It can be successfully argued that stock trading is pure gambling. While there are similarities, the successful trader will note the differences and similarities thus enhancing his or her performance by 1) focusing on the process, and 2) understanding the nature of the markets. In the following, I list several opinions about stock market speculation, provide a problem gambling test, and then list several resources for gaining the proper stock market perspective.

THE ARGUMENTS

Is Day Trading Gambling? “You can always tell when the stock market is getting better, because the day traders come out of the woodwork. Unfortunately, a vast majority will wind up grinding their retirement money into sawdust.” (USA TODAY)

Is Sports Betting Safer Is Safer Than Stock Trading? “Sports betting is a much safer play than stock market if you approach it with an investors perspective.” (BETTING RESOURCE)

Do Individual Investors Trade Stocks As Gambling? “Multiple natural experiments of large jackpot lotteries in Taiwan are used to document that some individual investors trade stocks as a form of gambling. Those investors substitute lottery gambling for stock trading.” (CMU EDUCATION)

Is Investing Gambling? “There is a lot of confusion in the general population concerning the difference between investing and gambling. This is understandable because the difference can not be explained in a singular short and simplistic statement.” (INVESTING VERSUS GAMBLING)

INVESTING AND GAMBLING PROBLEMS: TAKE THE TEST

“When people gamble excessively, and their behavior negatively affects other areas of their lives, gambling becomes a problem. Problem gambling may occur in the traditional recreational forms of gambling, such as sports betting, casinos, or the lottery. It can also be a problem in any financial transaction, including the financial markets, when money is risked in an attempt to gain more money.” (CONNECTICUT COUNCIL ON PROBLEM GAMBLING)

INCREASING YOUR ODDS BY DEVELOPING A SPECULATIVE STRATEGY

“In Trading in the Zone, Mark Douglas suggests that there are five fundamental truths that need to be accepted before you can trade from a totally objective mindset, that is, without all your years of accumulated baggage stuffing up your results. In very shorthand, he says you need to trade like a casino – probability based, with no particular outcome required of any one trade.” (ROGUE TRADERETTE)

“The expectancy in gambling is always terrible, while market speculation at times offers outstanding opportunities.” (DEREK HERNQUIST)

It is ironic that traders spend considerable time researching better indicators and models while giving little thought to the time frame over which these trading tools might be valid. If, indeed, the market consists of ever-changing cycles, then any system or indicator is apt to degrade in its performance over time. In fact, if one waits for an indicator or system to develop a fine historical track record, the odds are good that their useful life are limited…my favorite example is the Las Vegas casino.” (BRETT STEENBARGER PAPER ON STATIONARITY)

“The simple act of drafting a plan can significantly increase the odds that your trade will be profitable.” (RIGHTLINE)

Personally, I believe the stock market versus gambling comparison is a mute point. What difference does it make if we conclude that gambling and stock trading is similar or different? Will our conclusion on one side or the other make a difference in our trading? Probably not. All that matters is that we develop a plan to help us manage the speculative nature of future stock prices. To do otherwise would foster false expectations about the ability to predict the future. No one can predict with any high degree of consistency the next card in the deck, the next lotto number, or the DOW’s close, so why try? What we can do, however, is predict how we will react to changes in future prices.

CTU is about trading with a plan and a speculative perspective under controlled conditions.

David Blair

THE CROSSHAIRS TRADER