Are you familiar with the roulette game? It’s one of the most popular casino games, in which a player wagers on different numbers, groups of numbers, and colours (black and red) in an attempt to improve his chances of winning when the ball stops rolling. The crucial thing to remember is that no matter how many numbers or colours a player wagers on, he will never have a better chance than the casino. Yes. Yes, you read that correctly. The roulette wheel is set up in such a way that no one can anticipate which number will appear on each spin, but the house always wins over time.
Similarly, you cannot be certain when trading stocks in the stock market.
GAMBLING VS. Buying and selling:
As I previously stated, you cannot control the odds in gambling. However, this does not imply that you should begin trading without first obtaining sufficient training. If you don’t follow the protocol, it will quickly devolve into gambling. The following points will explain when trading is gambling in a nutshell:
- There has been no market education at all.
- There are no pre-determined strategies.
- There are no risk management guidelines.
- There are no money management guidelines.
- Taking high-risk trades, such as low-volume equities, penny stocks, and so on
- Trading in vengeance.
- Losing deals are averaged.
- There are no gains, only losses.
A skilled trader approaches and treats the market as if it were any other job. He doesn’t just throw himself into it. A trader will always back test his strategies, but a gambler will simply roll the dice and hope for the best.
Always keep in mind that the markets are in charge, and they don’t care who wins or loses. They do, however, reward those who follow the rules. And when you stick to pre-determined strategies, the market will not fail to reward you. The house, on the other hand, has always had the upper hand, irrespective of how a gambler bets. After all, casinos are in business to make money, not to make you wealthy.
Before entering into a transaction, a trader knows how much risk he is willing to take. He’s also aware of
Gambling is described as putting money on a chance that something would go wrong, frequently with a negative expected return. When trade is factored in, however, gambling becomes a far more complex dynamic than the definition suggests. Many traders are gambling without even realising it—trading in a method or for a motive that has nothing to do with market success.
Anyone who believes they don’t have gambling tendencies is unlikely to joyfully acknowledge having them if it comes out that they are acting on gambling impulses. However, understanding the motivations behind our behaviour can help us make good life choices.
Before going into gambling habits when it comes to trading, many people have a tendency that is evident even before they start trading. As traders gain experience and become frequent market participants, the same motivation continues to influence them.
There is a learning curve once someone becomes involved in the financial markets, which may appear to be gambling based on the social proofing debate above. Depending on the individual, this may or may not be true. Whether a person becomes a successful trader or remains a constant gambler in the financial markets is determined by how they approach the market.
The following two characteristics (among many others) are readily neglected but contribute to traders’ gambling tendencies.
Gambling (Trading) for the Purpose of Creating Excitement
Even a lost deal might elicit feelings of power and fulfilment, particularly when it comes to social proofing. If everyone in a person’s social circle is losing money in the stock market, losing money on a trade will allow that individual to enter the market.