How Trading and Gambling Differ

Trading in financial markets is often equated with gambling. This is based on the fact that more traders fail than succeed, which is similar to gambling, where most participants experience failures and only a few truly become rich from it.

Additionally, people often equate trading with gambling due to the element of speculation involved. Gambling is an activity heavily associated with speculative actions. Therefore, trading is considered a similar activity to gambling.

But is this a correct assumption?

Trading and gambling are two different things. And speculation is not the right factor to consider them as the same activity. Because essentially everyone in this world also speculates, considering that no one knows how the future will unfold.

Any trade, not just in the financial sector, also contains speculative elements. As proof, traders do not know if the products they sell will be purchased by consumers, how many products will be bought, and when consumers will buy them. They speculate that the products they sell are needed or liked by others so that people will buy them.

Then, what differentiates trading from gambling?

Trading and gambling are agreements that occur between two parties, either directly or through intermediaries. The fundamental difference between the two is the form of agreement.

Gambling is an agreement to give something of value, such as money, expensive goods, and so on, to the party who wins a match or game. The form of the agreed-upon game can vary, it can be guessing games (like guessing sports scores, card games, guessing numbers that appear after being scrambled, and so on) or it can also be a physical game or match between the two parties, such as competing in a certain sport or game.

Meanwhile, trading is the activity of buying and reselling. In this case, the trader will make an agreement with two parties, first the party selling the goods to the trader and second the party buying the goods from the trader. Traders make a profit because they buy at a lower price and then sell it at a higher price.

Both gamblers and traders want to make a profit. However, the source of a trader's profit comes from the selling price of goods set higher than the purchase price. And the profit is relative to the selling price, the higher the selling price, the greater the profit obtained.

Whereas in gambling, profit is generated from winning a game or match, which is in the form of valuable goods or money wagered in the agreement. Gambling profits are usually absolute, no matter how accurate a guess or how big the score is scored in a match, the profit earned will be in accordance with the amount that has been agreed at the beginning.

But, doesn't gambling rely on luck and trading rely on analysis?

This means that as long as the bet is made based on analysis, then it is not categorized as gambling.

And vice versa, if trading does not rely on analysis, then it can be included in gambling, not trading.

Analysis is an action taken primarily to achieve effectiveness and efficiency. In other words, conducting analysis is done to increase the success rate when doing something, so that a person does not need to try many things and make many mistakes to achieve their goals.

Trading without analysis remains a trade, because trading is a type of transaction or agreement. In this case, it is an agreement to exchange goods with comparable value. It's just that trading without analysis will have unknown risks and success rates. It could be that the trader will experience a lot of losses and it could also be that the trader will immediately make a profit.

The same is the case with gambling. Gambling based on analysis will not change the mechanism behind it. It is only a means to increase success in winning the gambling. While the type of transaction or agreement is still categorized as gambling.

So, the point is that trading and gambling are forms of categorization of transactions or agreements. Trading is a buying and selling transaction where the profit earned comes from the price of the goods being traded. While gambling is an agreement to bet something in a game or match. Where the winner will get something wagered by the losing party.

Trading and gambling will not change even if done with or without analysis. Because the classification for both trade and gambling is based on the mechanism that occurs in the transaction or agreement behind it, not on how a person makes decisions on the transaction or agreement.

#OPINIONLEADER#