Are you an investor, a gambler or a speculator?

Trading Discussion
1

[B][B] Are You An Investor, A Gambler Or A Speculator?

It is everybody’s goal to make an investment, to put money into something in the hope that it shall be profitable in the future.

What is investing? Investment has different meanings, In Financial terms, investment is putting money into something with the expectation of gain that upon thorough analysis has a high degree of security for the principal amount, as well as security of return, within an expected period of time. In contrast putting money into something with an expectation of gain without thorough analysis, security of principal, and security of return is gambling.

Putting money into something with an expectation of gain with thorough analysis, without security of principal, and without security of return is speculation.

The million dollar question is, have you been investing, gambling or speculating. Probably you don’t know the answer to that question yet. Most of the successful investors give the answer to this without blinking. Why? They know where they are putting their money, they care to do research and at least understand the risks involved. Most of us put money because we see an opportunity; that’s not enough, in fact it’s risky. Literally throwing money expecting it to bounce back. Lady luck has her bad days too.

They first step after being attracted by the opportunity is to identify and appreciate the risk involved. Look at what you are likely to lose when the spin follows unknown commands.

Are the risks involved too big for you to accommodate?

Is the return good enough to compensate for the amount of risk involved?

These questions answered, then go to the scarcity of the investment you are making. Scarcity can be caused by nature, skill or amount of capital involved. If you invest on something that every Tom **** and Harry can afford, then your chances are very slim. This is because you are forced to share the returns available with everybody else while the returns cannot stretch beyond their optimum level.

How many times have you looked through the doors of a gambling den and felt pity for the gamblers inside? Sad news is all the money you put in any project without analysis, security for your principal, and security of return puts you in the same boat with the gamblers. Be it a shop, piece of land, a degree, an asset …relationship, name them! The silver lining is that even gamblers take home some money, windfalls at times. But do you really want to be a gambler?

Most young people gamble in the name of investing. They want to take risks and yet they don’t know the amount of risk available. Over 50% of all small businesses fail within the first five years. Why do you think this is so?

The good news for young people is that you have time to learn form your mistakes and recover.

If you are a beginner, you will largely increase your chances on investing and avoiding all else until you have money to throw away; however it’s until you take chances (throw money) that your chances of making it big triple. Confusing right? We shall clear up the mist in the coming updates.you wouldn’t be surprise
[/B][/B]

2

I considered myself as a gambler, investor and speculator. Not at the same time. But at different times.

  • As a stock trader - Investor
    *Forex - Speculator
    *Casino - Gamble

LOL:60: but true

3

Glad you liked it.
Speculation in forex means that you do not use a stop loss on your trades and trail stops…
tell me that you always use SL. and trail your profits…
GRIX

4

At the end of the day we are all gamblers. People can put whatever spin they want on it but the definition of the word is sometimes confused with people playings games where odds are a lot less in their favor. You can make an educated guess and have a system that is backtested with sound mm but at the end of day you don’t know the outcome of your choice(you might have an idea about the probability based on past facts but you still do not know the final outcome, this essentially applies to EVERYTHING).

5

quite an interesting question. It is very difficult to separate gamblers from forex traders. This is because most of us here usually gamble with our capital by taking huge risks. Although forex is not a gambling business, people can choose to gamble with it. So, I don’t know if am a gambler, but am an investor. However, am not a speculator, because I make use of all available options to minimize my loss.

6

Totally agree with you mate.

7

Hello Grix,

As a MM technique it is better to us SL & TS always. But at the same time R:R ratio also very important. I know some traders with large funds do not use Stop loss for their trades. They are long term traders and use various exit strategies to get out of the trades. As small traders we can’t trade without stop loss.

8

the line between us (traders) and them gamblers: we protect our gains and capital, they don’t. We analyze the market based on historical occurrences, they don’t.
At the end of the day we are can tell how much we will get from the market but they cannot. Well have a technical system and you eliminate the gambling option.
Cheers
GRIX

9

Depends on your system and discipline…a newbie would never close a trade that has lost half of their capital and are affected by the “predisposition effect”. An experienced trader on the other hand would close the trade even if he/she has lost a considerable amount of capital because the more you trade, the greater you ability to place psychological stop losses.
I agree that some traders may trade without SL but the can easily get out of the trade.
For new traders and traders who have not made enough (trading money) the main business would be capital preservation rather than making profits.

GRIX

10

Dan in that case we would place the following in the gambling category: Life, education, travel, and everything else…
At the end of the day you can plan to be successful in life and forex trading but am yet to find a way to succeed in gambling… the difference lies in the determination to study history and do the right thing…’

GRIX

11

You must always protect your capital if you want to last in this business…As a newbie i once opened a lot size of 25% my account size and lost it…when you make such a mistake and read this article, you will figure it out. anyway all the beat in your trading.

12

I would say as forex traders we are speculators. An investor (i.e in stocks) is providing capital which a business uses to generate profit. In forex trading, not so. There is a winner and loser out of every trade.

13

Not exactly wiseguy, unlike in speculation, in forex we can protect our profits and capital using SL, and Trailling stops.

14

At the end of the day, all traders do 1 thing, Call it informed decition making/gambling with or without (hopefully all with) stop losses - you speculate on PRICE going up or down.

In my opinion: forex is TRADING - i can go out and buy some goods and hope price dosnt go down while i try selling all at a higher price to make a profit. This isn’t gambling or investing. I’m trading!

Buying stock is investing - this is the same as buying property bmv and waiting for the price to appreciate.

For many people (including myself) i think its all really just down to interpretation. Great topic and brain teaser.

15

I make my living from gambling.

There isn’t a single element of my methodology that isn’t dependent on random chance to a greater or lesser effect

even with a reasonable positive expectancy there is always the chance of losing money, and that’s just down to luck

16

The OP raises an important question, however I am rushing out for my final Christmas shop, so my brief comment will have to be that there are professional poker players who make a living out of managing chance: this puts them in the category of investors, does it not? And are we all not involved in gambling in FX, given that its full name is ‘Spread Betting’? If you bet on a horse you know well, or on a currency you know well, it is still betting with a bias and a risk/reward (or the odds, in the horse race parlance) in mind: there may not be stop-losses at the gambling shop, but, equally, you can stop-loss yourself into investment poverty in Forex - it is not a ‘safe’ investment. Horses fall on a hedge jump; bikers fall round a track apex; markets crash after an unpredictable event: all forms of ‘accidents’ lie ahead to potentially lose the better a lot of cash… The trick is, as someone said, to ‘gamble’ knowing how much you can afford to lose to stay alive long enough to ‘gamble’ again. Do not get too hung up on words: whatever you call it, FX spread betting is and will always be about risk management more than a get-rich-quick scheme, so let the big fund managers take the big risks (and the big hits: they may have more investment capital than you or me will ever have) and be aware of your capital/margin size all the way. Merry Christmas!!

17

For me, the question is interesting, but the OP fails to make a clear argument. I tend to agree with what some have already said, stocks=investing, forex=speculation and casino=gambling. I will however agree, that all three of these become pure gambling when done without done as if you were flipping a coin.

I’d also like to point out that a stop loss makes no difference in what is what. Most stock investments don’t have a stop loss and most gambling bets have the equivalent of one… you bet X amount and you can never lose more than that.

18

We are neither investor nor gambler.We provide advice to traders.

19

Well, it is a mixed bag I am trying myself in investing and speculating on binary options. In combination it demonstrates good results in profit. It is essential to cover the system from everyside to act effectively

20

Who are you then ? what kind of advice ? LOL