Day trading is Like Gambling, except that…

With Corona came an increase in the interest of daytrading. The rapid spread of the COVID-19 pandemic has led to a significant increase in the popularity of day trading. This trend is being driven by a number of factors, including economic uncertainty, market volatility, and the availability of online trading platforms – and the lockdowns around the world.

One of the main reasons for the rapid increase in day trading is the economic uncertainty caused by the pandemic. As businesses have shut down and unemployment has risen, many people have been looking for ways to generate income and protect their savings. Day trading offers the potential for quick profits, and can be done from home, seemingly making it an attractive option for many people who have lost their jobs or are looking for additional sources of income.

Another factor contributing to the popularity of day trading is the increased volatility in the financial markets. The pandemic has caused sharp swings in asset prices, creating opportunities for traders to buy low and sell high. This has attracted many people who are looking to capitalize on the market volatility and make quick profits from price movements.

Finally, the availability of online trading platforms has made it easier for people to get started with day trading. Many platforms offer easy-to-use interfaces and a range of educational materials and tools, making it possible for even inexperienced traders to enter the market and start trading.

With many new people entering this space, I often see the discussion about daytrading and gamble – two sides of the same coin or not comparable at all?

The question of whether day trading is Gambling is a complex one, and the answer is not clear-cut. On the one hand, day trading involves buying and selling financial instruments within the same day, in an effort to profit from price movements. This can be seen as a form of Gambling, since it involves risking money in the hopes of making a profit.

But what exactly is gambling?

Gambling typically involves betting or wagering on the outcome of an event or game, such as a horse race or a poker game. The outcome of the bet is determined by chance, and the bettor has no control over the outcome. The goal of gambling is to win money or other rewards, either by correctly predicting the outcome of the event or by being the last remaining player in a game.

Gambling is often regulated by governments and may be legal or illegal depending on the jurisdiction. In some cases, gambling is restricted to specific locations, such as casinos or racetracks, while in other cases it may be available online or through other channels.

Day trading fits into the definition of gambling in some ways, but not in others. On the one hand, day trading involves risking money on the outcome of an event, with the intention of winning additional money. This is similar to gambling, in that both involve risking money on an uncertain outcome. However, there are some key differences between day trading and gambling. One of the main differences is that day trading is not determined solely by chance, but also by the skill and expertise of the trader.

Unlike a game of chance, such as a slot machine or a roulette wheel, day trading involves using various strategies and techniques to try to increase the chances of success.

Another difference is that day trading is not typically regulated as gambling. In most jurisdictions, day trading is considered a form of investing, rather than gambling, and is subject to different regulations and oversight. This is because day trading involves buying and selling financial instruments, such as stocks or futures contracts, rather than betting on the outcome of an event.

On the other hand, day trading is not like playing a slot machine, where the outcome is entirely determined by chance. Instead, day traders use various strategies and techniques to try to increase their chances of success.

For example, they may use technical analysis to identify patterns in price movements, or fundamental analysis to evaluate the underlying strength of a company or economic sector.

Furthermore, day trading is not unlike other activities that involve risk and the potential for profit, such as investing in the stock market or starting a business. In these cases, the outcome is not determined solely by luck, but also by the skill and expertise of the individual or team involved.

Overall, the answer to the question of whether day trading is Gambling is blurry, partially because it depends on how you go about day trading, and partially because the definition of Gambling itself is not clear-cut. While day trading does involve risk and the potential for loss, there are ways to increase your chances of success, and it is not entirely determined by luck. Whether or not day trading is considered Gambling ultimately depends on how you approach it and the strategies and techniques you use. With all that being said, you may get the idea that you can read through a couple of books, and with that, master the art of day trading. Hold on now.

Understand the inner workings

While there is no doubt that reading books and other educational materials can be an important part of learning how to trade, it is not enough on its own. To truly understand the inner workings of a market and how to take advantage of it, a trader needs to have hands-on experience and a deep understanding of the dynamics that drive price movements.

One of the challenges with learning to trade from books and other educational materials is that they often provide a theoretical or conceptual view of the markets, without fully addressing the practical realities of trading. For example, a book may provide a detailed explanation of a particular trading strategy, but it may not address the challenges and obstacles that a trader may face when trying to implement that strategy in the real world.

Moreover, books and other educational materials are often written by authors who have a particular perspective or bias, and may not provide a balanced view of the markets. As a result, traders who rely solely on these materials may not develop a well-rounded understanding of the markets, and may be ill-prepared to adapt to changing conditions or unexpected events.

In contrast, a trader who has hands-on experience and a deep understanding of the markets is likely to have a more nuanced and realistic view of the opportunities and challenges that trading presents. This can help them make more informed and confident decisions, and better navigate the complexities of the markets.

Overall, while reading books and other educational materials can be a valuable part of learning how to trade, it is not enough on its own. To truly understand the inner workings of a market and how to take advantage of it, a trader needs to have hands-on experience and a deep understanding of the dynamics that drive price movements.

One of the key insights that a trader with hands-on experience and a deep understanding of the markets is likely to have is that the more obvious and clear a trading pattern seems, the less likely it is to work out. This is because the markets are complex and dynamic, and are not easily predictable or controllable.

For example, consider a trading pattern that seems to be perfectly clear and predictable. This pattern may be based on a strong trend, a well-defined support or resistance level, or some other technical or fundamental indicator. On the surface, this pattern may seem like a sure thing, and many traders may be tempted to jump on board and follow it.
However, a trader with experience and a deep understanding of the markets is likely to be more skeptical of such patterns. They may recognize that the markets are constantly changing and evolving, and that what appears to be a clear and predictable pattern may be subject to unforeseen events or shifts in market sentiment. As a result, they may be more cautious about following such patterns, and may look for other, more subtle or nuanced opportunities to trade.

In contrast, traders who rely solely on obvious and clear patterns may be more likely to be swayed by their apparent simplicity and attractiveness. They may not have the experience or understanding to recognize the potential risks and challenges of such patterns, and may be more likely to suffer losses as a result.

Overall, the more obvious and clear a trading pattern seems, the less likely it is to work out. This is because the markets are complex and dynamic, and are not easily predictable or controllable. A trader with experience and a deep understanding of the market, knows this.

Day trading is not pure luck. You can put the odds in your favor. There are gambling elements to day trading, but you do have the option to put the odds in your favor – but its difficult to learn, and not something that will happen by reading a couple of books on technical analysis. More on how to get started the right way in the next post. Say tuned.