_{Image courtesy: Mike Licht}

How do you define gambling?

In my first post on my series on gambling games, I had told you that there is very fine line dividing gambling and other risky ventures like trading stocks. I also mentioned this in my next post.

To clarify further, all high risk - high reward activity is not gambling. IMHO, the activity where we don't have any control over the outcome and we anyhow put our bet on a random and equal chance of a favourable or unfavourable outcome, it can be called as gambling.

Time and again, I've pointed out in my series of posts that you can never profit from gambling. It is the House that always win and not the players. So there is no point in playing casino games for the purpose of earning big.

In my previous post, I talked about the way to invest in casinos if you really want to earn from gambling games.

Today, I'm going to talk about earning possibilities from trading stocks, commodity, forex or crypto.

Trading is NOT gambling

Firstly, I'd like to re-state that trading activity does not fall under the definition of gambling. However, a vast majority of people who trade loss their money in trading ...and they loss more money than they would loss in gambling with the same amount in a casino. That's why, people brand trading in stock or crypto as gambling too.

But let me tell you why over 90% of people fail in trading and accrue huge losses. As far as I understand, Trading requires a great deal of understanding of the markets as well as understanding of various trading tools and indicators. After learning all these, a trader needs to master the different trading systems to apply them as the need arises. In brief, Trading is not for amateurs and not meant for part-time investors. It is a full time job which demands ample time for study and observation before opening a position.

In my life, I've met many people who used to trade in stocks, commodities and forex market. But none of them were well-versed with the requisite knowledge of T.A. (Technical Analysis). Although some of them were full time trader, they were performing their trades with half-baked knowledge of some TA and some tips. Obviously, none of them ever succeeded.

When you don't understand trading, you trade blindly or on some random tips. If you only rely on your luck to make a winning trade then you ain't a trader, you're a gambler!

Who shouldn't engage in trading?

The lesson to be learnt is that if you can't acquire all the knowledge needed for trading and can't do it as a full time activity, you should stay away from it. It's just like gambling in that scenario.

But if you have professional trading skills then you have an edge over the market.

Just like a casino House always win because it has a statistical edge over the gamblers; professional traders always win because they have a statistical edge while making the next move.

It's a fact that no professional trader can predict the market accurately and often they are wrong. Technical Analysts predict the future movements based on the past repetitive patterns. So you should not rely on any random tip of any professional trader too.

Why professional traders always win?

Winning or losing is not decided with just one trade because principle of trading works on the statistical edge in predicting. This means, they are more likely to be right than they are likely to be wrong. So if they perform a sufficiently large number of trades over a long period of time, they will emerge as ultimate winner.

This is very similar to casinos' strategy. You can't decide a win or loss by just a single bet. But if players keep wagering sufficiently large number of bets, the net outcome will always be in favour of the casinos.

Thus if you have an accuracy rate of either 50% or more to predict the market movement direction, you are always going to make money by trading. The whole purpose of learning Trading analysis is to gain this ability to predict the right movements more than half of the times. It doesn't mean you always need to be correct in predicting the movement but predict it right at least 50% of the times if not more. And this is very much possible to do with the help of all the tools & indicators. Market does not make any random moves but it performs according to the demand and supply rule.

What I'm trying to explain here has been done very beautifully by a professional trader Adam Khoo here:

I highly recommend you to watch this seventeen minute video. I bet, you won't regret it! 😉