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i wonder if the trader or gambler expectations differentiate between
speculating and gambling. a trader speculates in the expectation of
making a profit. but a gambler gambles with the expectation of not
making a profit necessarily, but rather for any number of other
unrelated reasons. this is true of a sample of gamblers i surveyed in
vegas and reno a few years ago. all but one mentioned other reasons
(thrill, excitement, danger, fear, hope, etc.) before making money as a
goal. the lone exception was a blackjack player using his system and
his goal was to profit. then you get the crossovers, ie, the gamblers
who trade are still gamblers, but they've traded the casinos for the
markets. and surely there are gamblers who like to think of themselves
as traders. to these "traders", profits are secondary to other
emotionally related considerations.
the moral reasons you cite should be irrevelant for traders who expect
to profit. but for many, the moral conflict (sin as you put it) causes
them to lose money, thus atoning for their "sin". so according to their
muddled logic, they rationalize that losing = good = salvation and
profiting = bad = sin. so when they win, they must ultimate lose to
feel good about themselves.
whether one win or loses does not define his activity as gambling or
trading, but rather the expectation. traders prosper and they fail.
gamblers prosper and they fail. but traders expect profits, gamblers
expect to get a rush. i think that the main distinction between the two
is the expectation of making a profit.
i try to think of myself as the casino and trade the markets as such,
with an edge and a positve expectation of making a profit over the long
haul.
TJ
just some ramblings on a slow friday nite
--- Scott Hoffman <trader20@xxxxxxxxxxxxxx> wrote:
> >in gambling, the casino has the edge; in speculating, the superior
> >system or method has the edge;
>
> The problem with relying exclusively on mathematical expectation as
> the
> discriminator between gambling and speculation is that it makes it
> very
> difficult to actually categorize many activities outside the casino.
> A
> participant in the markets may believe they have an edge, and thus
> they
> classify themselves as speculators. But other than casino games with
> well
> understood stable statistical properties, it is virtually impossible
> to know
> a priori whether an activity actually has an edge or not. An
> entrepreneur
> assumes risk and considers himself a speculator. But what if his idea
> is
> very poor and he fails? Was he then a gambler rather than a
> speculator
> because obviously he didn't have an edge or he wouldn't have failed?
> But
> what if the reason for his failure was some chance condition, and if
> he was
> somehow able to repeated this activity many times, he would come out
> ahead
> more often then not. Now he's back to being a speculator?
>
> Also, distinctions based on expectation do not assist those with
> sincere
> moral convictions that gambling is a sin. Such an individual would
> generally
> not find comfort in being "the house" simply because the house has
> the edge.
> It the very activity of casino gaming, regardless of which side of
> the table
> you are on, that is prohibited.
>
> I believe a better distinction which avoids the difficulties outlined
> above
> is made by classifying the activity by the nature of the risk
> involved. If
> the risk is created "out of thin air" for whatever reason
> (entertainment,
> thrill, or greed) then
> the activity is gambling. Although I would lack the ability to author
> a
> statute defining such activity, I know it when I see it. Casinos,
> track
> betting, poker, betting on airline arrivals and departures (ala the
> Seinfeld
> characters Kramer and his Texan buddy...maybe Mark Brown?) are all
> participating in the activity of gambling.
> On the other hand, if the risk is inherent in some valid economic
> activity,
> then the participants are engaged in the activity of speculation.
> Starting a
> business,
> planting
> corn, trading in the global marketplace are all speculation. By this
> distinction, if being late to a city would result in some economic
> disadvantage, some type of insurance or option contract on airline
> arrival
> times would be categorized as speculation.
>
> It is noteworthy that the tools of traditional gambling and
> speculation are
> the same which makes it easy for people to confuse the two. Things
> like
> analysis of edge, bet size selection, and psychology are applied
> without
> distinction to both activities. However, they are not the same
> activities to
> some moralists.
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