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Is Trading Like Gambling At A Casino?

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Is betting similar to trading in the financial markets? Well, this is a common question among many. Is there a difference between a punter playing roulette or baccarat on Lucky Nugget online casino and an investor in the financial markets? Generally speaking, stock market traders don’t like being compared to gamblers. Nevertheless, there are several notable similarities between the two. Read further to find out more.

Trading Can Be Like Gambling At a Casino
As you transact on the day trading market, you’re dealing with odds. There are usually emerging markets with favorable economic pictures that you could use to buy stronger currency like the Euro or GBP. In such a scenario where you are taking advantage of the imbalance, the odds are tilted but not guaranteed.
In casinos, odds are usually tilted in favor of the house; hence the famous phrase “the house always wins.” For a trader to make money in the stock market, he should find a way to skew the odds in their favor, just like the casino.
However, the difference between the two is that with gambling, you have a negative expected return meaning the house is expected to win. As for trading, if skillfully done, you can put yourself in the position of the casino.

Traders Must Improve Their Odds Just Like a Casino
As mentioned earlier, a casino has the odds tilted in its favor. In other words, they only offer games they are sure will skew odds in their favor.
Similarly, successful traders employ the same strategy. They only take trades that give them better odds of winning. Also, casinos usually have a minimum and maximum bet size. By setting the minimum bet size, they ensure that their clients’ value is not too low. On the other end, they put a maximum bet to avoid the risk of a large bet blowing a hole in their revenue.
Traders also employ the same strategy. They don’t usually put so much money on one thing, no matter the confidence they have. They are aware of the risk that the trade could go against them. It is an elementary principle of proper risk management. The most critical thing is preserving your capital.
Traders usually aim to have a long term edge that finds asymmetrically positive rewards to risk set-ups instead of betting the house on specific outcomes.

Summary
So, are traders gamblers? The two disciplines are similar in several ways. Here are the similarities between the two in a nutshell:
Casinos select the right strategy by:
● Offering games that give them an edge only.
● Setting the ceiling on the maximum bet to protect their profits.
● Prolong their service hours to take care of different clients from different time zones.
Similarly, as a trader, you ought to:
● Only take trades that will give you the highest returns relative to your risk.
● Ensure that no single trade dominates your profit and loss.
● Diversify your trades so that their collective performance is a function of a selection of high rewards to different risk trades. This approach also reduces the volatility in their performance.

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