Trading vs. Gambling from OptionSpreadTrades.com

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Trading vs. Gambling

I constantly hear from people that trading is the same thing as gambling. This is typically from the uneducated who have seen too many news shows about somebody who lost it all day trading. However the difference between Vegas and the Markets CAN be big if you play the game the right way. Here are a few things to consider when comparing the two

1. Gambling, with the exception of a few games like Poker and Black Jack are largely games of chance and the odds are always slightly in favor of the house.

2. In the Markets like in Poker or Black Jack you can wait until you have a statistically significant edge then and only then do you place your bets. Unfortunately in cards you have to pay an ante or minimum bet and you have to wait until you get good cards or in the case of Black Jack be a card counter. In the Markets you can do research until you find stocks that have an edge. Until you find an edge you can wait patiently and keep your money in cash.

For example you can look at the trend. If you purchase a stock when it is in an uptrend, the S&P is in an uptrend and the industry the stock is in an uptrend and you do a bit of fundamental analysis on the stock then you've already stacked the odds enormously in your favor.

Doing these three things alone can make the difference between a winning portfolio and a losing one. Fortunately or unfortunately the old adage, Whatever happens in Vegas stays in Vegas, can't be said about the Stock Markets and one needs to remember that gambling is entertainment and trading is a business.