Gambling, sports betting, and day trading are often used in the same sentences. Furthermore, the two strategies can help you make a lot of money by risking a small amount of money.
For example, if you spend $1,000 to buy a stock that rises by 10%, you will have $1,100 in that session alone. In gambling, you can risk $100 and make more than $1,000 in a single session.
In this article, we will look at the key benefits that trading has over gambling.
Contents
What is gambling?
Gambling is the process of putting a small amount of money with the goal of making a substantial return. There are two main types of gambling – skills based and chance based. Examples of skills-based gambling strategies are roulette and blackjack.
The most popular type of chance-based gambling is playing the lottery. In it, you risk a small amount of money and get a chance to make a lot of money. Gambling happens both online or in several venues like those in Macau, Las Vegas, or Monaco.
» Can Poker Players Become Successful Day Traders?
What is trading?
Trading, on the other hand, is the process of analyzing a financial asset and predicting the direction it will move. For example, you can analyze and find that Tesla shares will rise in the next hour. Therefore, you will make money if the stock rises. You will lose money if the stock declines.
The trading industry is a significantly larger in size than gambling. Every weekday, more than $6 trillion is exchanged in the financial industry.
Is trading gambling?
A debate has existed for a long time on whether trading can be classified as gambling. The answer to this question is debatable.
Day trading involves buying and selling stocks within the same trading day, with the goal of making a profit. While some may argue that day trading is similar to gambling, there are key differences.
Unlike gambling, day traders use analysis and research to make informed decisions based on market trends, technical indicators, and fundamental analysis. Additionally, traders use risk management strategies to limit their losses and maximize their profits, whereas gamblers often rely on luck and chance.
Still, a careful analysis shows that trading and gambling have some similarities (and also some common strategies). Furthermore, they involve taking a small amount of money and risking it in exchange for a bigger return.
Why Day Trading is not gambling
1. Facts and Figures
While true gamblers are simply playing the available odds, day traders always examine the past performance of target stocks leading up to a purchase. As such, traders have a wealth of information at their disposal.
Eschewing pure chance, individuals will be perfectly capable of using the tools of the market to determine which stocks they should buy.
With the appropriate facts and figures, most investment attempts should turn out quite well.
2. No House Advantage
Unlike traditional gambling endeavors, there is no inherent house advantage in day trading! In Las Vegas, for example, this is how bookies ultimately make their money.
In day trading, savvy investors will be dealing with markets that do not ultimately care whether they win or lose. With enough good information and a strong penchant for analysis (technical or fundamental), day traders will surely succeed in turning a profit.
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3. Rationality and Reason
While gamblers are often pulled to their doom by raw emotion, day traders approach their jobs with cold rationality.
If a certain stock is likely to perform badly over the coming days or weeks, most traders will simply ignore that particular stock for the time being. Men and women who do well with day trading are almost always lifted to success through logic and reason.
→ These 7 emotions can destroy your Day Trading Dream!
4. Slower Profits vs Fast Profits
Day traders are also perfectly happy to accumulate wealth a little at a time. This stands in stark contrast to gamblers, who are often looking to hit it big almost immediately.
With slow, steady gains, traders will usually have an excellent chance of turning a long-term profit. Instead of engaging in hasty, high-risk bets, investors will buy and sell stocks in a coordinated, thoughtful manner.
There are also taxations, laws and regulations.
The Bottom Line
Though day trading entails a certain degree of risk, it should not be intimately associated with gambling. Once people learn a bit about how the market works, they can use a variety of tools to achieve success in the financial arena (they can also read, watch and listen to news on stocks..also in podcast).
Positive results will surely follow quite soon.
More useful resources
- Differences between Trading, Investing, and Gambling – Dummies.com
- Gambling Addiction: Signs, Causes, Risks, And Treatment Options – Addiction Resource