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  1. #1
    Specialist Member TAllen1429's Avatar

    Gambling or Trading !!!

    Hi Guys,

    I am wondering if you could assist me with this task. I am attempting to define the difference between these two fundamental binary option approaches, i.e. gambling or trading. This reason that I am interested in doing this is because traders essentially fall into one or the other of these two camps.

    For example, novices tend towards gambling while more experienced individuals are traders. I have noticed that this trend prevails on the BOT’s forum.

    As such, my own definition for ‘trading’ is an approach that enables you to clearly identify the reasons why a binary option either finished ‘in-the-money’ (ITM) or ‘out-of-the=money’ (OTM). As such, you are subsequently in a position to enhance your trading strategy by using analytical and scientific techniques. This means that over a period of time, albeit many months, you then have the ability to produce a successfully strategy.

    In order to achieve this objective, traders tend to adopt techniques, such as the following:

    1. Use longer time frames.
    2. Follow proven money management strategies
    3. Seek realistic profit target by restricting their losses
    4. Are conservative about their trading prospects
    5. Research extensively into the fundamental and technical factors supporting a trade before activating it.
    6. Using other scientifically based techniques


    In contrast, gamblers have no idea whatsoever about why the binary options they activate win or lose. Instead, they tend to speculate on the financial markets primarily on hope or using the recommendations of some alleged guru. They also target techniques that are adrenaline-based backed by prospects of immediate wealth.

    As such, most of them opt for scalping strategies based on the ultra-fast time-frames, i.e. 1 minute where noise is the dominating factor. A major problem that they face by doing so is that their reward-to-risk ratio is appalling because payout ratios plummet as time-frames shrink. Not that they even know that or even care. As their results are totally random, there is little hope that they can ever devise successful strategies using such an approach. Even if they do hit a winning streak, gamblers do not last very long before they disappear into history.

    I would be very interested if anyone has their own definitions for trading and gambling. An observation that I have recently made is that most of the BOTS threads center about this issue with our valiant senior traders desperately attempting to stop novices (gamblers) from embarking on self-inflicted disasters.

  2. #2
    Veteran Member hchandra's Avatar
    In my opinion, gambler is someone:
    1. Who have salary of $2000 and deposit $2000 without having reserves of money to pay bill etc and expect to profit each month
    2. Who buy / sell securities using "Slot machine" system, means "I pick that thing because I like it and I'll use half or all of my money". Example I trust goldman Sachs, I'll buy all things they recommend.
    3. Who is adrenaline high when holding winning / losing position
    4. Who don't know statistic of their system after 100 trades in one instrument.
    5. Who let their emotion get the better of them while experiencing hard time in trading. We can have emotions while trading, but never let emotions take over while trading.
    6. Have no plan A,B,C,D,E. Every business has backdoor if they fail, what will you do if your trading career failed?
    7. Who make decisions without calculating risk or profit carefully he/she can accept.

    ================================================== ==================
    Below is for intermezzo:
    I believe talking about gambling, actually all people gambling about their life and decide what best decision for each of them, placing money to business even though that business has good record is already gambling, see Lehman brothers, see also Gold prices, remember tulip options BOOM and Ka-BOOM real fast.
    But using soft language, it is investing.

    Example investing in relationship, investing in skills, investing in love, investing in knowledge. All of them might have low yield or can be nothing at all but we choose carefully which we think in the future will benefit us. (This is talking while removing emotions and using logic only).
    ================================================== ===================

  3. #3
    Specialist Member TAllen1429's Avatar
    To be more specific, my proposed definitions are as following:

    You are TRADING binary options if you are using a strategy, that enables you to identify the reasons for why your trades finish either ITM or OTM, so that you can correct or enhance it.

    You are GAMBLING on binary options if you have no idea why your trades are winning or losing and consequently are totally unable to improve your strategy.

    I just think that some good definitions may prevent novices shooting off on the wrong track as so many seem to do, including those who post on BOTS.

  4. #4
    Master Member SeasaltMcFish's Avatar
    I think your two options are not enough.

    For instance: I trade the 2 minutes, but use a solid strategy, that has nothing to do with gambling.
    There are also long term traders that gamble a lot.

    To me Gambling is risking money with gut feelings or random trades. I also include very simple systems like the Martingale, if used as a pure system. Although it is a system, I call it a gambling system.

