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Redleg Jan 19, 2006 9:45am | Post# 61

Books by non-traders
 
If I may chase the rabbit a bit further - my favorite example of a worthwhile trading book by a non-trader is "Reminiscences of a Stock Operator" by Edwin LeFevre. It is a fictionalized account of Jesse Livermoore's life, written in first person as if it was an autobiography. In fact, many sources on the internet incorrectly list the author as Jesse Livermoore.

This book is one of the trading classics. It is widely praised in the world of trading. It is recommended over and over again in the Market Wizards books, with some of them claiming it was the best book on trading out there. But Edwin LeFevre never made a single trade in his life. The entire book (originally a series of magazine articles) was based on one week he spent doing detailed interviews with the real Jesse Livermoore.

Personally I think that LeFevre's book is a masterful presentation of the good and productive parts of Livermoore's psychology, while leaving out the bad parts. The real Jesse Livermoore was a wizard at reading the market, but had no clue how to hang on to his money (made and lost 4 separate multi-million dollar fortunes) and his personal and family life was a disaster that culminated in suicide (in his suicide note he declared his life to be a failure). No doubt there were many aspects of his psyche that were not conducive to success in trading and would have been potential distractions and red herrings to someone trying to discover the secret to his trading success. There is no way the real Jesse Livermoore could have written a book on the psychology of trading nearly as good as ROASO. But LeFevre, peering in from the outside, was insightful enough to nail many of the psychological aspects of good trading (as judged by the best traders in the world since that time.)

Of course you would be a fool to trust LeFevre's opinion on whether to go long or short on the yen. But that's not why traders still read his book.

James

naddix May 15, 2010 9:17am | Post# 62

Interesting... What about 9/11 and Katrina??? How many people has it affected??? Apparently FX thought otherwise...



I politely disagree... Forex IS tweaked against you, and it is a FACT....
I think this would all come down to your trading strategy. How does anything you said effect a long term trader? Or even just a medium term trader?

Davidee May 17, 2010 10:59am | Post# 63

hi guys,

Can anyone tell me what's the differences btwn gambling and trading?

Forex Trading (as it is practiced by most of people on this forum including myself) is speculation, not investing. Speculation is essentially a form of gambling.

In my opinion, traditional forms of gambling have either one or both of the following characteristics that speculating/trading doesn't -

1. Fixed quantifiable odds.
2. An edge that is ALWAYS in favour of the house/book maker.

Games like roulette and slot machines have both these characteristics.

Sports betting however tends to only have the 2nd characteristic while games like poker have the 1st but not the 2nd.

Forex has none of these characteristics. The exact probabilities of a trade going in your favour are never known since past performance is no guarantee of future performance and the odds can be in speculators favour.

The closest traditional form of gambling to Forex speculation is probably poker. In a poker game the majority of money will flow from the majority of players to a few highly skilled pros - but the difference is in poker the exact odds of your cards winning can be calculated in advance.

And I guess it could be argued that speculating on Forex and other markets is also socially useful as it helps to provide the world with well functioning liquid markets, but I've yet to be convinced of that personally.

smikester May 17, 2010 11:19am | Post# 64

In Blackjack and some other casino games, if you are able to play perfect basic strategy and card count, you can move the edge in your favour, though generally over a large sample, the edge is at least 4% in favour of the house, depending on the game.
Casino's soon spot professional gamblers and barrack them. It has happened to me, although I have never been a professional. I have heard professional gamblers can be warned off and barred.

To get on topic I would say trading is speculation or investment and gambling is a wide ranging term with negative connotations, for example, compulsive gambling and gambling addiction. Trading is a business of buying and selling currency. Just as in any other business, a poor trader will lose money and a good trader will make money. Someone who does not do the work to learn the profession and takes a risk is a gambler.

plasmapants May 17, 2010 11:28am | Post# 65

Whats the difference between a pot and a kettle.

DGC May 17, 2010 11:58am | Post# 66

The issue revolves around two questions:

1. Is the outcome random, or to some extent predictable (has patterns that conform to probabilistic analyses)?

2. Does the actor have the opportunity to effect their chances of success?

In pure gambling the outcome is random and the actor has no opportunity to effect their chance of success. Roulette is the archetypical example.

Blackjack has a random outcome (with sufficiently shuffled cards and multiple or infinite decks) but the player can effect their success depending on their knowledge of the game. Most still consider this gambling, though.

In sports betting, forex trading, stock investing and real estate the outcomes are not random as they are subject to patterns, and in each case the actor can effect their outcome through research and application of knowledge. These therefore are clearly not gambling.

The distinction between investing and speculating is a false one. All forms of so-called 'investing' are dependent upon predictions or assumptions of the outcome, and so by definition they are speculative.

hanover May 18, 2010 12:19am | Post# 67

It depends on one's definition of what constitutes "gambling".

