Is day trading the same as gambling? This is a question that has been asked many times. Some people continuously compare day traders with gamblers, saying that both of them take risks and hope that the odds turn to their favour. Well, if you want to know if day trading and Gambling are the same, you only need to understand how the two work for you to make an informed decision.
Defining Trading vs Gambling
Day trading, in layman’s language, is when traders do an analysis of the market in the morning, open the trade and then close them by the time the day is ending. The concept is that waiting overnight increases the risks. There are a lot of factors that are considered when opening the trade, and most of the day traders spend a lot of time watching recent trends, analysing news items, and understanding the stock market.
Gambling is taking part in a game where you put your money or anything of monetary value at risk hoping that the odds work for you and you win. There are many forms of Gambling, and it can be done both online and at a physical casino.
Even though the two are different, some similarities make people confuse them. For instance, in both day trading and Gambling, the result is a win or a loss. In both cases, when the chamber and trader transact, they are hoping for a win. The other similarity is that if one does not have self-control, they can develop addiction and a compulsive desire to keep up. Both the gambler and the day trader must know when to count their losses and stop if they do not want to make more losses.
Why Day Trading is Not Gambling
As much as there are some similarities between the two, you need to understand the glaring differences that set them apart.
- Focus on Facts and Figures:Gambling merely focuses on the odds. Day trading goes more in-depth to look at past performances the stock that they want to purchase, and other information that they think will help them make better decisions. They follow news items that touch on forex trading and stock market keenly, analyse the facts and figures before making their move.
- Need for Reason and Rationality: Even though online casino sites like Unibet have always asked players to be rational and reasonable when placing their bets, there is a huge section of bettors who let their emotions control them. For day traders, it is reason that takes prominence in decision making. For instance, if they know that some stock is going to perform poorly, they can wait for as long as one week without opening the market.
- There is No House Advantage: The unwritten rule of Gambling is that the bookies always make money. For day trading, there is no house advantage. The markets do not care whether they win or lose. If the day traders are keen enough, they end up making profits.
- Rush for Fast Profits: When one is starting out as a day trader, they are advised to start slow, and not be in a rush to make profits. For gamblers, if one is feeling lucky, they can be pushed to place a large bet, even if they lose it all. There is always a rush to make as much as possible in the shortest time. Day traders, on the other hand, work progressively.
Although gambling and day trading both have some level of risk involved, they operate differently. It does not mean that if one is successful at Gambling, they will make good day traders.