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Gambling and trading, what is the difference?

“It is generally agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of stock exchanges.” – John Maynard Keynes

What is the difference between gambling and trading? Quiet a question, isn’t it? So, on my quest to find answer, I an IT geek, of course googled it on the web and the results are somewhat interesting! Here are some of the results:

Stock Picks 101- The Difference Between Trading and Gambling

http://ezinearticles.com/?Stock-Picks-101–The-Difference-Between-Trading-and-Gambling&id=523858

Summary: The “Stock Picks 101- The Difference Between Trading and Gambling” article basically points out the major difference between traders and gamblers is that traders have more clearly defined risk management. And unlike traders usually evaluates the worst case scenario and the worst case risk in a situation, gamblers seem to be far focused on the reward totally ignore the risk that they might lose it all.

 

What are the differences between trading and gambling?

http://www.tradejuice.com/TFB/trading-vs-gambling-zk.htm

Summary: this article is very practical and very illustrative on the understanding of the trailing stops.  Not so much on trying to tell the difference of trading and gambling. However, Trailing-Stop Techniques 101, I’d like to include in this blog and if you don’t know what Trailing-Stop Technique is, I suggest you read this.

What is the Difference Between Gambling and Investing?

http://www.investorguide.com/gambling-vs-investing.cgi

Summary: thru out all of my reading this afternoon, this essay was the most interesting one and I highly recommend that you read it yourself. The essay starts up by finding the definitions of investing and gambling in hope to able to tell the difference and after finding the distinction isn’t clear, the essay then goes beyond the dictionary to examine some of the ways in which gambling and investing are generally perceived to differ, such as:

  • 1. Investing is a good thing, gambling is a bad thing.
  • 2. In investing, the odds are in your favor; in gambling, the odds are against you.
  • 3. Gambling can be addictive and destructive, but investing can’t.
  • 4. Gambling is entertainment, investing is business.
  • 5. Investing is saving for specific goals, such as retirement, while gambling isn’t.
  • 6. Investors are risk-averse, while gamblers are risk-seekers.
  • 7. Investing is a continuous process; gambling is an immediate event or series of events.
  • 8. Investing is the ownership of something tangible; gambling isn’t.
  • 9. Investing is based on skill and requires the use of a system based on research, while gambling is based on luck and emotions. 

Then, interesting enough, at the end of the essay, it has a very interesting section on the term, ‘speculating’. It points out the term, ‘speculating’, is often used to straddle the two terms ‘gambling’ and ‘investing’.  “…Perhaps speculators are those who are risk-neutral, while gamblers are risk-seekers and investors are risk-averse…”, you must read the essay yourself. 

So, after few hours of googling & reading, I still can’t tell the difference… You wanna give it a try?  I’d like to hear how do you tell the difference between gambling and trading…

 


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