Trading IS Gambling... | Forex Factory

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Trading IS Gambling...

  • #1
  • First Post: Jun 13, 2006 7:27am Jun 13, 2006 7:27am
...but in a good way.

I'm sick and tired of having people say things like "trading is gambling" in such a negative connotation. Trading is gambling. You're betting on the outcome of an unknown event. I saw the same thing when I played poker, people denied that it was gambling. The professionals had to slap the amateurs back into reality, poker is gambling too. But I'm guessing the latter seemed more obvious to you.

The difference however lies in that, just like poker, you can have an edge in trading. You can have a positive expectation and win in the long run. It's just like everyone says, "you will have losing trades, it's inevitable".

I think if you start to treat trading in this sort of mindset you will be better able to seperate yourself from your emotions while you trade. I'd go on terrible losing streaks in poker, but I wouldn't change my game because I knew I had an edge. Sure enough, I'd always end up making my money back and then some. Accept the fact that you don't have a damned clue what will happen on the next trade, only probabilities.

The key is to make sure you have a positive expectation when you gamble, be it poker or trading.
  • #2
  • Jun 13, 2006 7:38am Jun 13, 2006 7:38am
I mentioned this on another thread...

Gambling is when you risk everything on an event where the outcome is uncertain.

If you dont have the correct money management principles....then trading is gambling.

Overtime, with the right system and strategies, you will beat the market.

How much leeway you give yourself in terms of risk would determine just how far you go.

Cheers

Rusty
  • #3
  • Jun 13, 2006 7:41am Jun 13, 2006 7:41am
Quoting Rusty_forexman
Gambling is when you risk everything on an event where the outcome is uncertain.
Do poker players risk everything on the outcome of one event? No ofcourse not, that's silly. There's quite a bit of "bankroll" money management strategy involved in poker too.

Even the gamblers who play games with negative expectation (almost anything in a casino) don't bet everything on one event either.
  • #4
  • Jun 13, 2006 7:42am Jun 13, 2006 7:42am
You're right though, I should have stipulated that having positive expectation AND a sound money management strategy are the keys to success.
  • #5
  • Jun 13, 2006 8:16am Jun 13, 2006 8:16am
I believe Mark Douglas says it best in "The Disciplined Trader" when he speaks of the unlimitedness of the market and how it can psycologically affect you. Psycologically I think trading is more demanding than gambling. A trade doesn't end until u choose to exit it. Poker ends at the last turn of the cards.

"The most effective manner to illustrate the "unlimitedness" of the market environment is to compare it to gambling. With any gambling game you will always know exactly how much you can win or lose each time you play. You decide exactly how much you want to wager, you know exactly how much you can win as well as lose, and you may even know the mathematical odds of either possibility.
This is not the case in market environment. In any particular trade you never really know how far prices will travel from any given point. If you never really know where the market may stop, it is very easy to believe there are no limits to how much you can make on any given trade."
In trading, there is no bullshit. You either make money or you don't.
  • #6
  • Jun 13, 2006 9:21am Jun 13, 2006 9:21am
I agree that trading is gambling, but, it is not gaming. The negative connotation of gambling comes from the gaming industry.

Consider the following definitions from dictionary.com:
Quote
v. intr.

1a. To bet on an uncertain outcome, as of a contest.

1b. To play a game of chance for stakes.

2. To take a risk in the hope of gaining an advantage or a benefit.

3. To engage in reckless or hazardous behavior: You are gambling with your health by continuing to smoke.


1a/1b. This does not describe trading. Trading is not a game or contest, though some people may treat it as such.
2. This is trading.
3. This could be trading, depending on how a person trades.

So, given that Forex more closely resembles number 2, can you think of other activities that meet the same definition? How about starting a business? How about getting married? Giving up a good job to go to college while taking on lots of debt to pay for it?

We do a lot of things in life where we take risks hoping for a better outcome. These things do not need to be reckless nor hazardous, if we seek to understand and mitigate those risks. Forex, investing in equities, putting your money in a mutual fund or money market account are all forms of gambling, each with varying levels of risk and reward. Our ability to understand and mitigate risk and reward is part of what makes us intelligent beings.
  • #7
  • Jun 13, 2006 9:33am Jun 13, 2006 9:33am
Quoting stockwet
1a/1b. This does not describe trading. Trading is not a game or contest, though some people may treat it as such.
What about the fact that trading is a zero-sum game?

I'm not really disagreeing with you, but I just wanted to point that out.
  • #8
  • Jun 13, 2006 9:36am Jun 13, 2006 9:36am
Mark Douglas identifies this comparison best in "Trading in the Zone". He compares trading to blackjack in the sense that you are betting on an unknown outcome, he then states that there are tools that can give you an edge in the outcome but can never predict what will happen.

