IS TRADING GAMBLING?
As a Christian, I had been asked whether or not trading is gambling. It was a question also posed to me by my sister who is a leader in her church. This is my answer to her question as well as to others who have "discussed" this matter with me.
My answer:
People who trade in physical goods like oil, cocoa, etc buy them at wholesale (lower) prices and then hope to sell them at higher prices. They would hold inventory of these stocks and run the risk of prices falling based on supply/demand dynamics in the market. If they are selling perishables, time also comes into the risk and in the case of other goods, "seasonal"- fashion industry, etc are many other types of risks apart from just price risks. We trade currencies in which we also buy/sell our inventory without those kinds of risks. The trouble with trading of non-physical products is that it is seen as speculative whereas those merchants who trade physicals are perceived differently. If that were the case, all merchants are also gamblers. The truth is that good merchants read the market requirements well and are able profit from it. We read the market structure well and are also able to profit from it. It would be gambling if all we did was trade probabilities like the majority of traders do because they have no idea whether their trade will work out or not because it is not based on reading and understanding what the market wants, similar to merchants. Merchants that are wise identify market demands and meet them. We do exactly the same thing. The difference is the products that we trade.
Allow me to make an analogy. In Singapore, there are no private taxis anymore. In order to drive a taxi to earn a living, a taxi driver must rent the taxi on a daily basis from the taxi company. This rent is non-negotiable and based on the type of vehicle that he wishes to use. It can range from $120 for a Hyundai to $200 for a Mercedes per day. An experienced taxi driver will know the locations at which there would be potentially the most passengers and the times at which these people would be gathered there, waiting for a taxi. The taxi driver would then try to get fares from these places at these times. The newbie taxi driver or a very stupid one would not be cognizant of the locations and the times at which potential fare would be waiting for taxis and instead keep driving anywhere aimlessly, hoping to pick up fares. In trading terms, the demand levels (location/s) and the market timing (times) at which the potential trade (fare/passenger) presents itself in order to take a successful trade is important, it is as much a skill of the trader in that he studied the charts and recognized the levels much like the taxi driver who studied the various locations for number of people as well as the times that they would knock off work to take a taxi home. Is the trader 100% sure that he will be able to get a trade at those levels? Of course not, what if the demand there is so great that price moved off before his order was filled? Is the taxi driver 100% sure that he will get a fare at those times when he gets to the location? Of course not, other taxis may have reached before him and already cleared the passengers or perhaps he may have got caught in bad traffic and arrived too late. Could I also apply the same logic to someone who buys stocks of ingredients for his/her restaurant business waiting for customers to patronize his/her business? The restaurant owner would of course have identified a suitable location (level where he believes that there will be sufficient human traffic (potential customers/demand) for his food (product/instrument) before even signing the lease for the restaurant or purchasing it. He would not be investing thousands, or even millions on renovations without first identifying and satisfying the critical factors for success in his business. The question is, is he then gambling by putting his money (equity capital) into the business? A significant misunderstanding may be caused by the fact that in trading, most people think of "fast money". Here again, the comparison must be apple for apple, and usually are not. There are intraday traders, who may be likened to taxi drivers, they take a trade akin to a taxi driver paying the rent for his taxi for the day and they hope to make a profit from the trade for the day, akin to a taxi driver hoping to have enough profit to cover the rent for the day and some additional profit. There are also swing and position traders who take long term trades akin to a restaurant owner, who will take time to recover his capital but will be taking small profits along the way, these traders will also be taking profits along the way but take a longer term trade to allow it to make more profits. Even the farmer that sells his produce hopes to make a profit. Is he 100% sure that he will? Taking the argument of such religious zealots to the logical extreme, everyone who uses money, works for it, or use are all gambling because absolutely no one can ever say that they are 100% certain of any profit, whether it be profits, pay, etc.
The trouble with many religiously bound people is that their logic and reason seems to evaporate once they wear the mask of religion under the guise of holiness. The reality is that true holiness results in a liberty that is born out of love for Jesus Christ and a desire to please Him out of love for and of Him rather than fear of a big stick from an angry God. It is always the goodness of God that leads man to repentance.
Whilst I acknowledge others' views based on their own beliefs and convictions, I will hold my ground as it is both logical, rational and answers any questions from an entirely rational basis. There is also absolutely no contradiction with the Bible as some of the parables of Jesus encourage good stewardship of money. I will be gambling if I trade based on "systems", "indicators" and probabilities but I don't. Instead, I trade on an understanding of the principles of supply/demand and the dynamics that form the market structure, no different to a taxi driver or businessman and hence I rest my case.
Shalom
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