling-things-you-must-avoid-to.html

 

[Mecisteus]

In my humble opinion, you are gambling when you place bets with odds that are not in your favor. If you trade or invest when the odds are in your favor, you are not gambling. [/url]

just to add, anything that has a <50% chance of winning is gambling. In casino, the highest odd is close to 50% and this is a akin to flipping of a coin. thats why in the long run, you still lose money.

real investors or traders must aim for a higher chance of winning ie 60 to 80% success rate. then this isn't considered gambling. and in the long run, you will earn money.