This comparison has helped me get closer to thinking like a trader.
  • #9
  • Jun 13, 2006 9:54am Jun 13, 2006 9:54am
Quoting fizzleboink
What about the fact that trading is a zero-sum game?

I'm not really disagreeing with you, but I just wanted to point that out.
Hmmm. I'm not sure I follow the relevance. Are you saying that because Forex is considered a zero sum "game" that that is the same as playing a "game" of chance? I'm not sure you're using "game" in the same context as the definition.
  • #10
  • Jun 13, 2006 10:00am Jun 13, 2006 10:00am
Quoting stockwet
Hmmm. I'm not sure I follow the relevance. Are you saying that because Forex is considered a zero sum "game" that that is the same as playing a "game" of chance? I'm not sure you're using "game" in the same context as the definition.
That's exactly my question. What does the definition mean by "game". I do not think I am outside the context of the definition. Zero sum games can be games of chance.

It's probably irrelevant anyways, I just wanted to point that out. I don't really want to get into an argument over defining words in specific contexts (eg. what does "it" mean?). It doesn't really add anything to the discussion either.

We both agree that trading is gambling and that's the whole point of the thread.

Edit: Perhaps I just meant that 1a/b do apply to trading, but you have to bend the words a little.
  • #11
  • Jun 13, 2006 10:52am Jun 13, 2006 10:52am
today, it definitely feels like I'm gambling. I hate it.
  • #12
  • Jun 13, 2006 11:36am Jun 13, 2006 11:36am
If trading is not gambling, then many more people would have been successful with it.
Trading is gambling! Why? Because no one knows where the market will be in a minute from now.Fact!
Indicators? There is not one single indicator which is reliable! How many traders can honestly say that his indicators are the holy grail? It doesn't exist!

What do the real successful traders do to constantly beat the markets?

  1. They ignore the so called rules of this game. They do not listen to no one accept themselves and there experience. ( What are the rules of this game? It's all the stuff presented in books, articles and newsletters.)
  2. They have a unique way of laying there money out so that the market cannot hurt them, whichever way it goes.

I say this because i personally know such traders. I have recently started to trade their way. Today I am one of them......

Good luck to those who believe otherwise....


Cobra

Ps. You cannot beat this market, unless you are prepared to do things differently!!!!!! Totally different from the way you were taught!

Never Ever Give Up!
  • #13
  • Jun 13, 2006 11:42am Jun 13, 2006 11:42am
When I think of gambling, I think of buying a lottery ticket for $1 or $5 or whatever. Not taking any odds into consideration. Just handing the clerk $1 and scratching it off. When I turn my computer on, I do not just open up my account and with out looking at any charts or anything, just make a trade. Timing and knowledge will give anyone an edge in forex. It's not just handing your broker your money and throwing out some trading calls. besides, when buying a lottery ticket, the odds aren't 50/50 that you will win. With forex, either when you buy or sell, price can either go up or down. A little knowledge and timing, your odds should be 50/50. Better than any lottery ticket or slot machine.
JOHN 3:16
  • #14
  • Jun 13, 2006 11:46am Jun 13, 2006 11:46am
"Trading is Gambling, but if you are the House, then that's ok." (Twoblink)
google:
  • #15
  • Jun 13, 2006 12:10pm Jun 13, 2006 12:10pm
my take on this question....

Fact. The financial markets do not care who you are. They do not care about your trading history, they do not care how many pips/points you chase, they do not care how many times you visit the market during the day or night, they do not care how many £/$ you bet per trade and they do not care if you win or lose. Essentially, they just exist.

Fact. Casino's and Betting Shops ( Bookmakers ) care who you are. They care if you win consistantly, they care if you visit and win everyday, they care if you bet and win big amounts. They will never just exist but they will always be geared up to make most punters lose.

I know exactly where I'd rather place my money.
  • #16
  • Jun 13, 2006 12:21pm Jun 13, 2006 12:21pm
First of all "Game" can be broadly defined as in game theory. A couple of guys just got Nobel prizes for papers on game theory. It covers a lot of stuff like "zero sum game" and "prisoners delema" and my favorite the "screw your buddy game". It includes a lot more than just Monopoly.

Second, Forex can be gambling, but doesn't have to be. It all depends on how you do it. In my opinion, If you put down a few bucks on the green felt before a major news break, you might as well be in Vegas (without the free drinks). Or if you throw down half of your account on a wild idea that just poped into your head without a lot of thought; You might be gamblin' (try that last sentence with a Jeff Foxworthy accent and we might have something)

However if you aproach Forex as a business (like real eatate investment) then it is classed as speculation. It is just like buying any other item with a potential of price changing. Think real estate. You buy a lot with the hope of the price going up (we are not talking improvments here). We are used to land prices always going up around here but every now and again they go down. We could loose money here. That is speculating. Is the real estate guy gambling? His wife may think so. You and I would most likely think he was quite respectable.

