Difference between "trading" and "gambling"

[stueytrader]

Gambling = zero income tax
Trading = taxable at standard rates.

I know we can technically avoid income tax and NI, but all other 'buy it low, sell it high' trading activity from investment management to the local fishmonger attracts cgt, corp tax or income tax.

I won't be too sorry if the HMRC continue to call what we do 'gambling'.

Good point

I should say, from a little earlier, I did like Peter's post that a good distinction is that traders can still make money from correctly priced markets - I'd add a caveat though, that can only be done if the market 'moves' at some points to become 'incorrectly' priced...?
But I get the general idea that it isn't of course dependent on the true pricing of the outcome in the way that it is for the gambler.

[Euler]

You need to add the time element to the trading. So something could start at the right price, drift out and end exactly where it started. Value bettors made nothing but the trade made a good trade.

[Euler]

Essentially trading is gambling. Just on the direction of odds. It's really no different from spread betting on financial markets.

[LeTiss]

The difference between trading and gambling is basically discipline, because that's the only thing that gamblers lack when trying to trade

A trader with 6 successful greens is kidding himself, if he chases losses the moment he gets a red.

He's basically a gambler, not a trader at all

[stueytrader]

The difference between trading and gambling is basically discipline, because that's the only thing that gamblers lack when trying to trade

A trader with 6 successful greens is kidding himself, if he chases losses the moment he gets a red.

He's basically a gambler, not a trader at all

Agree with your final conclusion, but not the bolded part - some people who take a position (i.e. gamble on the outcome) on a market may be highly disciplined in their approach, and sticking rigidly to their own strategy/staking etc. So it is not a necessary difference - in reality it may often be a difference in practice, just not necessarily. So it doesn't distinguish these as an activity.

[foxwood]

Gambling = zero income tax
Trading = taxable at standard rates.

I know we can technically avoid income tax and NI, but all other 'buy it low, sell it high' trading activity from investment management to the local fishmonger attracts cgt, corp tax or income tax.

I won't be too sorry if the HMRC continue to call what we do 'gambling'.

All the taxable "trading" involves buying and selling "real property" eg fish, shares, money etc. - ownership of tangible goods or entitlement to services are exchanged between the parties - even if only for a few microseconds.

On Betfair etc there is no such thing as "trading" either technically or legally - it is all peer-to-peer betting (mutual wagers on the outcome of an event) facilitated by the exchange and does not figure as something offered in the T&C's of any exchange as far as I know.

Here, "trading" actually consists of multiple bets on win/lose and even then there is a gamble as to whether you can match any or all of your "bets" or not. It just happens to be a low risk form of gambling - which many manage to make high risk and wipe themselves out !

Tax precedent for ignoring gambling dates back to 1925 - see https://www.gov.uk/hmrc-internal-manual ... l/bim22017

However, if you are a volume layer making offers then you could be considered as making a book even if just offering on one runner - potential for tax may arise in that case since you are acting as a bookie.

[LeTiss]

The vast majority of people here have aspirirations to be a successful trader, but it reminds me of Mike Tyson's quote "everyone has a plan until they get punched in the mouth"

Having a succession of greens means jack shit. It's what you do when you have a red, that defines whether you're a trader or a gambler. The gamblers struggle to 'red up' and move on, they need to find a way to win those losses back

[foxwood]

The vast majority of people here have aspirirations to be a successful trader, but it reminds me of Mike Tyson's quote "everyone has a plan until they get punched in the mouth"

Having a succession of greens means jack shit. It's what you do when you have a red, that defines whether you're a trader or a gambler. The gamblers struggle to 'red up' and move on, they need to find a way to win those losses back

So need a like button for posts like that

[stueytrader]

The vast majority of people here have aspirirations to be a successful trader, but it reminds me of Mike Tyson's quote "everyone has a plan until they get punched in the mouth"

Having a succession of greens means jack shit. It's what you do when you have a red, that defines whether you're a trader or a gambler. The gamblers struggle to 'red up' and move on, they need to find a way to win those losses back

I do love his quote there must admit - funny and true! Iron Mike, not just a terrific fighter but a great mind too about the game.

I do agree with your point in relation to traders, but that is basically a trading discipline issue. It doesn't mean there can't be what we classify as 'gamblers' (position takers) who maintain their discipline.

[stueytrader]

A close comparison might also be in stock trading, long-term vs short-term market traders.

A short term trader is looking to close out quickly for a profit (similar to trading in exchanges) whereas a trader who simply wants to buy a stock and predicts it will be good long term is more close to a position taker (gambler).

In both cases (stock market/exchanges) there's always the option to 'close' for both people, but some simply prefer to wait for a longer term outcome.

[burntheory]

You need to add the time element to the trading. So something could start at the right price, drift out and end exactly where it started. Value bettors made nothing but the trade made a good trade.

Interesting observation. How would that work?

If BF were to offer markets on coin tosses, for instance, why wouldn’t gamblers just place their back orders at 2.02 and see if they get matched? Even if they were paying the full 5% commission, they’d have a positive expectation of 0.95% and an expected 50% strike rate.

Whilst a skilled backer might not be attracted by the risk/reward ratio of the above scenario, it doesn’t follow that there’s no value to be had, surely.

As a variation of the OP, it would be interesting to speculate what the split is between 'gamblers' and ‘traders’ in the x% of the BF population who are regular, long term winners.

[Derek27]

One thing that hasn't been mentioned on this now lengthy topic, is that most gamblers will avoid premium charge. You would need to make about 33% profit on stakes to be hit by PC.