5 ms·

Day trading is gambling and futures / puts are worst regardless of the asset being traded.

by username_my1 5y ago

jimbob45 5y ago
I agree but I don’t know how to stop it without just driving it underground.
user-the-name 5y ago
The difference is that crypto trading is entirely unregulated, and the markets are massively manipulated.
- vmception 5y ago
  Leveraged swaps - the kind of “futures” used in the crypto markets - are known to regulators around the globe. The UK is fairly lax in this regard. But its nothing to do with crypto trading because this wasn't spot crypto trading. On manipulation, eh, yay volatility. Avoid leverage in volatile markets.
  - user-the-name 5y ago
    First, the exchanges aren't in the UK and do not follow any regulations. Second, even the exchanges are manipulating.
cronix 5y ago
Please explain how day trading is gambling but long term trading is not? It seems in both cases, you are gambling on the price going up.
- dijit 5y ago
  I consider the major difference among them is that if you’re putting money into something long term then that’s more of an investment- Investments are gambles but they have more substance than a quick roll of the dice as your investment affects the outcome.
- osrec 5y ago
  They're similar, but day trading can fuel a gambling addiction, especially when untrained investors start to try and recoup their losses by taking bigger risks.
- JumpCrisscross 5y ago
  > how day trading is gambling but long term trading is not Simply: the average long-term investor makes money. The average short-hold individual investor loses money. More structurally: the U.S. economy and stock market have historically grown. They are a positive-sum game. There is no such fundamental gain in the stock market in the short term; it is a zero-sum game before transaction costs and negative sum after. The dynamic is similar for cryptocurrencies in the short term. The long-term crypto gain exists in the adoption pitch, i.e. to the degree new investors invest.
- brighton36 5y ago
  Day traders are gambling on surface noise. It's not much different than roulette. Long term investors have some notion of longitudinal value accrual and stability.
  - deleted 5y ago
    [deleted]
  - andyana 5y ago
    Where does one draw the line here? Isn't it possible some day traders are just quicker at noticing trends that are typically the domain for long term trading? I don't trade very much at all, no disrespect intended.
    - mikewarot 5y ago
      >Where does one draw the line here? The use of leverage/margin to buy more than one can reasonably afford is a good marker, in my opinion. If you're borrowing money to play the market, you're gambling, not investing.
- ALittleLight 5y ago
  Markets are somewhat like the opposite of the weather. It's possible, if done correctly, to predict long term trends but not short term. There is too much volatility to know what will happen today even if you can guess about a few years from now. Company X may indeed be a good company and undervalued for reasons Y and Z but the price could still go down tomorrow even if it will probably be up a year from now. One difference between investing and gambling is that you can expect returns from following an investment strategy. Most day traders lose money. They can't predict short term future prices. What gains they get are through luck. Compared to investors who can have predictions about trends or specific stocks and who typically make money.
- SavantIdiot 5y ago
  There are still people who purchase stocks for dividends, based on their track records, performance, and financials. Starbucks, Target, Ultra, ... these are bellweather stocks that pay dividends and and actually act like businesses, and not casinos. Yes, the derivatives market is insanity and probably shouldn't exist, but there are legitimate companies building business and generating wealth based on a real business plan. Having been investing for the better part of 40 years, I've seen five big events happen, but in the long term bellweather and bluechip stocks have been non-casino investments. Don't let this recent every-ten-year cycle of hype (Doge, Crypto, GME) guide the intent of investing.
- scatters 5y ago