For example, if "gambling" describes any activity that involves a succession of events, each of which has an uncertain outcome, then trading is a form of gambling.

However, let's look at it from a casino's perspective. The casino has a mathematically calculable edge on every game that it offers; hence, over a small number of trials the result is uncertain, but over a sufficiently large number, the overall outcome is a guarantee of profit. Hence the casino owner sees his enterprise as a profitable "business".

I think the opposite of what Davidee is saying could easily be argued, i.e. that where the odds can't be quantified, the level of uncertainty (and therefore the "gamble") is greater, and by a quantum order of magnitude. If I knew the exact probability of a win in every trade that I was about to undertake, I would certainly feel a lot more comfortable, because - by taking only those setups that offered a >50% probability of success - I would know for sure that I had an enduring edge.

So I would say that playing a negative expectancy game (like roulette, from the patron's perspective) is ultimately doomed to fail, and therefore futile; but that trading, given its complete uncertainty - for me - is the ultimate form of gambling. However, I can understand that those who have turned a consistent weekly profit for many years could validly view trading as a business, for the same reason as the casino owner that I described. Presumably their risk management is such that they are capable of surviving a 'black swan' event.

Mr J May 18, 2010 1:03am | Post# 68

It depends on one's definition of what constitutes "gambling".
It's not reasonable to debate on personal definition, and it's the source of much disagreement on this topic. Definitions wouldn't be so important if we could all understand the nature of an activity, but we don't. Many can't seem to think for themselves, and rely on terms such as "gambling" to form an opinion on an activity. The leads to ridiculous logical inconsistency such as "card counting is gambling, but trading is not", or "trading is gambling, but opening a shop is not".

Davidee May 18, 2010 9:29am | Post# 69

I think the opposite of what Davidee is saying could easily be argued, i.e. that where the odds can't be quantified, the level of uncertainty (and therefore the "gamble") is greater, and by a quantum order of magnitude. If I knew the exact probability of a win in every trade that I was about to undertake, I would certainly feel a lot more comfortable, because - by taking only those setups that offered a >50% probability of success - I would know for sure that I had an enduring edge.
I agree with you that it's also true that the "gamble" is greater. You see, it's the same uncertainty that creates black swan events that also creates circumstances where the odds are likely in the traders favour even if exactly how favourable they are can't be quantified.

If the risk were quantifiable markets risk would fit into a standard 'bell curve', markets would become 100% efficent and nobody could profit long-term.

As it is markets aren't 100% quantifiable and only a few traders will ever have the skills to take advantage of the uncertainty and profit from it, most will never be able to it. If all traders were equally skilled nobody could profit.


Anyway, I certainly wouldn't argue that trading is risker than traditional forms of gambling due to the increased uncertainty. What I'm saying is this uncertainty is what seperates it from traditional forms of gambling and makes profiting possible. The uncertainty stops the risks being exactly quantifiable and means the edge can sometimes be in the traders favour. Even in games like Black Jack where it's possible to get the edge in your favour the odds still remain exactly quantifiable.

sandycarrot Aug 6, 2013 7:51am | Post# 70

if you are betting with an edge, then you are investing. if you are betting without an edge, you are gambling. thats how i always saw it... so i dont consider playing poker gambling, because you can actaully have an edge. counting cards in blackjack is also not gambling, becuase again you can get an edge.
yes,,yes,,

if you are betting with an edge, then you are investing. if you are betting without an edge, you are gambling. thats how i always saw it...

TranceTrader Aug 6, 2013 12:34pm | Post# 71

{quote} yes,,yes,, if you are betting with an edge, then you are investing. if you are betting without an edge, you are gambling. thats how i always saw it...
What is the difference between one man having a strategy for picking value horses and you having a forex strategy? both could be considered an edge (by the speculator).

Gambling/Speculation/Trading/Investing are all in essence the same thing... public perception of one is better than the other due to the uninformed public and media labelling gambling addicts simply as gamblers. A drinker is not always an alcoholic.

Risk is the common denominator of all descriptions.

ronaleo10 Aug 6, 2013 7:07pm | Post# 72

There is a big difference.....
No matter what strategy you use in sports betting , horse race , casinos....etc....odds are always stacked against you...Entities offering games always have edge...in above cases...Casino, Bookies....etc

Hence people betting on it are called Gamblers and people offering it are called business.


In short when there is mathematical impossibility to keep winning in long run its called gambling.

Now Prove me Forex trading is gambling in that sense.

Masterm1nd Aug 6, 2013 7:27pm | Post# 73

Gambling: casino have the edge over the long term.
Trading: Banks have the edge over the long term.

