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But isn’t it gambling?

Is Trading Gambling?
Written by David

It is what you, in your opinion, think it is. It does not make one jot of difference these days, although spread betting providers did not have a good name years ago. They are steadily cleaning up their acts now, though, and the spreads are closer and the fills fast enough for me.

Sure, it can be argued that the stock markets are a gamblers paradise but one thing is for certain: over the past 30 years the financial markets have become an attractive marketplace for speculation. The stock market in this respect is one giant casino and the only way you win is by having an edge – just like its possible to beat the casinos at blackjack by having an edge.

Is it risky? Yes it is – While a 100-point rise on the Footsie will result in a profit of £1000 (assuming a £10 per point stake), a 100-point drop will lose you £1000. Of course there are ways of mitigating the risk like limiting the size of the stake… It is also good practice to work out a worse-case scenario. Let’s take the example of a stock presently trading at 150p. If the company goes bust, the most you can lose is 150 multiplied by the size of the stake – if it is a £1-a-point stake, it is £150; if it is a £100-a-point stake, it is £15,000. A stop loss order also helps to control the downside risks by limiting the amount you can lose on any bet once your stop loss level is reached.

But isn’t it gambling? Hmm, yes and no. With a spread betting company you bet on how much your instrument will go up or down. If that is not gambling I don’t know what is 😉 Having said that it irks me a little as i have put in so much effort to become good at this it’s not just luck – sometimes when I talk to people who are totally unaware of how the markets work, they ask what you do and if you reply that you trade commodities and currencies they always go oh you’re a gambler… Sounds better calling it something nice and impressive, like CRA i.e. Calculated risk analysis. 😉

I mean, no disrespect to gamblers, but I do think it is quite rude given the amount of work we put into trading! I also find it wrong to assume that business owners are all an intelligent bunch and also that mistakes in general should be referred to as ‘a blonde moment’! As an example, when I was an employee and my boss when speaking of a fellow employee of mine once said ‘I am obviously more clever than Jim. If he was more clever than me I would be working for him and not the other way around!’. Now, I found this wrong on a number of levels which I couldn’t begin to explain to him (my boss), because he has no idea what he did wrong! I think that some people just don’t think!?

Most traders don’t like that term, though, Especially, the ones who dedicate hours to technical analysis and theory. After all that hard work, to call it GAMBLING! Have some respect for the profession, mate! Call it something nice and impressive, like CRA i.e. Calculated risk analysis. -:)

But well, if that’s the price we have to pay for tax free profits so be it! In the UK we don’t pay income tax on gambling proceeds (of course, that assumes you get it right and actually win 🙂 )

About the author


I first cut my teeth in the Square Mile in the winter of 2002. I was young, fresh-faced and straight out of university; keen but maybe a little naïve about the way the investment world really worked… A few years ago I discover a whole new world of opportunity: spread betting on the financial markets.

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