While both gambling and trading are governed by probability, the difference between gambling and trading is a very fine line. However, it plays a huge role in determining a trader’s success in the long term.
Simply put, when money is placed on a bet that has a negative expected value, is called gambling. At times, a gambler might get lucky and make a fortune – but in most cases, this would be an unexpected and non-frequent event. Placing these bets many times will lead to long term losses.
Trading requires establishing a set of rules and testing those rules over a large number of trades to determine the expected value of the trading strategy. Trading has a positive expected value.
Trading should be treated and executed like any normal business transaction – Investing a certain amount of capital with an acceptable risk for a duration of time to derive a profit.