I’ve been investing for a couple of years now and a few years ago I had an unknown hatred towards traders. I’ve seen them as gamblers and manipulators, making the stock market a den of thieves and an online casino. Then a sudden turn of events made me who I am today, I have to use Technical Analysis to my own advantage and to save my portfolio. I wasn’t wrong! That was one of the best things I did. I was able to protect my funds and managed the risks of my investments. It made me a believer of Technical Analysis and from then on, I’ve been already trading stocks at the same time continued investing.
There were round of discussions couple of weeks ago in a trading community if trading is a gambling or not. Some say it is because due to the very short-term time frame. Some say it’s not, as long as you know what you’re doing. Being very vocal about my faith, many times I was in a dilemma weighing if I was already engaged in gambling… If I was already compromising as an active Christian. So I made a checklist to find out what are the grounds that trading could be identified as a gambling.
1. Gambling is relying solely on luck.
I’ve never been to a casino but I was able to try gambling as a kid. I had to stop it since I did not win even once. Gambling is purely playing to almost no chance! It is betting against the odds. On the other hand, trading is timing the market with proper tools and thorough studies. Trading can only be a gambling if you’re just buying and selling without knowing what you’re doing.
Technical Analysis is a mass psychology which is understanding the behavior of people towards money and analyzing price action of supply & demand. Stanley Druckenmiller, one of the greatest traders, never had any negative return for 30 years while working in a hedge fund company. I’ve known traders who are very good at growing their funds despite trading on very volatile and risky stocks.
2. Gambling is effortless.
You don’t need to study, you just need to put your money there and lose it! That’s what you do in the casino. When I took trading seriously, I could not imagine how many late nights I’ve spent just reading financial and Technical Analysis books.
I’ve practiced every morning just to analyze the chart, decoding Japanese candlesticks patterns, understanding indicators, and oscillators, and applying numerical sequence and harmonic geometry patterns. I’ve even posted all the patterns on our walls for me to easily memorize and recognize them. I’ve also invested in learning from veterans in trading who are doing this for a long time. Literally, I came back to school!
3. Gambling does not need discipline.
Another thing is that gambling can cause addiction. Many people fell into the casino because they feel good about it however little did they know that it’s already part of a destructive habit. You will come to a point that you will borrow money just to feed your impulsiveness. Trading is the opposite, in order to properly execute the trade, you need to have a proper trading plan: buying price, cut loss price, trailing stop and target price.
Traders are the most disciplined people I’ve known and they’re very professional on what they do. Big institutions and brokers have to execute trading with strict discipline or else they would lose big time!
4. Gambling does not need a system.
If you don’t have a system, that’s pure gambling. If you’re relying on stock-picks, that’s another one. Trading is very systematic and it is advised you have to use a system that will work for you. There are a lot of systems and strategies you can use from basic to complex. The point is, you have to have one so that you will have a sustainable and less-risky journey.
5. Gambling has one in a million chance, Trading can give you sustainable gains.
The goal of trading is to really protect the capital, manage risks and to maximize profits in a short period of time. Trading is not betting and it is highly rewarding. Fund Managers and brokers have already proved that it is a real deal. With my experience in investing, I opened my trading account to maximize higher yield and what I got from trading were pretty surprising. I could say trading is very promising!