Trading and gambling are two concepts that prompt a wide range of responses from the public. While successful traders don’t like to be referred to as gamblers, expert gamblers likened their skills to trading at all costs. Traders who gamble are recognized for their impracticable analysis, tactics, and habit of speedy returns. So, how can you know if you are a trader or gambler? How can you know the one you are?
Continue reading this article to find out!
Gambling Versus Trading
Gambling refers to betting on the occurrence of an event that has an indeterminate outcome for winning. Three rudiments must be present for an act to be called gambling: the stake, the peril involved, and the reward to be earned when the event finally occurs. Therefore, a Gambler plays a game of uncertainty, hoping to get a higher income than he invested.
The keywords here are “game” and “hoping.” A gambler puts up money in anticipation of a payoff if a chance event occurs. Even though the odds are always against the gambler, people love gambling because they like to aim that if they win, their income will be as much as their loss is likely to be.
On the other hand, trading entails buying and selling financial instruments like bonds, cryptocurrencies, derivatives, stocks, etc. There are various types of trading, including day trading, high-frequency trading, position trading, etc., each of which has positive and negative consequences.
A trader makes excellent use of financial tools by obtaining them cheaply and selling them at higher prices in the future. The keywords here are “cheap rate” and “higher rate.”
Also, traders act fast by using the advantage of short-term discrepancies rates to examine what the market is saying before reacting. Although most traders don’t study the securities, they trade comprehensively and know the reasonable prices and size patterns for identifying possible profit forecasts.
To be sure whether you are a trader or a gambler, let’s take a close and comprehensive look at the differences between a trader and a speculator under the following headings.
Top 4 Differences Between a Trader and A Gambler
1. Traders Are Risk-Averse, While Gamblers Are Not
Unlike traders, gamblers live for risk and uncertainty. Gamblers cannot predict their wins, an exciting part of gambling that traders avoid. On the contrary, traders aim to make accurate and possible forecasts.
2. Traders Accept Losses While Gamblers Get Emotional
Traders take losses and are unemotional. Although they mostly admit some of their trades won’t work out, they are fine as long as half of their transactions work. On the other hand, gamblers tend to believe the odds will be in their favor. However, they get angry and have mood swings when the opposite happens.
3. Traders Build Wealth with Trading, While Gamblers Can’t Build Wealth with Gambling.
Building long-term wealth through trading is another term that differentiates traders from gamblers. Successful traders build an incredible nest egg through solid investments and harnessing the rule of compound interest.
Unlike traders, gamblers can’t loan on future prizes to settle their bills since there’s no way to foresee what they’ll make within a specific period. This is an important reason to see gambling as fun and nothing more.
4. Trading Is Not Purely About Luck, While Gambling Is Mostly About Luck
Successful long-term traders are not “lucky.” No one can say they are proficient craps or roulette players. However, successful traders consistently follow a verified strategy, getting reliable results and more profits than losses.
On the other hand, gambling doesn’t require following strategic plans since it is a game of chances based on flips.
- A trader emphasizes long-term growth, reliability, and possibility, while a gambler is concerned about making quick money.
- A trader treats trading like a business, while a gambler sees it as a casino game.
- Successful traders follow a proven trading plan and back-tested approach and adjust it occasionally, while gamblers don’t have any strategy but trade based on tweets, coin flips, and word of mouth.
- While a gambler uses very high leverages and risks half of his capital on only trade, a trader strictly adheres to the risk management principles and does not over-leveraging his account.
- A trader trades when high-odds circumstances are available, and his entry principles have been accomplished while gamblers open random positions, trade all their capital, and make illogical decisions.
While gambling and trading may be more than similar, their differences separate them. For example, if, as a trader, you are consistently losing your hard-earned money, there is a possibility that you are gamble-trading.
Note: Trading for pleasure or social proofing, rather than in a precise way, means trading in a gambling style, or perhaps if one trades to win, they are likely gambling. Traders with a “must-win” attitude often fail to identify a losing trade and leave their positions.
There are trading rules successful traders follow. And to be consistently successful, you must also follow these rules. More importantly, remember that the lack of technical and fundamental analyses and illogical trading of assets because of public hum is a vital sign of gamble-trading. Close attention should be paid to the preconceptions usually innate in gamblers.