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Why People Think that Trading is Like Gambling
Forex and stocks traders express strong displeasure of being compared to casino gamblers. This is despite the fact that the two industries share similarities too indistinguishable to be considered coincidental. Below are some of these similarities and what they mean traders and casino players.
Both are Speculative
Buying Amazon stocks hoping they will gain value involves speculation. There is no guarantee their value will be higher tomorrow or the day after. Almost all casino games also involve predicting what happens. In sports betting, you speculate which team wins. In the roulette, you make a guess of where the ball lands.
Where there is speculation also lies risks. You can’t make money predicting something without risking your own funds. While some may argue that most investments consist of a fair amount of risks, prospects of losing your money in both trading and gambling are high.
Involves Finding Favorable Odds
Here’s another thing traders share in common with gamblers. Both are constantly trying to stack the odds of winning in their favor. Traders are usually advised to limit their number of trades and focus on trades with higher probabilities.
Gamblers also do this. They find casino games with low house edges and high win probabilities. In sports betting, bettors hunt for value odds. They will ignore all wagers with low profits and work around low-risk, high potential games.
Both traders and gamblers strive to protect their capital when working. Whether the trades/wagers look favorable or not, players understand the risks and won’t gamble unless they are confident about the bets.
Availability of Information is Crucial
While this does not apply to all forms of gambling, past information is the primary way sports gamblers decide which teams to back for a win. In trading, it would almost be impossible to trade successfully without past data.
Professional traders track both present and current data to place trades successfully. Usually, the more meaningful data there is, the more it can help traders avoid trading mistakes. In sports betting, recent data about the teams matter the most unless the teams have a long history that shows one team has always been superior.
Returns are Expected Quickly
Warren Buffet’s number one advice to stock traders is to focus on the long-term gain. For day traders, daily profits are as important as the long term gains. While the monthly and annual returns matter, market traders place trades with the goal of making profits immediately.
When it comes to casino players, there is no doubt of when they expect to profit. If a gambler spins the roulette wheel, they expect wins immediately it stops spinning. Slots also work in the same way. Find the best new casino and any wins you make could be withdrawn on the same day.
The fast nature of both trading and casino games is what makes the two professions fit the description of gambling. With long term investment, the risks are low. You could read trends over time and change your investments appropriately. Skill-based games also don’t fit the gambling description even when monetary risk is involved because the speculation involved is little.
Luck is important
Some traders always deny that luck is important in trading. But think of all the times people make trades based on instincts and emotions and end up profiting. Such people do little research and place trades passively believing they will profit. If they are lucky, they end up making profits.
Most casino games also involve a great deal of luck. From blackjack to slots, poker to baccarat—the only reason most people win is due to luck. In some games though, players are able to increase the odds of winning by using certain skills.
In a game like blackjack, there have been people who successfully counted dealer cards and won. In baccarat, some players claim to have the ability to manipulate how dice lands. Most sports bettors believe theirs is science while in poker, some people are always better than others.
There’s an Illusion of Control
Ever heard of a gambling story where a player wagered a crazy amount of money and lost it all? To make it worse, maybe they bet their mortgage money or the last dollar they had. If you ask the players, they always believe they had the game in their favor.
Traders who risk lots of money also usually have the same thing in mind. They believe they have the trades in control and will end up making insane profits. In reality, both traders and gamblers who think they have everything under their control are often delusional.
When delusional players and traders lose, they blame everything on misfortunes. But what kind of investments is determined by pure luck? Gambling.
Denial, Lying and Overreliance on Bots
Many casual traders and gamblers are honest about their earnings. However, professionals especially those that lose more than they win can be deceiving. If they are not exaggerating their wins they are making excuses of why they lose. It cuts across both gamblers and traders.
Of course, there are professionals more infamous for lying. But when traders keep lying about their work, most people are convinced that their job is no different than gambling. After all, most traders, like gamblers, lose more than they gain in the long-run.
When it comes to making predictions, traders spend significant amounts of money on bots to help increase profits. While it’s not unusual for modern professionals to use programs to their advantage, only in trading are bots expected to speculate and make profits for you.
With gamblers, overreliance leans toward strategy guides, YouTube videos and other scummy programs that rarely work. In the real sense, neither gamblers nor traders would have to use programs to profit if there were clear strategies of how to make profits.
Depending on who you ask, trading is similar or much better than gambling. But when the two professions are put into perspective, numerous similarities show up. First, they both involve speculation. There is risk involved and returns are expected quickly. More similarities include playing expressing similar behaviors, including illusions of control over their trades.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes.