Business or Gambling, that is the question

[tech/a]

'indent'

Stock.

 

[tech/a]

Perception Some may have heard this one.

A shoe salesman was asked to go to China to investigate the export of their shoes into China.

When he returned he reported that opportunities for shoe sales were virtually non existant.When asked why by the CEO of the company he said--

"They are all bare feet they have no need for shoes"!!

 

[rozella]

"They are all bare feet they have no need for shoes"!!

market wide open.....unlimited opportunity

 

[tech/a]

Excellent.You pass with honors.

Mind you there would be no market for shirts in INDIA as they all wear Kaftans.
OR trousers in Scotland--to many kilts.

 

[lesm]

market wide open.....unlimited opportunity

We should appoint you Chairman of the Board after that observation.

 

[swingstar]

And you may well reach your goals much sooner had you been more professional in your trading business.
It hit me fair between the eyes when I was 25.My business at the time turned over $300K and made me approx 10%
My Mentor had a larger business Turning over several Million and making him around 15%.
In a single year he made around 14 X more than I did.Wow 14 yrs of profit in one!Clearly to me at that time being a better business man had its rewards.

tech/a, very interested in further reading you can recommend. I'm all for being more 'professional' if you'll guide the way. I have a lot of theoretical knowledge on running a business, as that's what I was into before trading. However trading is just like a franchise in a way, you are tapping into something that's already there. Of course you can be somewhat creative, but the basis is there. Trading takes out a lot of other factors as well in your typical business, ie. marketing, customers, products, etc. That's probably why I've been able to stick with it and not the many businesses I attempted to start.

 

[rozella]

What's an 'indent' in this context Wayne? I'm not that familiar with the term.

Many decades ago, I used to indent container loads of wall & floor tiles. I did not have the direct contact with the manufacturer , so I bought through a 3rd party ( the wholesaler in Australia) I put up my own "letter of credits" & the wholesaler skimmed a small profit off the top. At the time my business was not large enough to deal direct. This was called indenting.

 

[It's Snake Pliskin]

A Trading plan is simply the way you are going to enter the market on an individual basis.

I would think a trading plan has more: buying and selling strategies, and money management principles and parameters. A system, or tool to make profit with basically - trading methodology and management.

The Trading business plan is what you do during the time in the market on an accumulation basis.

"In the market" is ambiguous. Does that mean one`s holding period or one`s business life?

The business plan, encompassing the trading plan, would be all else and would answer the following questions:
Why am I doing this? When will I stop doing this? What are my goals? How much time do I need to expect what I want to achieve? How much capital do I need? What overheads are there? Will I have a backup computer? Do I have access to my accounts by phone? Am I psychologically fit to carry out the business? etc.

More importantly it would look at monitoring the business and have strategies for a: making profit (trading plan), b: strategies for monitoring performance, c: strategies for adapting the business due to performance or new opportunities.

Discipline is what makes it work though, so simply having the plans doesn`t constitute future success.

Individually they are quite seperate.
Cumulative they are one.

Yes.

My business model ensures profit during those periods when the outliers are in hybernation-----Trading is no different

.

Good point here. This is what I see makes the difference between a gambling trader, as the word gambler is normally interpreted, and a trader in business to make profit off the markets.

Snake

 

[RichKid]

Many decades ago, I used to indent container loads of wall & floor tiles. I did not have the direct contact with the manufacturer , so I bought through a 3rd party ( the wholesaler in Australia) I put up my own "letter of credits" & the wholesaler skimmed a small profit off the top. At the time my business was not large enough to deal direct. This was called indenting.

Thanks Tech & Rozella,
So basically it means buying/stocking things via an intermediary/agent because it's impossible or difficult to source it direct.

 

[rozella]

Thanks Tech & Rozella,
So basically it means buying/stocking things via an intermediary/agent because it's impossible or difficult to source it direct.

It may not be impossible to deal direct, however, it may be more convenient & less time consuming. The intermediary/agent does the ordering & looks after shipping etc & we put up the security against the order.

 

[tech/a]

I would think a trading plan has more: buying and selling strategies, and money management principles and parameters. A system, or tool to make profit with basically - trading methodology and management.

Correct------its the way you'll do business.
It in itself ISNT the business.
VERY important to define the difference.

Does that mean one`s holding period or one`s business life?

Business life.

Discipline is what makes it work though,

More than that--firstly it must be a proven profitable methodology,secondly it must be adaptable to market conditions if trading falls outside of the business blueprint. to be disciplined when the method is OUTSIDE the Blueprint could be a disaster.

so simply having the plans doesn`t constitute future success.

I knew you had it!! see I was genuinely suprised!!

Swingstar.
Most business reading is designed for larger business,even medium sized business isnt directly catered for.
However Six Sigma for dummies.
Strategic Management---there are 100s of titles on this topic but suggest a no nonsense approach from John Viljoen.The book is titled Strategic Management.
I have some titles at home so will post a few tonight.

You need to take out snippets which you can associate with.

Most Uni's have Business Management Programmes as part of their MBA,s

They can be a few K (5K I paid) but believe me its money worth spending!!.

If traders had a grounding in business there would be more successful traders out there.

 

[RichKid]

It may not be impossible to deal direct, however, it may be more convenient & less time consuming. The intermediary/agent does the ordering & looks after shipping etc & we put up the security against the order.

so the agent takes on the credit risk and passes it on as part of the increased costs....sounds very normal now that you explain it so clearly. Thanks Rozella.

 

[IGO4IT]

To IGO4IT and flyhigher, statistics and the law of averages will say otherwise. If you test a system on a large population of historical data, it is reasonable to expect the mean longterm. Not exact and not even certain, but likely. You could have multiple systems for different markets to better your profits, as I doubt any mechanical system performs exactly the same in every type of market.

Swingstar,

Trading mechanical system imo is defenitely testing previous success stories & betting on them repeating previous preformance & being successful in future (considering all constants are same for past & future, e.g. market sentiment,world events, media focus on a certain industry..etc).

I don't accept the fact that yesterday's trading could had ever have the same constants as today or now as 1 hour ago. the difference is the extra info the market has that I as a person may not notice but many already know.

which makes the idea of trading probabilities a success but never to guarantee its outcome, which is by turn is a gamble. The risk here is hidden under your confidence from witnessing previous success but its still there & bigger than what you think.

business operations in general had totally changed fundementally in its core processes, email/call centres/internet/IP telephony/globalisation had changed business & what it used to be in the past & it KEEPS changing it today but by smaller portions, we don't realise the change in business processes because we live it but the change is happening now.

if depending on previous history in mechanical systems was successful as profits were higher than losses then imo in near future it can't be as successful as before, because the constants of the market & backgrounds are changing very fast now, the rate of change is a lot faster than 2 or 3 years ago & world events affect the market in seconds & others come along & do the same thing.

The recent correction was all about fear of inflation of US, it took int'l markets down while USA had a lot bigger issues in last 10 years that should've had the same effect but back then it didn't!

History is beneficial to those who can learn from it & use it today on today's environment, using history as a guide to future may not be the best option as we don't know what's the next 1 hour news that could make or break the market!

The risk of "anything happening" that could come in next minute that could affect int'l market is higher than what you think & it makes all trades gambles.

We feel safe because history shown that major issues that could crash markets are few but they still exist & I guess no one could ever think that sept 11 could ever happen or ever suggest when!!

I still believe we're betting in our trades that using previous theories will work again with same result, Same as proffessional gamblers who go to casino & play blackjack by the rules, they can win but never shocked when they lose...because they're at the casino

cheers,

 

[tech/a]

I still believe we're betting in our trades that using previous theories will work again with same result

.

Could be argued that this is true of all business.
In trading provided the previous "theories" are proven profitable then its up to the business owner to stay within the proven parameters and find ways of improving his business that are also proven to be profitable adjustments.

What business owners (The good ones) do is Quantify their risk to the best of their abilities.
Gamblers in the purest sence quantify their risk as 100% loss or gain of X by odds available.
Vast difference.

 

[swingstar]

IGO4IT, definitely agree that single trades are basically gambling (or what I prefer to call risks), you don't know what is going to happen after you enter a trade, but you can weigh up the odds given past samples of data.

