Is Share Trading Gambling?

Is share trading a gambling activity? The Australian Pocket Oxford Dictionary defines gambling as to 'play games of chance for money'. It also defines gambling as to 'risk much in the hope of great gain'. Now, old George doesn't think share trading is gambling. In that post, he says, "You used technical indicators to tell you that the balance of probability lies in your court and if it doesn't - well you must quickly initiate risk management and cut losses." A statement that contradicts our dictionary definition. So some people classify share trading as "glorified gambling." Well, if you stick to the genuine definition of gambling, share trading IS gambling. Personally, I was in denial with this for a long time. Every time someone brought up share trading and gambling I would refuse to believe it was. But surely there's more to this argument...?

Trading shares is all about the balance of probabilities - you risk your capital only when the evidence weighs up on your side. Hang on... am I giving up too soon on the argument? Let's go back to our dictionary... Gambling = 'Play games of chance for money'. Ok. Share trading is a game of chance. Price has only two directions to move - to either go up or down. And we are in it for the money, as we established earlier. But the question remains is that, is it a game? Trading for a living is not a game. I have to treat it as a professional occupation, a professional business complete with a business plan to succeed. So, maybe on this one point I have disproved that gambling (!=) is not equal to share trading.

Ok, what about the second definition? To 'risk much in the hope of great gain'. Ok, we are here for great gain. Tick. But hang on - 'To risk much'? Share trading is about risk management. We don't simply "risk much" to succeed. Before a trader enters into a trade they must calculate the risk that they are taking. They must set their stops. Some even implement that 2 per cent rule. Share traders are managers in risk, so therefore they aren't gamblers in that respect too.

In conclusion, I think I have conclusively argued that share trading is NOT gambling. Although it does tread a fine line at that. The only few pillars that separate the gamblers from the true share traders in the market is having a business plan - the plan of attack that tells the trader when to enter and when to exit and secondly their risk management scheme. Good Luck.

-- Marco