Is Trading a Business or Gambling? - Professional Trading

Professional Retail Trading
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Gambling or Investing in business?
It's a popular misconception to think of Trading as gambling. In the UK you are not taxed on gambling gains, but you are taxed on Trading gains, and therefore Trading from a tax perspective is classed as a business. The only exception to this is if you trade through a spread betting account, but otherwise Day Trading or investing is taxable and classed as taxable income. To trade as a business you could use CFDs (contracts for difference) or any other number of account types and any income or losses are taxable or off-setable against tax much like any other business income.

Gambling is speculation on indeterminable outcomes, whereas trading is speculation on probability of outcomes. An example would be any business but lets take antiques dealing, you utilise your knowledge of antiques to speculate on the probability of something rising in price, essentially buying at a price because you think its intrinsic value is higher, you purchase an item and sell it at a profit, or worst case scenario it goes down in price and you sell at a loss. People don't refer to Antiques dealing as gambling but as a business. Trading is the same as this, you speculate on the liklihood of something changing in price, either going up in price (going long), or going down in price (going short) and look to get rid of your purchase after making some money on it. The decision is based on your knowledge of how to trade. Entering any profession without skill or knowledge is gambling , but it is the individual that is then a gambler but not the profession being gambling.

That's not to say that people won't use trading in order to gamble money, much like they would if not skilled in antiques and purchased something to make money they didnt know much about, it would be classed as a gamble, whereas an antiques dealer would know the intricasies of the business and make an informed choice as a business decision. If an uninformed person made antiques purchases, then that would make it gambling - but it is then the person who is a gambler, it doesn't make the profession gambling.

So no matter how you trade, whether with longer term investments, or intra day trading, it is a business, and as with any other business you will need to learn the skill and knowledge in order to trade successfully. If you fail to do this you will be gambling, and that is the fundamental difference between a business person and a gambler, otherwise all businesses would be classed as gambling, as they pay out money for goods in order to sell at a profit, or sometimes it may be a loss if markets change, but it's an informed choice to do so. So don't be fooled by the lay perspective of Trading as gambling, it simply isn't. To enter into trading without any skill or knowledge through training and experience would be a gamble, but that makes the individual a gambler, not the profession being gambling.

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Based in outer London/Medway UK
Training and mentoring for FX Trading
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