There are really only a number of directions a stock can go after you enter a trade. Technical analysis is about looking at history and trading with the odds. If you repeat the same technique over and over again, math will argue that it is unlikely that the odds will change considerably.

Of course a world event or speculation can affect a certain trade, and can affect a trade entered on any type of analysis, but that is where risk and money management comes in. Without those you are doomed no matter what analysis you use.

 

[TraderPro]

I had a whole different perspective on this issue... But I like Snake Pliskin's as well as tech/a's and coyote's take as well... I might blog about it in future...

In May, at first I concluded that share trading was not gambling... but a few days later I then switched my arguement, concluding that share trading is gambling.

In the end - it really is up to the individual trader to decide what to make of it.

In the last post where I did conclude that trading was gambling, I noted that the more important issue was not to ever treat trading as gambling and have it rule your life as other gambling addicts have.

 

[It's Snake Pliskin]

In the last post where I did conclude that trading was gambling, I noted that the more important issue was not to ever treat trading as gambling and have it rule your life as other gambling addicts have.

TPro,

Like the blog! check your spelling here: share trading is gambling.

 

[coyotte]

Would have thought the term " Share TRADING " was enough to give the game away !

Was under the impression that the term " Trader " , going back to the Silk Road implied someone who bought items , hoping to resell them @ a higher price --- with enough profit to cover overheads ---- what a very ancient and proud profession we are in -- love it win or lose !

 

[IGO4IT]

IGO4IT, definitely agree that single trades are basically gambling (or what I prefer to call risks), you don't know what is going to happen after you enter a trade, but you can weigh up the odds given past samples of data.

There are really only a number of directions a stock can go after you enter a trade. Technical analysis is about looking at history and trading with the odds. If you repeat the same technique over and over again, math will argue that it is unlikely that the odds will change considerably.

Of course a world event or speculation can affect a certain trade, and can affect a trade entered on any type of analysis, but that is where risk and money management comes in. Without those you are doomed no matter what analysis you use.

Hi Swingstar,

if odds are 99.99% (99.99% being the max probability we can realistically forcast) in favour of a certain outcome...it still doesn't cancel the fact that there's 0.01% of having the opposite outcome.

even if risk is 0.000001% of an opposite outcome, it's still there & the more experience we have, the more we get less shocked if that small little probability exceeded the favourite outcome we're expecting.

I personally had a look at how many opposite outcomes achieved & realised that the odds of having an opposite outcome is a lot higher than the outcome which the market calculated because we simply ignore the "single" circumstances of each trade we make but we enjoy accumulating the overall risk of all trades which makes our risk lower than what it is "mathematically" but never realisitically. Other reason is that technical analysis tells the buying & selling figures based on each of the previous days circumstances of world events but it doesn't tell you if same outcome should be expected while for instance if gold had gone from $720 to $500 in 2 days!

The risk is there & higher than our calucated rates, same as having an accident while driving a brand new top brand car or being hit by a bus while crossing the road....its very minimum but it does happen...which makes all trades again a gamble!

cheers,

 

[IGO4IT]

. What business owners (The good ones) do is Quantify their risk to the best of their abilities.
Gamblers in the purest sence quantify their risk as 100% loss or gain of X by odds available.
Vast difference.

Do you mean that roulette player who puts bets on 3/4 of the numbers on the board didn't have good odds?

Do you mean that there's any business in the world that is 100% safe of competition? that could crash it?

the idea of losing part or all of your investment in any business comes back to "how long" will you last losing small amounts before you say it enough & pull your capital out!

losing all or part of your capital imo has nothing to do with trades & gambles, all are gambles.

A 2%/month loss over 5 years could have the same effect as 10% loss/day for 10 days or 100%/hour in 1 hour...the question is where do you stop is what make you lose all or part of your investment, but all business losing are gambling that better outcome will be achieved tomorrow or next hour!

No ones likes to lose all their capital but waiting 5 years on 2%/month loss expecting a good outcome that will push your business higher is also a gamble. (you're not really sure if your business using the BEST used/invented modules will still get profits or not UNTIL the theory physically works).

Which makes trades & businesses all gambles.

cheers,