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Is Retail Futures Trading The Same As Gambling?
06-16-2021, 10:50 AM,
#1
Is Retail Futures Trading The Same As Gambling?
“You can lose everything by trading futures!” That's what we were told. Another thing we've probably heard from skeptics: "If you're going to lose your money, then why do it in futures when you can actually enjoy losing money more slowly in a casino?So here it is: the common perception that retail futures trading is tantamount to gambling. Quick money earned, quick money lost.

But is this really the case? What are the similarities and differences between an experienced player and an experienced futures trader? Is a long or short position on S&P 500 futures the same as a black or red position on the roulette table?

If you say YES, you are most likely wrong, depending on how you view it. If you say NO, you may also be wrong, depending on how you view it. This probably doesn't make sense to you. So, let's look at this in more detail and clarify the similarities and differences. But first, the story.

Let's play " Who is the trader?”
Let's imagine three hypothetical traders named Jim, Jeff, and Julia. All three traders were eager to profit from the S&P 500 index, as market sentiment seemed to be heading for an upswing.

Jim had a gut feeling that S&P 500 futures could go up after the previous day's pullback. After reading the news, he took a small guess position. He suggested that the Federal Reserve's near-zero interest rates would continue to support companies and, as a result, their stock prices. After all, the S&P 500 index is diversified across multiple sectors, more or less evenly, unlike Nasdaq (NQ) futures, which are heavy on the tech sector.

Jeff used indicators, order flow software, and other technical price action settings to enter his trade. He came to the same conclusion as Jim–that the S&P 500 has plenty of room to grow. So he opened up a huge position three times Jim's size .

Julia did the same thing that Jeff did–he built his setup using indicators, analytical software, and he went so far as to advise analysts ' forecasts. He also saw a lot of upside for the S&P 500. But his position was small, equal to Jim's.

The S&P 500 index rose 20 points that day, but only two winners emerged.

Jim closed his position with a full 20-point return.
Jeff would have done this if not for his huge position, which caught him under margin on one of the downward swings; he was “automatically liquidated " by his broker.
Julia finished the day with a total return of 20 points, as did Jim.
So, who gambled and who traded? The answer is that Julia was the only trader, while the other two were gambling. How so?

Jim was trading his gut without a real tactical or strategic mindset. He didn't have a clear idea of the odds. Instead, he was just lucky that the market went his way. It's a gamble.

Jeff used a very strategic approach to trading, as a responsible trader. However, his strategy of managing money by determining the size of the position (if he had one at all) took over his settings and took him out of the market. This is a gamble, not a calculated risk.

Julia calculated her chances and made her best shot, knowing full well that the market could go against her. Fortunately, this did not trigger her stop loss, and so she benefited from all the market movement.

Gambling is a decision that leaves more chances than pre-calculated moves . On the other hand, a trade is a calculated risk taken with the best probabilities in mind.

Lesson: You can have the same trade and the same result by approaching it from two different points of view–the trader and the player.

Disclaimer: Placing conditional orders, such as a stop loss or stop limit order, by you, a broker, or a trading advisor will not necessarily limit your losses to the estimated amounts, as market conditions may make it impossible to execute such orders

ALSO READ / Confessions of Failed Futures Traders And Lessons You Can Learn from Their Mistakes

We've heard that Wall Street is the biggest casino in the world. You can also include the Chicago Mercantile Exchanges. But are retail institutions as prone to gambling as retail traders are often unwittingly prone to?
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06-16-2021, 11:00 AM,
#2
RE: Is Retail Futures Trading The Same As Gambling?
Great to see how trading is separated from gambling.
Most of the struggle is what not to do and yet we do anyway.
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06-16-2021, 11:11 AM,
#3
RE: Is Retail Futures Trading The Same As Gambling?
Aside from execution and market knowledge, the easiest and biggest hurdle to overcome is the mentality going into trading.
I think it’s all about how you approach it.
If I go into a casino I have already decided on a few things: I’m going to be drinking, having fun, and socially gambling.
I would say the majority of people who visit casinos would feel the same. Therefore there is an assumption already about what “gambling” is. That has long been the perception of trading, that it’s a “gamble” as well.
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06-16-2021, 11:29 AM, (This post was last modified: 06-16-2021, 11:30 AM by MrStuden.)
#4
RE: Is Retail Futures Trading The Same As Gambling?

It's a cool and useful article. I read it with pleasure. I like that gambling is gaining popularity. Personally, I successfully play at the casino. During all this time, I perfectly learned all the schemes and subtleties of casinos and sports betting. I love sports, and I always follow various matches and fights. And I like that LTC gambling is separate from trading. Everyone finds a source of income to their liking. Unlucky people who don't understand anything in this business are angry at our way of earning money, but the luck, prudence and cunning are our advantage.

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