    Trading is putting your money in with a solid system in mind, with good reasoning and money management. Although there are more bad systems than good systems, using a bad system doesn't automatically means that you're gambling. Lacking knowledge doesn't make a losing trader a gambler, but an (at than moment) bad trader.

    A winning gambler doesn't convert into a trader just because he is winning.

    Conclusion: I think you have traders from very bad or novice to very experienced and profitable, and also bad gamblers and winning gamblers (at least for the moment)

  5. #5
    Specialist Member TAllen1429's Avatar
    Quote Originally Posted by SeasaltMcFish View Post
    I think your two options are not enough.

    For instance: I trade the 2 minutes, but use a solid strategy, that has nothing to do with gambling.
    There are also long term traders that gamble a lot.

    To me Gambling is risking money with gut feelings or random trades. I also include very simple systems like the Martingale, if used as a pure system. Although it is a system, I call it a gambling system.

    Trading is putting your money in with a solid system in mind, with good reasoning and money management. Although there are more bad systems than good systems, using a bad system doesn't automatically means that you're gambling. Lacking knowledge doesn't make a losing trader a gambler, but an (at than moment) bad trader.

    A winning gambler doesn't convert into a trader just because he is winning.

    Conclusion: I think you have traders from very bad or novice to very experienced and profitable, and also bad gamblers and winning gamblers (at least for the moment)

    With your 2 min strategy, what do you do when you experience losses? Can you identify the problems and update your strategy or do you do something else?

  6. #6
    Master Member SeasaltMcFish's Avatar
    Yeah, I look at news items, speeches etc.

    My strategy works better if I avoid speeches.

    Until now, every series of losses were clearly a result of news items, like speeches and one big loss when North Korea threatened with a nuke war.

    Single losses are unavoidable in short term trading, but only the big, long moves causes big losses.

    I'll try to post my results in my blog tomorrow.

  7. #7
    Specialist Member TAllen1429's Avatar
    Quote Originally Posted by SeasaltMcFish View Post
    Yeah, I look at news items, speeches etc.

    My strategy works better if I avoid speeches.

    Until now, every series of losses were clearly a result of news items, like speeches and one big loss when North Korea threatened with a nuke war.

    Single losses are unavoidable in short term trading, but only the big, long moves causes big losses.

    I'll try to post my results in my blog tomorrow.
    Thanks very much for your replies. I am trying to determine if my two definitions should be modified, i.e.

    You are TRADING binary options if you are using a strategy, that enables you to identify the reasons for why your trades finish either ITM or OTM, so that you can correct or enhance it.

    You are GAMBLING on binary options if you have no idea why your trades are winning or losing and consequently are totally unable to improve your strategy.


    They are just initial ideas and I am attempting to produce two concise definitions in the end that truly reflect the binary options world, if possible.

  8. #8
    Specialist Member marc's Avatar
    @McFish
    Do you use the FFCal indicator? ... it is quite handy in this case ... (for news ... not the nuke war threat, though

  9. #9
    Specialist Member TAllen1429's Avatar
    Quote Originally Posted by SeasaltMcFish View Post
    Yeah, I look at news items, speeches etc.

    My strategy works better if I avoid speeches.

    Until now, every series of losses were clearly a result of news items, like speeches and one big loss when North Korea threatened with a nuke war.

    Single losses are unavoidable in short term trading, but only the big, long moves causes big losses.

    I'll try to post my results in my blog tomorrow.
    You clearly identified that the Koren issue was the root cause behind your big loss. What I am particularly interested in is what did you do then? For instance, did you attempt to update your strategy to prevent such a problem happening again or was that not a viable option?

  10. #10
    Specialist Member marc's Avatar
    Quote Originally Posted by TAllen1429 View Post
    You clearly identified that the Koren issue was the root cause behind your big loss. What I am particularly interested in is what did you do then? For instance, did you attempt to update your strategy to prevent such a problem happening again or was that not a viable option?
    Terry, I don't think that you can consider everything which can influence a trade ... there will always be some amount of unpredictable factors ... be it a nuke war or something else ... of course, you can analyze it after it happened, but how will you change your strategy, 'securing' it against future events?
    The difference between a gambler and a trader is maybe, how many risk am I willing to accept ... but I don't think, that you can draw a clear border here ... for me, that topic is simply not black & white

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