Exploring the Difference between Day Trading and Gambling

Trading, and specifically day-trading, has certainly been around for a long time, but it gained sweeping popularity during the 90’s stock market boom. Although the fervor has dampened a bit there are still a great number of individuals worldwide attempting to make a living by day-trading. This begs the question as to whether these individuals are simply gambling, or truly endeavoring in a world where one can consistently make money?

The short answer is that it really depends on the mind behind the actions. One that simply attempts to trade on their own, with little to no experience, no guidance, and little understanding of what to read in the market will inevitable fail, miserably. Basically, these individuals would be gambling.

The longer answer is that there are certainly many individuals that make a living trading, and have seemingly become so consistent that one cannot just chalk it up to gambling (or any form of randomness, or luck, if you will).

The successful trader needs four things before he even makes a trade to be successful: passion, focus, discipline, and a competitive spirit. The latter of these is often not mentioned during trading discourses, but it is essential. The trading world, although more of a virtual world than a tangible one, is still one of the most competitive arenas on the planet. It is analogous to a high stakes chess game that commences every business day as the sun arises.

The successful trader (that is NOT gambling) is one that is creative and reads the market. An example of reading the market is seen in an individual that is trading NASDAQ related equities. The successful trader participating in NASDAQ stocks must read the Level Two information (reading the box). Level Two is simply where one can see all of the bids and offers for a stock made by market makers, ECNS (electronic communication networks)…anyone participating in the buying and selling of the stock. For the individual trading a NASDAQ stock reading the information of this Level Two box is a mental game that really begins to separate the world of trading from a casino, to a terrain of consistency.

So, day-trading a gamble? Not if the right individual is behind the keyboard.