Gambling VS Trading
Apr 07, 2024
It's funny how in the Mainland U.S., there are ads that run "Win a trip to Hawaii!!" and the question that I've been asked before is: "if people win trips to Hawaii, where do Hawaii people win trips to?" Well, that answer is Vegas, baby! - The unofficial "9th island". And what else do locals find themselves doing? Gambling..in hopes to win thousands of dollars off luck.
Now, we aren't saying you won't make money off luck. We also aren't saying there's no such thing as professional gamblers. However, if you ask these professionals if they are gambling, their answer without a doubt would be no...they have an edge.
A few key points that make a difference between gambling and trading is having an edge. This edge can come in a variety of ways: experience, edge, risk, time in the markets. But, to keep it simple an edge is something that can be proven to have a success rate through probabilities. Probabilities is one thing more likely happening than another. Professional traders and "players" (aka what you would call gamblers) have many similarities.
When it comes to trading, the most common thing that occurs is when "traders" begin to thwart ownership of choices and avoid the hard stuff like journaling and learning where mistakes were made. Traders turn into gamblers when emotions get in the way and start to take over in decision making. The chemical imbalance fueled by emotion distorts our perception of what the market is really trying to tell us.
In both gambling and investing, a key principle is to minimize risk while maximizing reward.
Gamblers have fewer ways to mitigate losses than investors do.
Investors have more sources of relevant information than gamblers do.
Over time, the odds will be in your favor as an investor and not in your favor as a gambler.
Trading is a business. Be the professional. Take it seriously. Be wise.
Trade to compound your money over time. Don’t fall for the get rich quick.
