This entry has now been placed in a series we are doing regarding the fact that Trading? IS Gambling. And thus this post continues from the previous post in that series …
We have stated numerous times throughout this series that, “Trading is Gambling. This is not an opinion. This is a fact.“
However it should be admitted that to date, we have largely been providing our own reasons and rationale’s for making this statement. Which we admit would classify as: Opinions.
Although we would qualify that, by reminding ones we have cited religious institutions that have wrestled with this topic. And we have also dropped a few hints in earlier articles in this series, that this is an accepted Academic viewpoint. Statements such as …
“Talk to ANY Quantitative Finance graduate”.
“This is not an opinion. This is science. I need not bore you with all the technicalities surrounding Complex Adaptive Systems (CAS) and discrete quanta released onto complex systems (which is what is occurring with financial markets, every second of every day). We don’t have to get into Power laws, Agent Based Models for collective entities, or volatility clustering and autoregressive conditional heteroskedasticity (ARCH) models. If you want the mathematics? To be sure, there are more scholarly papers written on this fact and topic, that can be provided …”
So we have talked around this idea. But now let’s circle back to what we have already hinted at.
As we have been saying, Trading … is Gambling. And this is not an opinion. Universities understand and embrace this viewpoint. Academics have researched, taught and expounded on our understanding of trading financial markets … as an iterative gambling process.
Here is a nice little link to an essay by Stewart N. Ethier and Fred M. Hoppe that will take you through scores and scores of courses taught at Colleges and Universities regarding the mathematics of gambling. For those of you who will not read the full paper, a few excerpts …
“A fourth reason would be to offer a course on the mathematics of gambling as a subject in its own right, much as one might give a course on the mathematics of finance”
or when it quotes Bachelier in 1914, p. 6 of “Le jeu, la chance et le hasard” …
” … it is gambling that allows us to conceive of this calculus in the most general way; it is, therefore, gambling that one must strive to understand, but one should understand it in a philosophic sense, free from all vulgar ideas.”
or the many courses listed in the essay such as those at Stanford …
Stanford University: “Mathematics and Statistics of Gambling.” Offered in Spring 2018. Enrollment: 40, including 10 undergraduates and 15 graduate students from Mathematics/Statistics, and 15 from other departments. Prereq.: Undergraduate probability and undergraduate statistics. Intended for graduate students.
I could go through University Course, after Game Theory model, after published paper that backs up what we are saying.
This is not an opinion. This is an established fact.
Here … here’s a link to a paper that literally took me 10 seconds to find which discusses quantitative traders and gambling! There are myriads more.
In addition to the courses that we cite above? Scores of mathematical concepts and statistical outcomes are based off of modeling gambling outcomes. We have “Gambler’s Ruin“, “The fallacy of the maturity of chances“, “Parrondo’s Paradox” and many others. All of which are studied and understood by quantitative traders.
Folks, this is accepted academic fact. One must treat professional trading? As gambling. Heck, the above article by Bachelier was written over 110 years ago! This is not a ‘new idea’, or a ‘revolutionary concept’. To dispute the idea, is analogous to believing you are in first place in a race. ‘The race of discussion’, which ended over a hundred years ago; as everyone else has lapped you and gone home.
We are not saying that to trade, you must become an expert in Markov chains for probability outcomes. We are not saying that.
But we conclude these text articles by reiterating: Trading? Is Gambling. The sooner you accept this truth, and learn to become a good and talented professional gambler? The sooner your trading will improve.
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We will continue this entire discussion in the next and final entry. We know that ones may not read through all of these posts, so we’ve decided we’re going to produce a podcast where we review these ideas …
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