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Day trading is not gambling in the traditional sense but they both do share some similarities.
In this article I want to go over 4 reasons why people say day trading is gambling, and 5 reasons why it’s actually not.
Day trading is a business, that can be very easily flipped into gambling, and here 4 reasons why people say it is.
One reason why people say that day trading is gambling is because both involve the risk of losing money.
When you’re day trading, you risk the possibility to lose money. Studies have shown that 80% of day traders actually lose money everyday.
Another reason why people say that day trading is gambling is because of the quick-decision making you need make. Day trading is all about intraday movement, which at times can be very volatile. This can be a difficult task for a lot of people who attempt to be day traderes.
Day traders to make a significant amount of money, usually have to take riskier trades. This may involve short expiration dates on options contracts or very volatile stocks. With higher risk, comes high reward, and people may associate this with gambling like behavior.
Day trading can be very thrilling, as you see the profits and losses fluctuate very violently. This type of thrill releases dopamine in one’s brain and can it make very addicting to the day trader. This can lead people to make bad trading decisions, and losing a lot of money that they cannot afford to lose.
Like I mentioned before, day trading can be easily turned to gambling if not handled correctly. But if it is treated with the proper respect, this can be a very well worth paying career.
Here some reasons why people day trading is not gambling.
One reasons day trading is not gambling is are the goals. Day traders treat day trading as a business, and will look to make profit by buying and selling options or stocks within a single day. Day traders, will apply proper scaling out techniques so they can lean to be profitable.
Gamblers on the other hand, risk their money on the outcome of an event, which is usually done for entertainment. A gambler does not treat the risk as a business but more for pleasure.
Another key difference why day trading is not gambling is that day traders use research and analysis to try to predict the future of a stock. For example, day traders will look into factors such as:
Gamblers take risk on events that have no research or analysis – for example, a roulette wheel spin.
In day trading, you can apply risk management and stop losses to your day trades. For example, you can take a trade, but when you see that the trade is not going as planned, you can exit and retrieve the remaining premium of your option contracts.
Unlike gambling, risk management and stop losses do not exist – It’s either all or nothing when it comes to gambling.
Day trading requires a high level of skill, and knowledge in the following:
Gambling requires none of the items above.
Sure day trading and gambling have similarities, and yes, a person can turn from day trader to gambler, but when day trading is done right, day trading is not gambling.
If you’re considering to become a day trader, it’s important to do your research and understand the risk involved, so you do not become a gambler.