A bloke dressed to the nines and with his hair slicked back swaggers into the local gambling house and stuns all nearby by casually wagering a thousand pounds on single wheel spin. At a financial house in London, another bloke wearing a suit whose cost reaches into 5 figures strolls across the trading floor and casually purchases a few thousand shares in a tech startup for 7 figures.
Since neither of the two guys mentioned in the above scenario is endowed with the ability to see the future, is there any difference in what they just did? In other words, is the trader’s optimistic speculation essentially the same as the card sharper’s gambling? Let’s go find out.
A professional gambler could confidently argue that all his gambling decisions are not randomly made and are instead based on what he refers to as a “system.” This system is regarded as rock-solid and as faithful as the seasons. The gambler is of the opinion that before making a gambling decision he carefully considers the odds, angles and potential results of the bet, rather than just basing his decisions on chance.
However, while the gambler might be correct, the act of gambling involves staking money in situations where the odds are generally not in the gamblers’ favour. The gambler relies more on luck than skill, though that might not be very obvious or palatable.
Gambling is the act of creating risk whose aim is the thrill that comes about when the odds are surmounted. The gambler is not really in the game to win, as both wins and losses provide a rush to the seasoned gambler. This is why gambling addicts do not really gamble for wins, but for the thrills and the rush, they get with staring fate in the face and getting it to back down.
As money is at the root of the thrills in gambling, the bigger the amount staked, the more the risk and more the thrill when the bet pays off. A big-money loss, on the other hand, can be quite devastating to the gamblers’ psyche.
The Savvy Speculator
The speculator performs detailed research and carefully calculates the risk to reward ratio before undertaking a financial transaction. Just like in gambling, every speculation comes with an inbuilt element of risk. The more funds that are invested in speculation, the bigger the potential payout.
The speculator is usually an expert in his area and knows all about how the financial system works, and the reasons for its constant up and down movement. Knowing precisely where, when and how much to invest, is more science than gambling, though the market direction is never certain.
The job of the speculator is to make wise financial investments. Most speculators work for companies, though there are speculators who are in business for themselves.
As they mostly work for companies and brokerages, speculators make use of the firm’s money to make financial investments. This is in contrast to gamblers who invariably use their own money to gamble, instead of making use of the funds of others. While there are few gamblers who gamble on behalf of others, the thrills they experience is probably not on the same level as folks who gamble with their own money.
In the main, the chief difference between the gambler and the speculator is the skill set. Speculators usually spend an ungodly amount of time learning the skills considered vital to their profession. Gamblers, on the other hand, swear they are making use of a system, but are actually relying on luck.
Sometimes the gambler gets very lucky indeed and can paint the town red. Other times he gets very unlucky indeed and drowns in debts. Luck plays little part in the life of the speculator, as they make use of the available evidence to come to an enforceable conclusion and then do what needs to be done to the best of their ability.
Gamblers make use of a large variety of systems. Usually, the online casino has the upper hand, but smart use of a system can result in the gambler making smart gambling decisions that can boost winning chances.
Gambling systems vary in complexity and effectiveness. Some are based on mathematical progressions, while others are all about repetition. Popular gambling systems include the Martingale, Fibonacci and more. Making use of these systems often require that gamblers have very deep pockets.
The Speculator’s System
Most speculators are involved with trading in futures and foreign exchange. Speculators make use of available data to judge if the price of future or currency will rise or fall and act accordingly. To arrive at the correct data, graphs, charts, financial forecasts and more are consulted before a decision is arrived at, which is certainly not the case with gambling and gamblers.
However, speculation is still gambling in another form as the speculator is totally unable to guess the future with 100% certainty. Still, speculators work from within the financial system and their activities are regarded as totally legal.
Gamblers, on the other hand, are on the fringes and outlaws as it were. They dance to the beat of their “gut feelings” and hunches and make use of systems. Systems that in any case rely on large amounts of luck to work.