Difference between "trading" and "gambling"

[max_usted]

Hi all, sorry if already covered (ad infinitum), but was wondering what are people's thoughts on the difference between 'trading' and 'gambling'? This is a question I've been asked a few times since trying to explain what it is that I do and being met with the usual semi-horrified/dumbfounded reaction.

I never gambled before taking up trading on Betfair, so I don't feel able to properly explain the difference - though I'm sure it must exist.

[LeTiss]

There have been stacks of threads covering this over the years, which obviously shows just how blurred the lines are in between

[ruthlessimon]

Although this isn't necessarily true - & generally everyone outside the trading circle will call us gamblers, I prefer the term speculator.

Gambler: Trades when the odds aren't in their favour
Speculator: Trades when the odds are in their favour

Quick example: A casino owner isn't considered a gambler. Their games have a verified edge, they just need to execute it.

[LeTiss]

You don't have a gambling background max_usted, and I believe that helps

I've mentioned this numerous times on BA, but when you consider 2 of the biggest pitfalls here - overstaking and letting bad trades go IP, those with a gambling background I believe are more vulnerable to making those rash decisions.

Those without a history of betting, seem more capable to remain analytical and in control

[Derek27]

Although this isn't necessarily true - & generally everyone outside the trading circle will call us gamblers, I prefer the term speculator.

Gambler: Trades when the odds aren't in their favour
Speculator: Trades when the odds are in their favour

Quick example: A casino owner isn't considered a gambler. Their games have a verified edge, they just need to execute it.

A gambler is someone who takes risks for reward based on the outcome of an event. It has nothing to do with whether or not the odds are in his favour. Both, casinos and people who play them are gamblers.

When I used to gamble on horse racing (successfull, I might add), I remember bumping into an old (elderly) friend. When I told her that I spend most of the day betting on horse racing she became extremely sympathetic - she told me that at least it's a good thing that I'm able to recognise and admit it !!!

[Crazyskier]

Those without a history of betting, seem more capable to remain analytical and in control

...and yet many of those still fail miserably at achieving a consistent profit... Let's be honest, if there is risk (irrespective how small) it's gambling, pure and simple.

oh and OP, you might wish to search the forum before posting as there are MANY similar threads to this one.

CS

[to75ne]

...and yet many of those still fail miserably at achieving a consistent profit... Let's be honest, if there is risk (irrespective how small) it's gambling, pure and simple.

oh and OP, you might wish to search the forum before posting as there are MANY similar threads to this one.

CS
[/quote]

bang on

[Derek27]

You don't have a gambling background max_usted, and I believe that helps

I've mentioned this numerous times on BA, but when you consider 2 of the biggest pitfalls here - overstaking and letting bad trades go IP, those with a gambling background I believe are more vulnerable to making those rash decisions.

Those without a history of betting, seem more capable to remain analytical and in control

I disagree with what many people say, that trading and gambling don't mix.

If your trading to high stakes, far more than you would bet, than of course you cannot allow the bet to run, regardless of any value in the bet.

I started using Betfair to gamble and just place back bets. I soon found it impossible to resist laying odd-on favourites that were ridiculously short. But eventually I was laying odd-on maidens at prices that I was confident were in my favour, I'd back them if they reached a certain price, but I was happy to let them run if they didn't. I would also back horses with the intention of letting them run, but if they got so short that it was now a good lay it made sense to trade them.

Gambling and trading work together, but you have to be gambling orientated and focus on value in the odds - it won't work the other way round.

[ShaunWhite]

There's no difference, but say 'gambler' and they picture a guy with a whippet, say 'trader' and they picture a guy with a porsche.

What they'll actually judge you by is whether this time next year you've either lost your house or got a bigger one.

[ruthlessimon]

Shaun I thought you had a whippet

[ruthlessimon]

many people say, that trading and gambling don't mix.

It's tricky. Because a top gambler, will look identical to a top technical trader in both trade entries & results. In theory, it should be very easy for a good gambler to become a top trader, as they already understand 'value'.

All of my trades today were based on where I thought the pro-gamblers were positioned. If I know where they're positioned, I can anticipate where they will see value - & if I see them execute - there's my entry signal. It's a technical traders job to stalk the good gamblers. They're the ones who know the intrinsic value of a horse, & with them playing a different timeframe, give me an edge.

[LeTiss]

Shaun is absolutely right - people's perceptions of a professional punter vs professional trader are very different, even though many of their activities will overlap each other

[Derek27]

All of my trades today were based on where I thought the pro-gamblers were positioned. If I know where they're positioned, I can anticipate where they will see value - & if I see them execute - there's my entry signal. It's a technical traders job to stalk the good gamblers. They're the ones who know the intrinsic value of a horse, & with them playing a different timeframe, give me an edge.

That is an interesting trading angle.

My view though, is that gambling, just like trading, is all about getting it right significantly more often than you get it wrong, rather than precision.

I can easily imagine a scenario where two highly successful gamblers have a completely different view of a race; one thinks the favourite has a 6/4 chance, the other thinks it's not worth backing at 5/2 and is more interested in a longer shot. One of them may be right and the other wrong in this particular race, but they could both be right for the majority of races and continue to be successful.

For this reason, I don't think there is a general position for pro-gamblers.

[Derek27]

Shaun is absolutely right - people's perceptions of a professional punter vs professional trader are very different, even though many of their activities will overlap each other

When I tell people that I trade on the Betfair exchange most of the day, they usually don't have a clue what I'm talking about. When I say it's similar to trading on the stock market they assume I must be a highly intelligent hot-shot dabbling in things that are beyond their understanding.

But if I just said I spend the day gambling on horse racing, which is basically what I'm doing, they'd probably take a very different view.

[ruthlessimon]

I can easily imagine a scenario where two highly successful gamblers have a completely different view of a race; one thinks the favourite has a 6/4 chance, the other thinks it's not worth backing at 5/2 and is more interested in a longer shot. One of them may be right and the other wrong in this particular race, but they could both be right for the majority of races and continue to be successful.

But in your example, if fair value is 11/8 & price touches 6/4 - gambler 1 is desperate to get his back filled. I'd imagine gambler 2 would be the one filling his back orders, considering he's unhappy backing @ 5/2. I think this is why the SP is so accurate. The bad traders are killed off.. well their banks are killed off - just like natural selection (an argument in favour of PC). Lets say in your example price currently trades @ 6/4. Gambler 1 is happy executing at this price & will get filled as much as he can. Whereas gambler 2 disagrees & thinks this is an extremely good lay price. The two battle it out & price their knowledge into the market. If trader 1 is correct with his analysis & others agree 6/4 is cheap, he will move the market back to fair value. Gambler 2 now has a huge loss, his knowledge was incorrect - & the market takes his money - & he is removed from the game.