A common view of trading is that it’s the same as gambling.
While gambling itself can be harmless when done is small doses and for harmless excitement, it becomes a problem when it’s an addiction, and causes grievous harm to a person and/or other people involved.
As a result, gambling has negative social connotations.
The actual definition of gambling is:
“Betting or staking of something of value on the outcome of a game or event.”
Trading in essence is betting or staking something of value on the outcome of a trade, but the difference is that we can take trades that place the probability of winning in our favor.
Trading for profit is a skill, and should be approached as a business in order to turn a profit from the markets. When one is trading and gets caught up in the emotional highs and lows, it’s very difficult to keep composed and rational when making decisions.
While gambling is essentially a game of chance, we can turn trading into a business by placing the odds in our favor. Having a trading system that returns us a profit after a series of both winning and losing trades is literally the license to print money.
Of course, it’s easier said than done, but there are people who understand this and have mastered the art and science of trading for profits. And if someone in the world has done it, it means that we know it’s possible to make trading a business.
Trading and Casinos
Why do casino’s make so much money? They are involved in the gambling business, right?
They win because they’re the house, and they get to change the rules so that the games favor them. If you’re the casino, the more money being gambled at your tables, the more money you make at the end of the year.
The thing with trading is that you can put the odds on your side. That’s your trading edge.
If you look at an individual trade, essentially yes, the outcome is uncertain. But if you have a system that generates profit after a series of trades, are you still a gambler?
And the point is this, whether trading is gambling or not isn’t the main issue. It’s just a psychological trick that traders allow other people to play on them.
Thinking that trading = gambling isn’t going to help you become a more successful trader one bit. If you know you have no chance for success, then why even attempt it? Give it up, and find something better to do with your life. Unless you’re trading (or gambling) for the thrill of the highs and lows!
The best way to prevent trading from turning into gambling is to start treating it like a business. Don’t plunk your money into just any trade. Have a trade selection criteria, eg. if you have 10 trades that meet your trading set-up, take only those that have the best risk:reward ratio, for example.
Stop looking at hitting that home run with one trade, but look at the long term picture of what it’s most likely going to be after a series of trades, or after a length of time.
If you approach trading as you would starting a business, then it’s much easier to prevent trading from turning into gambling.