Trading v gambling – the ever-prominent argument
Is trading gambling?
If there is one argument that seems to be challenging to resolve amongst investors and traders, it is the question of whether trading and gambling are the same thing. This argument of whether trading is gambling is almost the same thing as football lovers go through when they argue who is better: Ronaldo or Messi? Both footballers are great and, looking at things from different perspectives, everyone has a reason to say one player is better than the other. So, in this article, we are looking to put an end to the age-old argument: is trading gambling?
Basic facts
When you go to the casino and decide to gamble, irrespective of whatever game you choose to indulge in, one thing goes through your mind, and that is the uncertainty of the outcome. You cannot predict what will happen in the end. When trading, on the other hand, there are many strategies, a lot of information and techniques such as hedging and trading the news, that can be used to make sure that the trade goes as planned. Even with all of these facts, why is it hard for people to make something out of trading with the right information and skill set?
Again, irrespective of whatever you do and how strategic you are when it comes to trading and stock analysis; can you say that you can be sure of the resulting outcome? The answer is NO.
Gambling from a general perspective
When we ask the question, “Is trading gambling?”, we have to understand that gambling is a diverse subject just as trading is, which is the reason for the difference in perspectives when it comes to how people look at the subject matter. Looking at the matter from a general perspective, trading is like gambling, and we are going to be looking at a few reasons why.
The addiction factor
For people who gamble, they understand that, at any point when money is made, the act becomes something that they would love to continue. The continuity of something, even when we know the outcome might be consequential to finances as well as many other aspects of life, is what we call addiction. If you ask many gamblers today if they are addicted, they will tell you outright that they are. On the other hand, if you ask a trader – either day trader or stock investor – if trading is addictive, they would say NO, highlighting that it is a profitable venture that needs some extra push to make money. The truth is that, whether you take trading as your full-time job or as a side hustle, there should be a time to look back and reflect on whether or not you have mastered the art of trading and whether or not you need to take out time to change your tactics. If I were to be asked, “Is trading gambling?”, my answer would be yes. This is because no matter how tactical you are as a trader, you cannot predict the outcome of your trades. Many traders who make money from trading are better at managing funds and losses than those who gamble.
The open factor
For what it’s worth when we look at trading and gambling, we look at what people say and how they say it. What do I mean by this? The perspective we have about trading is different from the one we have when it comes to gambling. Gamblers are regarded as people who take their hard-earned money and stake it in anticipation of getting more and, most of the time, they end up losing their money. The reason why gambling is more popular than trading when it comes to losses is the fact that traders are more discreet about whatever is going on with their trades, especially their losses. Let me highlight some points to you:
- Many traders who follow up with the list of richest traders know George Soros as one of the richest traders today, and if there is one thing we know that brought him to the spotlight, it was the time he risked $10 billion and made $1 billion in a single trade. This was not only one of the best trades in history but something that earned him the fame he has today.
- Bill Lipschutz risked his only funds, which amounted to $12,000, and won $250,000 as profit from the trade, which was the starting point which made him famous and wealthy.
One thing you have to ask yourself is that if these trades did not go as expected, would anyone broadcast their failures? Gamblers are open about their wins and are still open when they lose money. Traders, on the other hand, lose a lot of money daily, and many of them do not say anything. A trading platform is a place for people who have an understanding of the market and the analysis of a lot of information, which makes them different from those who go to gamble, as this trade does not need any education or skills, just a basic knowledge of the game in question and luck.
General perspective
For many people, trading is an occupation, while gambling is a nuisance to society. With that general perspective in mind, many do not deem it fit to look at every aspect of trading before labelling it as better than gambling. Right from the very beginning, trading has been considered a job where you predict the direction of currency pairs and expect that by using some tools, you will get the outcome you expect. On the other hand, the percentage of people losing their money daily is something that you would be shocked about if you were given the figures.
The foreign exchange is the most actively traded market in the world today, with more than $5 trillion traded on an average day. These figures are interesting, and if you look at things, then you’ll understand that traders are the ones funding the market, with over 65% losing their money and many others finding themselves in the same position they were from the beginning, applying trading tactics such as stop losses and hedging.
If the general perspective and the bias that people use when thinking about Forex and gambling is taken away, then it will be clear to many that they are much of the same in themselves.
Final note
This article is not one against trading because we all know and love trading, but the truth of the matter is that, when looking at trading and gambling, there are lots of similarities that make them almost the same, with just a few differences. Before now, we know that many traders took the system as a profession; one which was not taken lightly. Nowadays, the majority are in it to make money and not to understand the market. If we check out those who have made money and made something out of any endeavour, they first decided to master the art and then the money followed.
Nowadays, we have people waiting for signals so they can input the currency pair and make the trade based on the signal given. If you ask them the basic questions on Forex, they do not know. If you ask them about other tactics used on long-term trading, they do not know, and if you ask them what they do, they will tell you they trade Forex or options.
The truth of the matter is that if this question were asked when trading first started, then we would say that for the majority of the traders back then, it was more of a job than gambling. Now we find the majority of traders today are in it for the money.
All we can say at this point is that with the way things are at the moment, with the number of brokers making it look like trading is something for everyone, and with the majority of the people flooding the Forex market today, it is evident that trading is gambling. It takes a certain level of guts to put in the right stake that will yield the right results in terms of profit. Forex has made a lot of people, but it has also brought a lot of people down; all signs saying that the side of the game you find yourself on is determined by how well you can play the game.
Trading is deliberate, trading is fun, trading is profitable, and everything you get from trading is the same as you get from gambling. So, from us as well as the entire investment world, it is essential that you keep on doing what is profitable as far as you know is right under the law and you have a clean conscience. Everyone is striving for perfection when it comes to making the best out of your life, and what you do is entirely up to you as well as your knowledge about what you do. Live, learn, and trade because in it lies the future.