is trading gambling
Trading is the game of odd and even. Its all about probability, once you will raise the coin you don’t know either head will come or tail will come?
Is trading is gambling or not its depends on what kind of mindset a trader have. If he/she understand this thing that its game of odd and even anything can happen, for that person it will be a business not a gambling. But if a person doing trading with just a mindset like he always want to win in the market, that person playing this game as a gambling.
Gambling: There are two main psychological factor works in gambling, one is excitement (Greed) and Fear ( Emotional attachment with money). If someone is doing trading with these two emotions without understanding the rule of probability then this type of trading will be known as gambling.
Example: Mr. Michael buy 10 shares @ 100 with an expectation that it will give return of 5% in coming few days. But instead of this from very next coming day it started going down from 100. Mr. Michael hold their position with a hope that it will come back to their cost price. stock keep on falling every day by 1% but he still hold their position with that same hope that it will come back. In one month stock got down by 20% but he still have hope that it will come back. This kind of mindset is called gamblers mind set. Because Mr. Michael is playing with emotional attachment of money, he just don’t want to loss their money. He just believe that if he enter into trade then he must have only profit, he is not getting ready to accept loss.
Trading is not a gambling: If a person understand that its all about probability (game of odd and even) and he/she is not playing with emotions of greed and fear then for that person it will not be a gambling.
Example: Mr. Tom buy 10 shares @ 100 with an expectation that it will give return of 5% in coming few days. But instead of this from very next coming day it started come down. Then Mr. Tom decided that if stock will fall by 2.5% then he will exit their position and he will accept the loss. This kind of trading is not a gambling. Because Mr. Tom understand that its all about the probability, he know that once he took the trade either he will go in his favor or not. He accepted that his trade gone wrong and he got exit before getting loss more than what he was willing to earn.
External factor’s Effect:
Most of the time people cant recognize that weather they are doing trading as gambling or as a business. Because mostly people doing trading under the influence of recommendation and news flow from news channels and social media networks. People don’t have their won trading plan.
Example: In 2020 when due to COVID 19 there was hot news of Lock down, people started keep on selling the market. But in reality from the day of lockdown happened in real ,market started keep on rising, and mostly people tried to hold the short position with hope that it will come back because there was negative news flow on ever news channel and social media networks.
How to stop doing gambling? :
Make your own rule based trading plan (Entry plan and exit plan with stop loss), always follow your rule based plan don’t get into influence of any news flow and recommendations of others.
