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Gambling and trading, what is the difference?

Posted: December 8th, 2005, 2:47 am
by KackToodles
the diff between gambling and trading is that gambling is a zero sum game: for every winner, there must be a loser. in contrast, every trader could win if a company does well and its price continues to go up (or at least not crash). so, as a long term, well diversified trader, your odds are somewhat better than in gambling.

Gambling and trading, what is the difference?

Posted: December 8th, 2005, 10:06 pm
by TraderJoe
Depends how and what you are trading. In some instances, for example purely speculative commodities trading, they are the same thing.

Gambling and trading, what is the difference?

Posted: December 10th, 2005, 7:36 am
by KackToodles
another difference is that it is possible to "win" in trading if you have superior information or forecasting ability, whileyou cannot win in gambling over the long run (e.g. 25 years). do you know anybody as rich as warren buffett who madehis billions by pure gambling??

Gambling and trading, what is the difference?

Posted: December 14th, 2005, 1:45 am
by rralph
I would say the main difference is that gamblers invest on an outcome where all participants have access to the same information regarding the odds of the game, or at leat they should if the game is fair.Trading involves investments on outcomes where not all information is known. Participants may believe they have a model to predict the odds or hedge the risks, but there are always openings for someone to come up with a better model.I can think of some counter examples already - Sports bets have unknown information (could exclude these by saying there is no hedging available). So I think there is some crossover - e.g. what is the difference between a bet on a political party winning a seat vs investing in the same result on one of the predictive markets?

Gambling and trading, what is the difference?

Posted: December 14th, 2005, 11:20 pm
by exotiq
QuoteOriginally posted by: KackToodlesanother difference is that it is possible to "win" in trading if you have superior information or forecasting ability, whileyou cannot win in gambling over the long run (e.g. 25 years). do you know anybody as rich as warren buffett who madehis billions by pure gambling??Not quite...having superior information is similar to having superior information or rigging power in sports betteing

Gambling and trading, what is the difference?

Posted: December 17th, 2005, 11:45 pm
by KackToodles
> Having superior information is similar to having superior information or rigging power in sports betteingrigging power is generally illegal. on the other hand, there are perfectly legal ways to obtain superior financial information -- such as doing your own market survey ofconsumer demand for a product.

Gambling and trading, what is the difference?

Posted: December 19th, 2005, 12:24 am
by cordless
QuoteOriginally posted by: KackToodleswhile you cannot win in gambling over the long run (e.g. 25 years).Not all fair gambling games are -EV to all participants. Consider poker for example.

Gambling and trading, what is the difference?

Posted: February 2nd, 2006, 3:57 pm
by bigslick
i don't see much of a difference in philosophies or methodologies between the two... a good gambler or odds maker (sports book) will take all info, use a model and calculate odds... if the risk reward payoff is worth it, the gambler will take the bet or offer the bet out. A trader does the same thing, the only difference between the two is that there are larger barriers to entry into trading. the pool of traders on average are better at making money than the pool of gamblers, but if you take the best in Vegas vs. the best on Wall Street I don't think you'll see much of a difference in relative P&L.poker is a great example. Lets say a guy betting the nut hand with the "river" left to come is making a risk reward bet based on the fact that there are 10 cards that could drop making his hand second best. the next player to call is left with a decision. is the total value of the pot worth calling the bet based on the odds of the card dropping. But then there are other factors in play, such as human behaviour (is he bluffing), and imperfect information (do i really have 10 outs or are bunch of those outs already mucked). all these variables are apparent in the every day life of a trader. the real difference between the two is that one is considered a career which companies will provide salaries for, the other isn't.

Gambling and trading, what is the difference?

Posted: February 4th, 2006, 3:10 pm
by TraderJoe
So poker players/gamblers are one man armies. Why hasn't someone thought of employing some good gamblers and taking a cut? Not because it's too risky but because the gamblers don't consider there to be any financial advantage in doing this.

Gambling and trading, what is the difference?

Posted: February 6th, 2006, 12:21 pm
by bigslick
to trader Joe: I don't understand your point. are u answering your own question? if u are, i'm sorry to say but ur flat out wrong. if you do actually work on wall street you must be dealing with some pretty illiquid stuff, away from the rest of the trading floor or maybe you don't work on wall street. if you were trying to make some other point then pls explain further because from what i know there are many firms hiring the trader version of "the King of Vegas" and taking a cut.

Gambling and trading, what is the difference?

Posted: February 22nd, 2006, 6:28 pm
by tbatson
Gambling is when you know your expected value is less than zero.Trading or Investing is when you think your expected value is greater than zero.

Gambling and trading, what is the difference?

Posted: February 23rd, 2006, 3:28 pm
by TraderJoe
QuoteOriginally posted by: bigslickto trader Joe: I don't understand your point. are u answering your own question? if u are, i'm sorry to say but ur flat out wrong. if you do actually work on wall street you must be dealing with some pretty illiquid stuff, away from the rest of the trading floor or maybe you don't work on wall street. if you were trying to make some other point then pls explain further because from what i know there are many firms hiring the trader version of "the King of Vegas" and taking a cut.Exactly. But no-one's hiring the "King of Vegas" himself. This is because The King of Vegas knows that he is better off on his own. The trader, on the other hand, can leverage his bank's resources to gain competitive advantage. QF 101.

Gambling and trading, what is the difference?

Posted: February 24th, 2006, 5:59 pm
by bigslick
TJ, u could be right... i personally don't know what the 'other' guy's motivations are or what he/she is thinking. i do know however, that top prop traders at IBs are pullin in over 20MM and in some cases 40M a year, which to me indicates these guys are willin to use other people's capital and take a cut at some point in their careers. I somewhat agree with u though, the best of the best could be better off on his own... but the question still remains, would he make more money using his own capital or a larger pool that belongs to others. Guys like Bill Gross are undoubtingly pimp and he seems to favour the latter. Was the other course u took along side 'QF 101' 'ESP 101'?

Gambling and trading, what is the difference?

Posted: February 26th, 2006, 1:55 am
by exotiq
QuoteOriginally posted by: TraderJoe...Why hasn't someone thought of employing some good gamblers and taking a cut?Several people have thought of this, and today we call them "Investors in hedge funds (at least more than a few I have seen)". QuoteNot because it's too risky but because the gamblers don't consider there to be any financial advantage in doing this.I would consider "2 and 20" to be more than sufficient financial advantage.

Gambling and trading, what is the difference?

Posted: March 14th, 2006, 11:25 pm
by TraderJoe
QuoteOriginally posted by: bigslickTJ, u could be right... i personally don't know what the 'other' guy's motivations are or what he/she is thinking. i do know however, that top prop traders at IBs are pullin in over 20MM and in some cases 40M a year, which to me indicates these guys are willin to use other people's capital and take a cut at some point in their careers. I somewhat agree with u though, the best of the best could be better off on his own... but the question still remains, would he make more money using his own capital or a larger pool that belongs to others. Guys like Bill Gross are undoubtingly pimp and he seems to favour the latter. Was the other course u took along side 'QF 101' 'ESP 101'?Possibly.