Just talking out loud. We know many people at casinos (and sports books) have a gambling problem. Just wondering what % of active traders have a gambling problem, but won't admit it? Those who work the sports book would say they know their games...And may make a profit. But besides the house taking their percent, there must be many who lose on the other end. It isn't like no money down...Flipping houses. So what percent have a problem and how can you tell if you are one of them??
When they're no longer betting on any semblance of odds. Gamblers chase; true traders/speculators/investors double down on improved odds and fold the moment they know they're drawing dead regardless of sunk cost.
Q: Just wondering when does a trader becomes a gambler?? A: When they start ET threads about selling options for "income". Those guys crack me up with their stupidity.
A trader is always a gambler, simply because the risk of ruin cannot be eliminated, regardless of how clever or exotic the strategy.
Yeah, I double downed on GM (2007), GE, and Rite Aid...Does that make me a gambler?? I thought I was making wise moves... I am a buy and hold person (covered calls). I have learned to not put more than $10,000. in any one stock...Too risky!! Except for buying things like Alibaba...100 shares going over my limit. I've learned from my mistakes...
I think your criteria is not practical. Leaving the house imposes a risk of ruin or at least death which is worse than ruin. So since that risk cannot be eliminated, should one never leave the house? But then the house can burn down so... RE: OptionsOptionsOptions - Wit your assertion that selling options for income is stupid. I don't think selling options for income is any more stupid than holding a stock to collect a dividend. However, the downside is that selling options involve all short-term capital gains unless perhaps the option is sold and held for more than a year. So it's not a tax-efficient strategy unless done in an IRA.
That's not the kind I meant. Buying soybean futures isn't the same as buying farmable land to grow soybeans, just like buying apartment buildings isn't the same as buying REIT's. You get the drift? If you don't, stop trading immediately. We're dealing with side bets where your hard earned money can evaporate within seconds.
Theoretically, unless you are doing insider trading, ALL traders are gamblers because you never know for sure what's the exact outcome of your trade, so you are gambling away your trading capital guessing and hoping that you will make more back.
I'd say for most people it starts out as gambling. Any of the following would count: buying something because you are "hoping for a big win" or emotionally biased decisions. Someone suggested to me that I pretend I am investing a friends money, not ever going to get paid for it, and have to explain in detail WHY I did what I did, especially if it deviates from modern portfolio theory.
I responded to your post #4 above in which you made a very general claim: "A trader is always a gambler, simply because the risk of ruin cannot be eliminated, regardless of how clever or exotic the strategy." I simply stated that just about everything has risk of ruin. So if you define gambling as anything where the risk of ruin cannot be eliminated...that's a very broad claim. By that definition my dentist is a gambler since he exposes himself to malpractice lawsuits everyday which have the potential to ruin him. Although, actually what you said isn't correct. A lot of trades don't have unlimited risk. If I buy a call on some stock or ETF, I'm not risking ruin as long as my account has a balance significantly greater than the cost of the call.