Admin Admin Sep 01, 2018 12:29 PM Other Shares Are you investing or gambling? Gambling is defined as staking something on a contingency. However, when trading is considered, gambling takes on a much more complex dynamic than the definition presents. Many traders are gambling without even knowing it — trading in a way, or for a reason that is completely dichotomous with success in the markets. In this article, we will look at the hidden ways in which gambling creeps into trading practices, as well as the stimulus that may drive an individual to trade (and possibly gamble) in the first place. > Hidden Gambling Tendencies It is quite likely that anyone who believes they don't have gambling tendencies will not happily admit to having them if it turns out they are in fact acting on gambling impulses. Yet discovering the underlying motives behind our actions can help us change the way we make decisions in the future. Before delving into gambling tendencies when actually trading, one tendency is apparent in many people before trading even takes place. This same motivator continues to impact traders as they gain experience and become regular market participants. > Social Proofing Some people may not even have an interest in trading or investing in the financial markets, but social pressure induces them to trade or invest anyway. This is especially common when large numbers of people are talking about investing in the markets (often during the final phase of a bull market). People feel pressured to conform with their social circle. Thus they invest so as not to disrespect or disregard others' beliefs or feel left out. Making some trades to appease social forces is not gambling in and of itself if people actually know what they are doing. But entering into a financial transaction without a solid investment understanding is gambling. Such people lack the knowledge to exert control over the profitability of their choices. There are many variables in the market, and misinformation among investors or traders creates a gambling scenario. Until knowledge has been developed that allows people to overcome the odds of losing, gambling is taking place with each transaction that occurs. > Contributing Gambling Factors Once someone is involved in the financial markets, there is a learning curve, which based on the social proofing discussion above may seem like it is gambling. This may or may not be true based on the individual. How the person approaches the market will determine whether she/he becomes a successful trader or remains a perpetual gambler in the financial markets. > Gambling (Trading) for Excitement Even a losing trade can stir emotions and a sense of power or satisfaction, especially when related to social proofing. If everyone in a person's social circle is losing money in the markets, losing money on a trade will allow that person to enter into the conversation with their own story. When a person trades for excitement or social proofing reasons, it is likely that they are trading in a gambling style, rather than in a methodical and tested way. Trading the markets is exciting — it links the person into a global network of traders and investors with different ideas, backgrounds, and beliefs. Yet getting caught up in the "idea" of trading, the excitement, or emotional highs and lows is likely to detract from acting in a systematic and methodical way.