  If an instrument is priced correctly, that is to say at the risk adjusted net present value of its future cash flows, then it absolutely will go up in the long term as it returns cash (dividends, buybacks) and as cash flows that are still in the future come closer to the present so become more certain and more valuable (time value). There is of course the question whether the instrument is currently priced correctly. That's why you diversify, ideally into uncorrelated investments so that misvaluations balance out on the upside and the downside.
- mikewarot 5y ago
  Gambling is trading money for a chance to win more money. Day traders use various market mechanisms to spend money for a chance at earning much more money. Investing is the purchase of something you think will hold or rise in value. It is always possible the value could go to zero (Enron, for example), but by diversifying your investments, you can reasonably expect to avoid all of them going to zero. Bitcoin, for example... hasn't crashed to zero (YET). So if you bought at $60,000 you would have lost about 40% of your investment, not all of it. You only realize gains or losses when you sell (which you can be forced to do if you are using leverage). There is an old saying "The stock market can remain irrational longer than you can remain solvent", which I take to mean you should never use leverage.
- onlyrealcuzzo 5y ago
  I think "gambling" implies that there are decent odds that you'll walk away with nothing. This is obviously a high probability event in options trading. Odds you'll walk away with nothing if you buy into Tesla? Close to 0. Odds you'll lose >50% of your money - not 0. If you think buying into a global market index fund over a 30-year horizon has a decent probability of a negative real return - not to be rude - but you're a bit clueless about finance. Sure, if you buy individual stocks - for any horizon - that's roughly "gambling". You could even call buying into the S&P for a <10 year horizon "gambling" - although, statistically, your chance of a negative real return is VERY low, and your chance of a positive real return is VERY high. This isn't what normal people think of when they think of "gambling".
- chris11 5y ago
  Cost, or drag, is also much higher with day trading. You will pay transaction fees more often. And day trading means you are paying higher taxes more frequently. Holding means you are profiting off of money that would go to taxes if you sell.
- drexlspivey 5y ago
  Short term price movements are random, long term stocks go up.
- vmception 5y ago
  A) it depends on if the concept of gambling is a pejorative term for you or not. Like, is it important for your personal and social standing for there to be a difference? B) outside of the concept, there would then be the observation of a transaction having similarities to “a gamble”, daytrading has the similar probability of losing money. Hope that helps.
- jfengel 5y ago
  You got a lot of answers, but I don't think any of them are adequate, so I'll try to be clearer. In long-term trading you are buying a piece of the company. Your payback comes from the earnings of the company, either in the form of dividends or in the increased value of the company itself. It's not a certainty, but it is a positive-sum game. The money you make comes from outside the market. You don't actually need the price to go up at all: a blue-chip company could distribute all of its earnings as dividends and have the price remain almost constant. Day trading, by contrast, is a zero-sum game. Your profits come almost entirely from other day traders. Your decisions are made not by looking at the company's underlying fundamentals, but from the psychology of other people also selling stocks. Day trading is not identical to gambling, and the uncertainty of long-term investing make it not entirely distinct from gambling. No analogy is ever perfect. But the positive-sum vs zero-sum aspects make day trading much more like "gambling" than long-term investing is.
spottybanana 5y ago
Futures are great, if used right. Too much leverage kills always.
- agumonkey 5y ago
  In some article, there was a mention that in the 80s, 400x leverage was common practice.

