This question has been asked nearly every day since I began my career.
My initial answer was that is was not gambling but speculating the market whilst making informed decisions. Great sales pitch!
This view changed when I became a broker and account manager and saw that the majority of new retail traders (individuals trading their personal accounts) had a tendency to trade for the sake of it with the aim of making quick easy money. I assume this is gambling.
What is the definition of gambling?
According to the Cambridge online dictionary:
the activity of betting money, for example in a game or on a horse race:
“Gambling can be an addictive habit”.
“He had to borrow money to pay off his gambling debts”.
According to the Oxford online dictionary:
the activity of playing games of chance for money and of betting on horses, etc.
Ok, this answers our gut instinct, trading online has many of these traits. The interesting premise is paying off debts and an addictive habit.
Let us go a bit deeper into the reasons some people trade, eventually calling it a scam.
Many people have no interest in the financial markets, economics or business, however social/peer pressure often turns their attention to take some action in investments.
You go down the pub and a mate mention’s he made a killing on a certain stock and you would be crazy not to buy it. This arouses the other person to consider, should I go along and buy this stock, with no real understanding of the company or what buying the stock means. If this person buy’s or trades the stock without any informed decision, this is gambling.
Paying off debts.
This is common for most who are looking to get out of a financial hole, often during times of economic recession.
You go online and look at money making ideas, quick and with little capital required. There are thousands of opportunities. Trading is a trillion Dollar industry and therefore the internet is saturated with brokers looking for your business.
If the person does no research and jumps into the first opportunity that looks easy that catches their eye. This is gambling.
The new trader does some due diligence, opens an account, understands the basics of trading, makes some trades, makes or loses money but sees the opportunities of the market and continues to trade all the time with no goals or exit strategy. This is gambling.
The markets move quickly, and opportunities arise all the time. Win or lose the thrill, adrenaline and passion of trading pushes them to “chase the dragon”. This is gambling.
I can give many more examples; we all know someone that gambles.
Ok, not everyone goes this way. So, let us look at the upside.
The beginner needs to understand the basics, the risks and be prepared to learn. It does not mean you need to have a PhD in Economics. It depends on the individual how much time and effort they want to give it.
The trader will have resources and support to achieve their goals, but they need to decide what approach best suits them.
The successful traders I have met and know have probably gone through some of the examples above but eventually they trade because they understand the system and not trade just for the money. They will adapt strategies and keep an eye on the fluctuations of the market. All traders, experienced or not will lose at times.
If a trader, has a strategy and speculates the market making informed decisions 😊
This is not gambling.