Yes we are taking a risk. Some people are so risk averse that they call any risky behavior "gambling", yet those same folks will jump into thier car and blaze down the freeway at breakneck speed.

If you don't want to take risk then please leave the planet.

(MrWhipple gets down off his soapbox and crips back to his lab to conjor up a few more pips before the news dies down.)
Nolite dormiens pungere ursum. -- Latan Proverb.
  • #17
  • Jun 13, 2006 1:31pm Jun 13, 2006 1:31pm
Forex is a zero sum game only in the sense that it doesn't create new wealth directly as creating/producing something would. But the amount of money in the game is not fixed nor limited. It's a game of many things all at once, economics, perception and psychology.

You can gamble it, you can invest in it, you can make smart pre-emptive moves as well as stupid late mistakes. It's what you make of it.

Then there's them other people out there, who actually use forex to do something real like hedge earnings, repatriate profits and such. Creepy people with no healthy speculative skills.
  • #18
  • Jun 13, 2006 1:49pm Jun 13, 2006 1:49pm
Quoting Rusty_forexman
I mentioned this on another thread...

Gambling is when you risk everything on an event where the outcome is uncertain.

If you dont have the correct money management principles....then trading is gambling.

Overtime, with the right system and strategies, you will beat the market.

How much leeway you give yourself in terms of risk would determine just how far you go.

Cheers

Rusty

Well, trading with rules or not, you're just speculating with an educated guess as to where the price "might go". Weither you get a confirmed trend, or. Since this is a prediction game, based off speculation and smart guessing,


system, rules, or random trading.

It's STILL gambling, the word "investment" regards to gambling at a lose to gain more. I agree with the topic starter, however. If you want to keep it "business like" and classy with conversation. It's investment speculation, aka.
"trading" for the gain.
  • #19
  • Jun 13, 2006 2:14pm Jun 13, 2006 2:14pm
Quoting Klaka
Well, trading with rules or not, you're just speculating with an educated guess as to where the price "might go". Weither you get a confirmed trend, or. Since this is a prediction game, based off speculation and smart guessing,


system, rules, or random trading.

It's STILL gambling, the word "investment" regards to gambling at a lose to gain more. I agree with the topic starter, however. If you want to keep it "business like" and classy with conversation. It's investment speculation, aka.
"trading" for the gain.
Then I would submit that if you buy a home (odds are you will sell it in 5 years) you are "gambling". If you start a business, you might be gamblin'. If you have a yard sale (tag sale for you Brit types) you might be gamblin'. If you buy anything with hopes for resale you might be gamblin'. because as you just said " Since this is a prediction game, based off speculation and smart guessing," The whole world is like that. It is just a matter of degree.
Nolite dormiens pungere ursum. -- Latan Proverb.
  • #20
  • Jun 13, 2006 3:06pm Jun 13, 2006 3:06pm
Quoting MrWhipple
Then I would submit that if you buy a home (odds are you will sell it in 5 years) you are "gambling". If you start a business, you might be gamblin'. If you have a yard sale (tag sale for you Brit types) you might be gamblin'. If you buy anything with hopes for resale you might be gamblin'. because as you just said " Since this is a prediction game, based off speculation and smart guessing," The whole world is like that. It is just a matter of degree.
I'm just stating the obvious, you'd be delusional if you couldn't understand the concept. If you risk losing something in order to gain something else that isn't yours, either you, or the opposite party initially stand to lose something, or gain in the current process. It's ultimate, or immediately, either way you want to put it. Considered gambling. Someone has to lose in that exchange because of the gambled item exchanged.

In trading, in this case. You BOTH, you and the opposite party are speculating against each other on the simple concept of moving prices. How hard is that to see? You may be good at what you do, don't get me wrong and you may know how to profit very well and know afew of the ropes. But, you shouldn't let ego cloud ypur judgement, you "risk to gain". = Gambling, trading is in my opinion "respectable gambling", you have the stock market and tv movie rumors to thank for that.

Lose for gain, gain for loss.

In every aspect of life, this is considered gambling, i guess in investing, or "trading" so to speak. The moral is set too high, because alot of really big egos aren't willing to expect, nor except that very basic, yet drastically important fact. Now, please by all means. Don't throw a fist fight, i am stating facts on what it really is. It maynot be what you want to hear, but.

It DOESN'T get anymore obviously simple than that.
Speculation Investing is what trading is based off of.
"An educated guess", systematic, fundamental, sign provided, technical, inside, or otherwise. Noone knows where the price will go guaranteed and someone has to win, or lose based off that speculation.

You don't need rocket science to prove that. It's right infront of you.
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