The only difference is STOP LOSS, and positive RISK to Reward Ratio, however most trader don't use it though so why mention

xandi Aug 6, 2013 7:28pm | Post# 74

There is a big difference..... No matter what strategy you use in sports betting , horse race , casinos....etc....odds are always stacked against you...Entities offering games always have edge...in above cases...Casino, Bookies....etc Hence people betting on it are called Gamblers and people offering it are called business. In short when there is mathematical impossibility to keep winning in long run its called gambling. Now Prove me Forex trading is gambling in that sense.
90% of traders says hello!!!
but trading has the missing piece that gambling is missing, which avoids gambling of being profitable...

conscience Aug 6, 2013 9:18pm | Post# 75

。。。 What we are doing is speculating. We are making an educated guess about where the market is going and backing up that guess with cash. To me it is no different than going out and buying a chunk of land or a house in hopes that the price will go up 。。。
Basically I am doing the same thing as you.
Most of the time I earn money, except the time when Standard and Poor downgraded the rating of the US Sovereignty.
At that time, I made a loss which more than offset what I earned hitherto.

Pips2Take Aug 7, 2013 4:27am | Post# 76

With gambling the odds are set by the house and no one can change that except those card reader people with super memory.
With trading you at least have the chance to shifts odds in your favour, but then again without a game plan to trading, I guess one will be gambling.

TranceTrader Aug 7, 2013 5:00am | Post# 77

There is a big difference..... No matter what strategy you use in sports betting , horse race , casinos....etc....odds are always stacked against you...Entities offering games always have edge...in above cases...Casino, Bookies....etc Hence people betting on it are called Gamblers and people offering it are called business. In short when there is mathematical impossibility to keep winning in long run its called gambling. Now Prove me Forex trading is gambling in that sense.
I don't know if you know but gambling facilities aren't limited to the roulette wheel where you're probabilistically more likely to lose the longer you play. There is such a thing as a professional gambler who wagers on events looking for value or mispricing's (market inefficiencies in our language) and using the same analytical approach and risk/reward theory that is recommended to traders in an effort to to take advantage of these inefficiencies.

Look at poker, it's foolish to say that the professionals are not gambling but still they can consistently make money using the same risk/reward theory while playing the odds of hand strength. Your "mathematical impossibility" statement is a flawed generalisation assuming all gambling takes place at the casino.

Risk is taken in the same way by the professional trader, poker player, blackjack player, horse speculator, sports speculator... there is no difference really as they are all speculating on an outcome trying to maintain an edge regardless of the specific mechanics of each event.

Just because it's difficult doesn't mean it's impossible.

ronaleo10 Aug 7, 2013 7:28pm | Post# 78

All of the things i mentioned is still considered as Gambling.

Irrespective of outcome those facilities offering games doesn't take risk....for ex..they simply give you back 95 cent back every time you give them 1 dollar.
Now you must absolute lunatic to think that you can beat that game of randomness by choosing some variable , there are thousands of variables affecting the outcome.
So in the end its still a 50/50 in long run.

There are no Professional Gamblers lol.....There are only gamblers...

Yes there are professionals in all of this field but they have advantage by screwing the game it self..
For example--- like buying Jockey , players and match fixings and what not.
Roulette - By measuring velocity of ball and roulette wheel
Poker - It depends on relative skill of players playing it...still casino will always make money by taking out something from rake.
Blackjack - card counting .

Although all those way are illegal there are so so many people continuously make the money making them professional ...but you cant tell that they are gambling.

And its Mathematicaly Impossible to beat those game of randomness or chance simply by risk reward, or by choosing some variables..

Kanzler Aug 7, 2013 7:34pm | Post# 79

All of the things i mentioned is still considered as Gambling. Irrespective of outcome those facilities offering games doesn't take risk....for ex..they simply give you back 95 cent back every time you give them 1 dollar. Now you must absolute lunatic to think that you can beat that game of randomness by choosing some variable , there are thousands of variables affecting the outcome. So in the end its still a 50/50 in long run. There are no Professional Gamblers lol.....There are only gamblers... Yes there are professionals in all of this field...
I can't agree with you on poker, at least. There is in fact an edge that good poker players have over novices; they wait for good hands to cash in and minimize losses on bad hands. Do this long enough against naive opponents and I would be willing to wager my own money that the player employing this edge comes out ahead. There's also the psychological aspect of it when it comes to being a good liar, but I'm not sure where I'd start with that argument as it's far from objective.

ronaleo10 Aug 7, 2013 7:58pm | Post# 80

Thats what i am saying...
Poker is a game of relative skill...
By saying that your winning depends on how skillful your relative to the other person playing against you.

But lets assume every player has exact same skill and put exact bet according to their hand probability and they are playing it in casino everyone will lose in long run.
Casinos will eat them out slowly .
Poker and trading are both game of skills ( Relative ) and thus are not impossible to beat.
But in order to win you have to outsmart the other opponents by any means possible.


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