What’s the difference in a trader and a gambler?

As a trader I often look at all other forms of trading, betting and gambling to see what and if there are any new or unique concepts that have developed or are developing. Mostly people reinvent the wheel and resell systems to gamblers. I’ve noticed this phenomenon over the years as a trader repeat itself continually.

Gamblers will always buy the new system that will make you a £1000 a week because they have gambled all their previous funds and are hoping to find a new silver lining. But on the other hand some people that say they are traders are actually gamblers, they just don’t know it! Some traders rely on luck and hope and even worse are in the business for recreational value… A trader decides on a trade and has an entry and exit plan, the gambler places a bet and luck provides a result occasionally or maybe even regularly but bad money management soon reinvests the gamblers winnings into other people’s pockets. The professional trader reinvests their profits wisely to make bigger profits in the future that go back into their own pockets.

Some gamblers do make money though and lots of it, but they act like traders. They look after their banks like real investors and have money management in place; they find value and trust their own judgement. They understand losing streaks but know in the long run they will profit. Just like traders they don’t rely on hope.

If you open a trade without a plan that suits you you’re gambling; if you fully understand yourself, your stress threshold, your ability, your self-discipline, understand risk and reward, have good money management and the ability to exit a losing position you’re a trader. If you prefer to place a trade and hope because all of the above sounds like too much hard work you’re probably a gambler. So which are you?