Day trading is gambling and futures / puts are worst regardless of the asset being traded.

jimbob45 5y ago

I agree but I don’t know how to stop it without just driving it underground.

user-the-name 5y ago

The difference is that crypto trading is entirely unregulated, and the markets are massively manipulated.

vmception 5y ago
Leveraged swaps - the kind of “futures” used in the crypto markets - are known to regulators around the globe. The UK is fairly lax in this regard. But its nothing to do with crypto trading because this wasn't spot crypto trading. On manipulation, eh, yay volatility. Avoid leverage in volatile markets.
- user-the-name 5y ago
  First, the exchanges aren't in the UK and do not follow any regulations. Second, even the exchanges are manipulating.

cronix 5y ago

Please explain how day trading is gambling but long term trading is not? It seems in both cases, you are gambling on the price going up.

dijit 5y ago
I consider the major difference among them is that if you’re putting money into something long term then that’s more of an investment- Investments are gambles but they have more substance than a quick roll of the dice as your investment affects the outcome.
osrec 5y ago
They're similar, but day trading can fuel a gambling addiction, especially when untrained investors start to try and recoup their losses by taking bigger risks.
JumpCrisscross 5y ago
> how day trading is gambling but long term trading is not Simply: the average long-term investor makes money. The average short-hold individual investor loses money. More structurally: the U.S. economy and stock market have historically grown. They are a positive-sum game. There is no such fundamental gain in the stock market in the short term; it is a zero-sum game before transaction costs and negative sum after. The dynamic is similar for cryptocurrencies in the short term. The long-term crypto gain exists in the adoption pitch, i.e. to the degree new investors invest.
brighton36 5y ago
Day traders are gambling on surface noise. It's not much different than roulette. Long term investors have some notion of longitudinal value accrual and stability.
- deleted 5y ago
  [deleted]
- andyana 5y ago
  Where does one draw the line here? Isn't it possible some day traders are just quicker at noticing trends that are typically the domain for long term trading? I don't trade very much at all, no disrespect intended.
  - mikewarot 5y ago
    >Where does one draw the line here? The use of leverage/margin to buy more than one can reasonably afford is a good marker, in my opinion. If you're borrowing money to play the market, you're gambling, not investing.
ALittleLight 5y ago
Markets are somewhat like the opposite of the weather. It's possible, if done correctly, to predict long term trends but not short term. There is too much volatility to know what will happen today even if you can guess about a few years from now. Company X may indeed be a good company and undervalued for reasons Y and Z but the price could still go down tomorrow even if it will probably be up a year from now. One difference between investing and gambling is that you can expect returns from following an investment strategy. Most day traders lose money. They can't predict short term future prices. What gains they get are through luck. Compared to investors who can have predictions about trends or specific stocks and who typically make money.
SavantIdiot 5y ago
There are still people who purchase stocks for dividends, based on their track records, performance, and financials. Starbucks, Target, Ultra, ... these are bellweather stocks that pay dividends and and actually act like businesses, and not casinos. Yes, the derivatives market is insanity and probably shouldn't exist, but there are legitimate companies building business and generating wealth based on a real business plan. Having been investing for the better part of 40 years, I've seen five big events happen, but in the long term bellweather and bluechip stocks have been non-casino investments. Don't let this recent every-ten-year cycle of hype (Doge, Crypto, GME) guide the intent of investing.
scatters 5y ago
If an instrument is priced correctly, that is to say at the risk adjusted net present value of its future cash flows, then it absolutely will go up in the long term as it returns cash (dividends, buybacks) and as cash flows that are still in the future come closer to the present so become more certain and more valuable (time value). There is of course the question whether the instrument is currently priced correctly. That's why you diversify, ideally into uncorrelated investments so that misvaluations balance out on the upside and the downside.
mikewarot 5y ago
Gambling is trading money for a chance to win more money. Day traders use various market mechanisms to spend money for a chance at earning much more money. Investing is the purchase of something you think will hold or rise in value. It is always possible the value could go to zero (Enron, for example), but by diversifying your investments, you can reasonably expect to avoid all of them going to zero. Bitcoin, for example... hasn't crashed to zero (YET). So if you bought at $60,000 you would have lost about 40% of your investment, not all of it. You only realize gains or losses when you sell (which you can be forced to do if you are using leverage). There is an old saying "The stock market can remain irrational longer than you can remain solvent", which I take to mean you should never use leverage.
onlyrealcuzzo 5y ago
I think "gambling" implies that there are decent odds that you'll walk away with nothing. This is obviously a high probability event in options trading. Odds you'll walk away with nothing if you buy into Tesla? Close to 0. Odds you'll lose >50% of your money - not 0. If you think buying into a global market index fund over a 30-year horizon has a decent probability of a negative real return - not to be rude - but you're a bit clueless about finance. Sure, if you buy individual stocks - for any horizon - that's roughly "gambling". You could even call buying into the S&P for a <10 year horizon "gambling" - although, statistically, your chance of a negative real return is VERY low, and your chance of a positive real return is VERY high. This isn't what normal people think of when they think of "gambling".
chris11 5y ago
Cost, or drag, is also much higher with day trading. You will pay transaction fees more often. And day trading means you are paying higher taxes more frequently. Holding means you are profiting off of money that would go to taxes if you sell.
drexlspivey 5y ago
Short term price movements are random, long term stocks go up.
vmception 5y ago
A) it depends on if the concept of gambling is a pejorative term for you or not. Like, is it important for your personal and social standing for there to be a difference? B) outside of the concept, there would then be the observation of a transaction having similarities to “a gamble”, daytrading has the similar probability of losing money. Hope that helps.
jfengel 5y ago
You got a lot of answers, but I don't think any of them are adequate, so I'll try to be clearer. In long-term trading you are buying a piece of the company. Your payback comes from the earnings of the company, either in the form of dividends or in the increased value of the company itself. It's not a certainty, but it is a positive-sum game. The money you make comes from outside the market. You don't actually need the price to go up at all: a blue-chip company could distribute all of its earnings as dividends and have the price remain almost constant. Day trading, by contrast, is a zero-sum game. Your profits come almost entirely from other day traders. Your decisions are made not by looking at the company's underlying fundamentals, but from the psychology of other people also selling stocks. Day trading is not identical to gambling, and the uncertainty of long-term investing make it not entirely distinct from gambling. No analogy is ever perfect. But the positive-sum vs zero-sum aspects make day trading much more like "gambling" than long-term investing is.

spottybanana 5y ago

Futures are great, if used right. Too much leverage kills always.

agumonkey 5y ago
In some article, there was a mention that in the 80s, 400x leverage was common practice.