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Is Trading Stocks Considered Gambling?


January 17, 2022 ( Newswire) There's a popular belief in the market that trading stocks is no different than gambling. The statement itself is a myth. The stock market and gambling share several similarities that can lead you to believe they're the same. At their core, trading and gambling are totally at odds.

trader using trade automation

Trading stocks and gambling are two different sources of income. However, on some occasions, traders are actually gambling without even realizing it. I'll discuss when and why it happens, but first, let's have a look at some of the characteristics trading and gambling have in common.

The Similarities Between Gambling and Trading

Both gambling and trading strategies involve risk. The major similarity between the two is that you have to risk money in hope of gaining value.

Another similarity between the two is that they require knowledge of risk tolerance. Both a gambler and a trader should know how much risk they can afford to set realistic limits and expectations.

Despite these few similarities between the two income alternatives, it's evident that they're not the same thing. That's why we should move on to the differences.

The Differences Between Gambling and Trading

The difference in risk and return ratio is where trading stocks and gambling part their ways. A gambler risks capital without any chance of calculating the exact outcome. While a trader can monitor risks and predict the rate of return.

Contingency is the key factor in gambling. This means success in gambling depends on sheer luck. Although luck can play its part in the stock market at times, at the end of the day it's all about smart decisions based on continuous research.

The creation of value is another essential aspect. Trading creates value and increases the overall economy. Gambling doesn't create any value-it just takes money from several gamblers (losers) and gives the same money to some other gamblers (winners).

You have a collection of practices, skills, strategies and tools to succeed in the stock market. It takes decent risk management and careful planning, in contrast to gambling which is quick-paced and doesn't require profound research. However, it's worth noting that games like blackjack also allow you to increase the chances of winning with the usage of logic and analytical skills.

Why Some Traders Are Actually Gamblers

As already mentioned above, doing intense research and monitoring risks are some of the key factors to success in the stock market. Yet, some traders refuse to adopt an adequate strategy. Instead, they put their money into the stocks without analyzing risks and expectations. Typically, these traders have higher chances of losing their money because they're not planning. They're just hoping they'll succeed.

These types of traders are the ones who are actually gambling. So, trading stocks isn't gambling, but if you trade like a gambler, it really is gambling to you.

Both trading and gambling strategies can be very lucrative. There's nothing wrong if you don't want to spend time analyzing risks and planning each move. If you feel lucky and want to gain earnings while having fun, there are thousands of online slots waiting to be explored.

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