An Extract from Trading and Exchanges by Larry Harris-
Many - Probably most - traders who gamble in financial markets are unaware that they are gambling. Most beleive that they are pursuing other objectives. Traders need great discipline to discriminate betetween prudent risk taking behaviour and gambeling. Many traders traders who beleive they are speculating actually are gambling because they do not recognise that the information upon which they trade does not give them any advantage over other traders. Traders who gamble can sometimes be identified by their enthusiasm for trading and by their inability to clearly articulate their reasons for trading.
The notion that some traders are gamblers is controversial. Many regulators fear the damage that they can do to themselves and to the markets. They especially worry that gamblers may make the markets more volatile.
Gambling is not necessarily bad for financial markets. Since gamblers are uninformed traders, they tend to lose to well-informed traders. When many gamblers are present, informed trading can be quite profitable.
Like all other utilitarian traders , gamblers like to trade in liquid markets. The low transaction costs in such markets allow them to aquire and divest their possitions cheaply.
Gamblers also like to trade volatile instruments because they typically provide the greatest potential for exciting entertainment. The great popularity of public lotteries suggests that some gamblers like bets which win big with low probability and lose small with high probability.
Many - Probably most - traders who gamble in financial markets are unaware that they are gambling. Most beleive that they are pursuing other objectives. Traders need great discipline to discriminate betetween prudent risk taking behaviour and gambeling. Many traders traders who beleive they are speculating actually are gambling because they do not recognise that the information upon which they trade does not give them any advantage over other traders. Traders who gamble can sometimes be identified by their enthusiasm for trading and by their inability to clearly articulate their reasons for trading.
The notion that some traders are gamblers is controversial. Many regulators fear the damage that they can do to themselves and to the markets. They especially worry that gamblers may make the markets more volatile.
Gambling is not necessarily bad for financial markets. Since gamblers are uninformed traders, they tend to lose to well-informed traders. When many gamblers are present, informed trading can be quite profitable.
Like all other utilitarian traders , gamblers like to trade in liquid markets. The low transaction costs in such markets allow them to aquire and divest their possitions cheaply.
Gamblers also like to trade volatile instruments because they typically provide the greatest potential for exciting entertainment. The great popularity of public lotteries suggests that some gamblers like bets which win big with low probability and lose small with high probability.
Living the adventure in my head.