A Close Comparison between Stock Trading and Online Gaming

It’s not uncommon to hear people compare stock trading to online gambling. The contrast arises from the fact that both activities involve risk. Playing the stock market doesn’t offer you any assurances that your investment will generate the desired results. The same applies to gambling. When you get money on online blackjack, you are not 100% sure that you will win. Although this is the biggest similarity, a few other reasons lead to these comparisons. Of course, any trader worth anything detests the association to gambling.

A good trader will argue that stock trading involves a lot more science than luck, and they would be right. Investing in the stock market requires a bit of strategy and calculated decisions. However, that doesn’t eliminate the relationship between online gambling and stock trading. If you are new to stock trading, then you might want to understand the different aspects that draw the connections between the two sectors.

It’s All About Risk

The concept of high risk, high reward applies to both investing and gambling. Whether playing the currency or stock market, the idea is that it means to put up a significant amount to try and enjoy favorable results. However, when you buy a stock, no one guarantees that it’s going to pay off. Various factors influence market performance, and it’s hard to tell what will happen the next day. A trade that looked promising could end up losing money. Of course, traders are not entirely blind when making these decisions. In some instances, investors use the information at their disposal to make educated guesses. Nonetheless, an element of uncertainty exists. One trait of a good trader is the willingness to take risks. Some investors even take pride in being daring.

Online gambling involves the same risk component. Playing casino games means wagering money without the assurance that you will get it back. You could end up hitting the jackpot and multiplying your beta thousandfold or losing the entire stake. However, not even the best Bitcoin Casinos ensure desirable outcomes. Several factors affect the risk levels in trading and gambling. The size of the funds invested is one. Putting a huge chunk of your investment or gambling budget on a trade or casino game increases your risk. The type of product you choose to spend money on matters, as well. When investing or gambling, you have to consider the risks that a particular instrument carries. Some products have lower odds than others, and that impacts your risk.

Trading Fees and the House Advantage

Another similarity between stock trading and online gambling is the expectation of leaving money on the table even when you win. All casino games have a house edge or advantage. It refers to the statistical advantage that the operator holds in each product. The house edge determines how much the casino takes in the long run from a particular game. A roulette title with a house advantage of 2.7% indicates that for every 100 units spent on that product, the gambling site keeps 2.7 units. It means that over a prolonged period, the house always wins.

Most traders argue that the probability of losing when gambling is higher than when investing due to the house edge. An investment doesn’t have a house advantage, but it involves an almost similar element – trading fees. A majority of investors hire brokers to handle their assets then pay them a percentage of their returns. Apart from brokers, traders incur other charges, including drawdown fees, transactional fees and taxes. The point is that even when you win, you don’t get 100% profits from your investment.

The Key Differences

Traders who debate that what they do is not gambling have good reasons because a few differences exist. Here are the major ones:

Mitigating Risk and Loss

When gambling, you have few alternatives to ease the losses and risks. Some skill-based games such as poker and blackjack let you develop betting strategies that can help reduce losses. Nevertheless, no wagering strategy is foolproof, and you could end up losing your investment despite your efforts. Sports betting can provide better risk management with features like cashout that allow you to request a payout before an event ends if it’s not going your way.

Conversely, stock trading offers some effective means of ensuring that investors don’t take unnecessary risks. Traders can impose stop losses on investments, alerting you when the purchase price hits a certain level. You can then sell the stock to salvage a fraction of your investment. Another aspect to consider is technical analysis. Traders use systems that incorporate selected trading indicators to predict the most opportune time to invest in specific instruments. Stock traders have a lot of resources to work with, such as financial ratios, company earnings and management teams. In this respect, unlike gambling, trading utilises science to draw conclusions. It’s not simply shooting in the dark as it happens in slots, roulette or dice games.

The Time Aspect

The concept of time when trading is different than when gaming. Online gambling is all about instant gratification. When playing your preferred casino games, you either win or lose in a short time span. Once a game ends, so does your chance to cash in on your investment. It’s why gamblers tend to make impulsive decisions. Stock trading, on the other hand, is usually more long-term. Buying company stocks can bring in dividends for years, even decades. You don’t have to settle for instant results. Even when investing on a short-term basis, trading still affords you more flexibility than gambling.

The question of whether stock trading and online gambling are the same can be debated endlessly. However, the important element to recall is that the practices have some similarities and differences. The risk-taking involved in trading and casino gaming is hard to ignore. Other factors distinguish one from the other, though.

Relevant articles