Are You Investing Or Gambling?
How many times have you heard that traders are called gamblers? There are certain things that resemble in trading and gambling, especially in trading with binary options, where you basically “bet” on something to happen.
But there is of course a huge difference between a person who predicts the ongoings at the market and people who make predictions about outcomes in casino games or sports.
Even among traders, you will find those who act just as if the market is a sports arena and they “guess” or predict based on certain “facts” who is going to win.
Comparing Investing And Gambling: difference between a casino player and a gambler
The difference between a trader and a gambler should be the same as the difference between a casino and a gambler. The casinos are rich and are stable institutions, just like real traders are, and gamblers are usually at the pawn shops trading their jewelry for another chance at the roulette table. Casinos work with an edge that is in their favor, they have calculated limits for gamblers, and so a gambler at a certain point cannot double the money and wait for the edge to return the invested. The edge is in favor of the casino.
A true trader must act like a casino and have calculations about your capital, how much you are willing to risk, set limits for spending and determine how much doubling you need for the edge to turn the money your way.
Casinos’ limits are there to ensure that whenever a gambler wins, it doesn’t affect overall situation of the casino. So should you; whenever you lose it mustn’t cause difficulties for your budget. That you do by limiting investments and by counting on minor losses.
If you read about the beginners’ mistakes, you will see that bragging and celebrating your wins while ignoring losses isn’t going to get you profits. Those way casinos’ don’t get emotional about a gambler loosing it all (in the example where you are a casino, which means that you actually won something). Casinos just develop strategies to not lose money; the games have already been there.
Trading vs gambling
What a gambler does and you shouldn’t is not leaving after a win. So in a trade when you are in a position to exit a trade with a win – don’t wait around long before your assets drop. Generally, gamblers want to earn big money in seconds, being a trader is a profession that you do for a weekly or monthly paycheck.
Conclusion: Trading is not gambling
In order to make sure that you are a trader and not a gambler, see if you trade based on predictions or you trade based on the possible revenue. If you risk your whole account instead of investing in small position sizes, change that, because you don’t want to trade based on your “gut” but based on plan. When you enter a trade, check if the edge defined can be reached before you clean up your account.
Calculate the possible outcome, don’t just “feel”, it is not art or a song, it is business. But most notably, this job pays off if you work, and if you are dedicated to work, not dedicated to profit. Profit is a result of the work you do – not a goal. Indeed, the part of the work is paying attention to your money, so when you trade, don’t put all your capital at risk, that’s called “all or nothing” and it is related to gambling, it is not related to a JOB.
And the thing that surely differentiate gambler from a trader is that a gambler follows form of a team, and a trader calculates the outcome.