Are You Trading or Gambling?

> If you are poor, you have few good options and generally wouldn't brag about your gambling. If you do, you are labelled irresponsible.

And rightly so. For two main reasons

- demonstrably negative expected value of the bets (like in casino floor games or the lottery)

- relatively high proportion of total net worth wagered

I'm very comfortable with labeling this as irresponsible (regardless of levels of wealth). It's not just a case of "everyone does it but only poor people are shamed for it", there's a clear distinction between the two cases.

Around 20 years ago, I had the opportunity to listen to a member of Nasdaq top management talk about the stock market. It's all a _tiny_ bit blurry, being a long time ago, but I remember how he talked about three different perspectives for investing in stock:

First, the "company perspective". An investor would buy stock in a company they believed in. Maybe they had good products, or good management, or something else. The idea was looking at the how well the company would perform.

Second, the "stock perspective". An investor would ignore the underlying company, but look at the stock itself. It didn't really matter if the company was doing good, but only if the stock itself had good potential. The idea was looking at how well the stock would perform.

Finally, the "game perspective". An investor would not really care about the stock, but only about the behavior of other investors. Day trading would be the example here, profiting mainly on marketplace dynamics, no matter the stock. The idea was looking at how to be a better player than the others.

Then he talked about how the game perspective was the only model that really matched the marketplace, and how the stock market had evolved from being place where people would invest in companies, to a place where they would play a game with other peopl.

The reason is pretty simple - probability of events are an important input to calculation of expected values. If the probabilities are off, expected value calculations will differ. Also, Expected Value works under the “law of large numbers” assumptions. That in turn brings into picture the “sequence of return” risk. Two drastically different sequences can lead to the same Expected Value but can have serious short term implications.

“The market can remain irrational longer than you can remain solvent.”

I was referring to the concept, not whether it is centralized or decentralized. Most blockchain applications don't need one to function.

One better-than-nothing way is to look at historical data:

Looking at the closing price for each trading day, count how many times the stock ended higher and how many times it ended lower than the previous day.

Then you have your odds.