Wikipedia had a nice definition of Gambling: "Gambling is the wagering of money or something of material value on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods. Typically, the outcome of the wager is evident within a short period." That sure sounds a lot like trading to me. However, I think that some might further subdivide gambling into distinct categories. Fore example, one might define gambling as the risking of money on uncertain outcomes for the pleasure derived from the risk itself, rather than any realistic goal of making money. For example, the slots machine are stacked against you. Everyone knows that, but people continue to play for the entertainment value--not because they really think they are going to make any money. The same might be said for the way that some people play poker. However, a professional poker player, which closely resembles the skilled trader, looks at the game as a game of probabilities and will play more aggressively when the odds are in their favor. Therefore, some might not view trading as gambling because they see the skill involved and how a true gambling edge can be obtained, which contrasts with the amateur that gambles merely for entertainment. Therefore, I believe it to be quite obvious that in general, trading is gambling. That doesn't mean there are not good versus bad gamblers/traders, but nonetheless, its all gambling.
I have always taken aim at those like terms also, ...take money off the table ...odds in your favor ...stacking up the probabilities ...better than even chance ...putting the odds in your corner ...loosers' mentality ...wining edge ...playing with house money I have also seen those prognosticators that annoint themselves with the designation of teacher and conduct one of those sessions at the many different traders' conferences that we all attend, take exception also with these terms. In particular one used to chide us relentlessly with the loser mentality of using terms like "playing with house money", as if what one earned through investment (taking the risk with a particular trade, and it turning out positive for him) was not his to begin with or should be, but some unknown "house's money". He used to define that term and seek to break the easy association with that mentality and trading through peaks and valleys and scalping and gaining a winner's perspective on things. I obviously do not intend to make his arguement, just point out that usage of that term already predisposes one to losing. clearly the bar of definition of gambling is set so low that any form of risk taking, even the mundane, seemingly safe and irrelevant things in life such as living, crossing a busy intersection at the light (when its green) are also meeting the definition of gambling. Most (intelligent) people define and associate gambling with horse racing, card games where money is wagered and other games of chance. Most intelligent people usually associate investing with buying dividend yielding stocks, interest bearing bonds or other similar long term trading objectives. Most intelligent traders (again investors just with a higher risk tolerance) will engage in shorter term investing with shorter term objectives such as option or derivative trading, spreading, hedging (option plays or otherwise) and scalping (frequent day trading of investment vehicles (futures, electronic mini futures, futures options, etc.)). Most people who have lost at investing, whether long term or short term and are bruised usually condemn trading and start taking the artificially high moral ground and call such activities gambling. They are not losers although they have lost and are bruised in feeling, however that poses the other logical question. Are gamblers losers? Are losers gamblers? Are investors both gamblers, losers and morally upright? How far does one need to push this social question? Clearly we all set the standard and have not convinced anyone to change in their deep held beliefs regarding this controversial, yet simplistic question.
Seems to me that people can't accept it out of pride, or because they're ignorant of the definition of gambling.
seems to me that this supposed definition which has the negative social connotation is being stretched to respectable honest and legal professions. no, trading is NOT gambling, however, they do share risk taking in common and that is where most confuse whether they are the same thing or not.... beyond that, I would like to see the financial disclosures on every casino crap game, one arm bandit and card game, as well as on each and every horsey at the horsey races, just like they do on the financial reporting requirements on corporations, especially those that are US based and registered and pay dividends or use the capital markets (which just about covers every one of the 1,800 NYSE, 6,000 NASD and some 1,200 ASE stocks).
There is no 1 answer to this, it's all relative to experiences, though in gambling environments it is almost impossible to get a profitable edge, in trading it is possible. Trading of course can be gambling if one just plays the game relying on intuition/instinct. Forget what dictionaries say, try telling IRS what you found in a dictionary LOL
Ok, I can't believe this thread keeps popping up and has gone on for 16 pages, because its such a simple answer and anyone who doesn't know the answer immediately, certainly shouldn't be engaging in any odds-based business, particularly trading. The definition of gambling is, "to stake or risk money, or anything of value, on the outcome of something involving chance." http://dictionary.reference.com/browse/gambling So, in any odds based business or game, whether its poker, blackjack, craps, running a casino, running an insurance company, or trading, there are always two sides to the bet or trade; one side is gambling and one side is playing the odds. Whether you're "gambling" or "playing the odds" depends on what the actual percentages are of your success in that given situation. If you're chances of success are greater than 50%, then you're not gambling, because the odds are in your favor that you'll be successful more than half the time and you'd have to get "unlucky" in order to lose on that particular proposition. If you're on the side where your odds of success are less than 50%, then that means you're gambling because you'd have to beat the odds and "get lucky" in order to get paid on that particular odds based event. Look at the relationship between the casino and the craps player. No matter what bet the craps player makes, he is always gambling because there isn't any bet he can make where his odds of success are greater than 50%. The casino on the other hand is simply playing the odds, not gambling, because no matter what bet they take the other side of, the odds are in their favor to win any given bet. Does that mean that the casino will always win every single bet and the craps player will never win any bet. Of course not, it just means that as the number of times they take that bet approaches a very large number (remember, the laws of averages are insignificant unless you have a large data sample), their percentage of success (or failure) will move closer and closer to the actual expected odds. The same relationship exists in poker... If a player moves all-in with the best hand, and is called by a player with an inferior hand, then the player with the inferior hand must get lucky in order to beat the odds and win the hand. The player with the best hand however, only needs to avoid getting unlucky in order to win. Therefore, the player with the worse hand is gambling while the player with the best hand is simply acting like a casino and playing the odds. Now in the regards to the poker player, he has no way of knowing in advance whether or not he has the best hand before he makes the call. Therefore, even though he may suspect that he's playing the odds, he won't know if he's correct until after he's made the decision to call and is able to see his opponent's hand. If he calls and finds out that his opponent has a better hand than he does, now he's the one who must beat the odds and get lucky in order to win, therefore even though he called because he suspected he was playing the odds, in retrospect he is actually gambling and his opponent is the one who is playing the odds. So if you play poker long enough, you will eventually find yourself in some situations where you are gambling, and you will find yourself in some situations in which you're playing the odds. Depending on the skill of the player, and the length of time he plays the game (hours, days, months, years) he will either find himself in more situations where he's gambling (in which case he'll lose money in the long run) or he will find himself in more situations where he is playing the odds (in which case he will make money in the long run). So the answer as to whether or not trading is gambling is simple.... it depends. If you're consistently putting yourself in situations where the odds are in your favor, then you're not gambling, rather, you're simply acting like a casino and playing the odds. However, if you're consistently putting yourself in situations where your odds of success are not in your favor, then yes, you're gambling because in order for that trade to work out you have to overcome the laws of averages. And just like the poker player (or the insurance company for that matter), quite often you won't know whether or not you happen to be gambling or playing the odds on any given trade until after the fact, and therefore, whether or not you are consistently gambling or whether or not you're consistently playing the odds will depend upon your skill level as a trader. However, if you take enough trades, you're invariably going to find yourself in some trades where you are gambling and you're going to find yourself in trades where you're not gambling. But over a long enough period of time, good traders will take more trades where they're playing the odds and less trades where they're gambling, and losing traders will take more trades where they're gambling and less trades where they're playing the odds. So the correct answer is sometimes trading is gambling and sometimes its playing the odds... it just depends on how good you are as a trader at finding situations where the odds are in your favor. However, if you trade long enough and take enough trades, invariably, you'll find that in some trades you ended up gambling and in some trades the person on the other side of the trade was the one gambling.