Published by: Walter Hughes
Trading – The Clever Man’s Gambling
Most traders won’t want to admit the fact that there are clear similarities between trading and gambling. Unfortunately for them, the reality is that the two share a range of commonalities that cannot be overlooked. Is trading just the clever man’s gambling? And how alike are the two – really?
What is Trading?
Trading is when a person or entity buys and sells assets, with the intention of making a profit (seeing returns). That’s the most basic definition, but it’s accurate. There are many different types of trading – day trading, signal trading, swing trading, scalping, and position trading for example – but each comes with a risk of significant loss.
What is Gambling?
Gambling is almost as old as humanity – we’ve essentially been gambling for as long as we’ve had any sort of trade system. If you had to open a dictionary, you might be told that gambling is:
- “To play games of chance for money.”
- “To take risky action in the hope of a desired result.”
We’ve come a long way from the days of sticks and stones gambling, but the principles remain the same. Whether you’re playing John Hunter and the Tomb of the Scarab Queen at an online casino like GreenSpin, or a game of high-stakes poker on the floor of some swanky club, you’re betting – much like in trading.
The Similarities Between Gambling and Trading
Traders will not want to admit that there are similarities between gambling and trading, but that doesn’t mean we shouldn’t take a closer look. This argument essentially comes down to one word: “odds”.
When you’re trading, you have to deal with odds. The same with gambling – you’ll take a look at your odds no matter what kind of casino game you’re playing.
Okay, but how does “odds” connect the two concepts? Well, let’s say that the emerging markets a few years ago allowed you to buy strong currencies like the British Pound. The odds weren’t necessarily guaranteed, but the circumstances seemed good. So, you bought in, and in doing so you gambled. That’s really it – your choice in that moment was a gamble.
Even the dictionary definition of gambling as laid out above gives a clue as to the connection between the trading and gambling. “To take risky action in the hope of a desired result” – what is more of a risky action than putting money into a trade that you’re not sure will pay off? And how can you ever be sure that you’ll see returns? Both gambling and trading have major risks involved, which connects the two even further.
Do you see where we’re going here? There are inherent connections between trading and gambling – and they’re essentially just two different versions of the same thing: Risky action with the hope of pay off.
So, is trading the smart man’s gambling? You tell me.
Trading and Gambling are Two Sides of the Same Coin
Trading and gambling are the same concept – just turned against each other. Trading is the smart man’s gambling, whether traders like that or not. There are frankly too many similarities to deny this further, with the core principle being exactly the same for both: you’re taking a risky action in the hope of a beneficial outcome, and that can’t be overlooked.