I often receive the question is stock trading gambling? So today we gonna talk about that. So, is stock trading gambling? Well this depends on two things.
The first thing is how you select a stock that you want to invest in. And the second thing is how you manage the trade. Let's talk about the first one. Picking a stock. Many people pick a stock based on a hot stock tip that they get from a friend or from a Web site might be a marijuana stock or a biotech stock right. So they get the hot stock tip that there's something about to happen instadebit casinos in Canada. I want to show you something really scary. Take a look at this. So let's go to Google and just google hot stock tip and see what's coming up shall we sell hot stock tip. Here we go. Let's see what we have. Oh wow. Look at the first one here 17 out of 19 stocks rose. Fantastic. Let's take a look at this. So here we go. All right. Latest alerts. Let's go right there. Oh my gosh. The first one for sure. This must be a marijuana stock. So that's what everybody is crazy about these days. So let's check it out. Because they say it went from nine cents to forty seven point nine cents so four hundred thirty two percent gains. Let's take a look at this. So we go to finance dot yahoo dot com and enter the symbol MJNA and a so. So this MJNA... and Here we go. Medical Marijuana Inc. What can possibly go wrong right. Let's take a look at this. So here we're bringing up the charts on full screen. Now let's take a look at this. Oh now that's odd. Look at this. Didn't they say wait wait wait wait what did they say. This is the chart over the past two years. We're looking at the chart over the past two years and it has been trading at 10 cents for the past two years. What did they say? It went from nine cents to 48 cents? Well that's interesting. I don't see that at all. Do you see this? So is this how you pick stocks? Have you ever experienced like this what do you think about this? Leave a comment right below and let me know what you think about this. But let's take a look at the next pick here. So the next pick is VMRI let's do this. V.M.R.I. So we're looking it up V.M.R.I.Just Double checked Valmie Resources Inc. no idea what that is we're looking at the last two years year. That's what we're looking at. So right now it's trading at one cent. Wow look at that that is very interesting. Didn't they say that it went to six dollars six dollars. I don't see this. Now if you pick a stock like this then of course stock trading is gambling. Here's how I pick a stock. I'm using a scientific approach. I am using indicators and in another video I will show you exactly how I do it. But if you are relying on the hot stock tip then most probably you are gambling. Is this making sense? If so leave a comment below and say yes this is making sense to you. Now the second important factor whether you're gambling or not depends on how you manage the trade. And what do I mean by this? When managing the trades, there are two things that you need to keep in mind. First of all when do you exit the trade with a loss because losses happen when trading. And secondly when do you exit the trade with the profit here is my rule of thumb. I never risk more than 2 percent of my trading account on any given trade. What does this mean. Well let's say you have a ten thousand dollar account if you are entering a trade your risk two percent of ten thousand dollars which is two hundred dollars. So if you lose on this trade you lose two hundred dollars while big deal right. You still have nine thousand eight hundred dollars left. So this means that you still have enough money to enter the next trade. But what do most people do they just don't set a stab loss and let the trade go down down down down. That to me is gambling. Now the other way to manage the trade is with the profit target. You want to take profits while they're there. And here is the golden rule that I like to use for every dollar that I raise. I want to make two dollars off for every hundred dollars that is I want to make two hundred dollars. Or like an hour example for every 200 dollars that are risk. I want to make 400 dollars. Now the beautiful thing if you follow this principle if you apply the Golden Rule you'll make money even if you are wrong half of the time. Hard to believe? Let me prove it to you. Now let's say you're risking 2 percent of your account on any given trade and if you have a ten thousand dollar account it would be 200. Now you also apply the golden rule meaning that when you risk 200 dollars you're trying to make 400 dollars. Making sense? Now let's say that you're placing 10 trades half of these trades are losing trades. So what does that mean? How much do you lose on your losing trades while five trades are all losing trades in on these five trades. You lose 200 dollars each means that you lose a thousand dollars. Now the other five trades are winning trades and let's say on those who you make 400 dollars each. Because that's our profit target. So five times 400 dollars is two thousand dollars. Now take a look at this how much money do you have after ten trades? Right! It's a thousand dollars! And look at this, half of your trades worth losing trades. Now can you see how this is a scientific way to approach the market? If you risk less on your losing trades than you make on your winning trades. This is how you can succeed in trading. Now again, losses are part of our business as traders and we want to make sure that you limit your losses. And then you also take profits while they are there because these days profits can disappear quickly viewer experience that you had a winning trade and then it turned into a losing trade. If so leave a comment below. So in summary is stock trading gambling. It all depends on how you approach it. It is gambling. If you're relying on a hot stock pick from a Web site or a friend of a friend or I don't know how ever you get your hot stock picks. And secondly yes it is gambling if you do not limit your losses and if you do not know when to take profits. However, if you have a proven way on how to pick stocks and you have a proven way how to exit a trade by keeping your losses small and taking profits while they're there, then stock trading is no longer gambling because then you have a plan. You have a trading system and when you follow it the chances of making money in the market are much higher than relying on the hot stock tip as we have seen. Hope this helps. Did you enjoy it?
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AuthorCharlotte Martensds ArchivesCategories |