Stock Market Investing vs Trading vs Gambling

The stock market is a place of least resistance to entry. In any other field e.g. doctor, engineer, CA, etc. you have to go through years of academics and exams, while the stock market is an easy entry to everyone, you just need a few hundred rupees to pay for account opening fees and you are good to go; earn thousands to lacks every day. 

Seems really attractive, right? but don't fall for it, that is the trick why 90-95% of people lose money into the stock market, they look at it as a way to easy money and quick riches. 

The industry is filled with so much false marketing that a lot of people don't even know what they are doing. While they exclaim that they are investing or trading in reality they are gambling. This article is to help you guys analyze what you are doing and what should be the path ahead.

Stock Market Investing:

Though we call it stock market investing or share market investing very few people understand and deal with it as a partnership in a company. If you are the one who understands that you are buying a part share in the company. 

If before investing go through annual reports, websites, social media pages, and financial reports of that company. Try to find the right value of the company and then buy it at fair to the cheap valuation you are investing.

`You are onto the right path but make sure to have patience as companies won't grow overnight and hence you should hold them tight. Alongside keep updating your knowledge so you can help yourself taking right decisions.

The best way to keep updating your knowledge is to keep reading. I would suggest you read annual reports, research reports, business newspapers, and blogs.

Stock Market Trading:

There is a big misconception in the world of the stock market about trading and gambling. A part of the community calls trading as gambling while others talk about technical analysis. Technical analysis is a really good tool but the way it is being presented in front of a new audience is making a lot of people lose money. Yes, I am talking about the so-called 80% -100% accurate/No Loss strategies that we do find onto YouTube free of cost. 

Technical analysis is a tool to read current market conditions, positions created by the majority, and how they will react when the price will touch certain important levels.

 e.g. if a stock is trading in a very small range for a considerable amount of time (depending upon the time-frame) and suddenly one candle breaks low of the range, then the people who had bullish positions will have a fear of losing money so few of them try to push the market back in the range by adding more bullish positions(only a few because most people understand it is not possible) while the majority will close their bullish position by selling. As the range was small people with bearish positions will not be in a hurry to book profits. A lot of people who were waiting for the market to indicate direction may also create fresh shorts. The cumulative actions of the majority to sell may move stock prices lower for the next few candles.

If you understand the above example and your thought process is similar while trading then you are are a trader.

You are on the right path but remember to keep your money management rules intact as the price may and not must move. 

Stock Market Gambling:

Most of the newcomers in the stock market fall into the trap of gambling while not even realizing it. Thanks to fake gurus of the stock market whose sole purpose is to earn either training fees or brokerage. Not all trainers are fake, there are a lot of good trainers out there who keep doing really good tasks. So instead of blaming trainers, one should analyze the things himself.

Few Categories of Gambler in the Stock Market:

• Tips Trader: These guys deserve to lose as they don't even try to learn and analyze things before putting money. My advice would be to either take some efforts to learn and analyze or leave the stock market before it kicks you off.
• Magic Indicator Trader: These guys are better than the first one as they at least take some efforts to back-test though it doesn't work. My advice to such people would be to take proper training from a good technical trainer to make sure the trainer also trades his own money.
• Know Nothing Investor: These guys invest blindly mostly into index stocks thinking that the stocks are in the index so in the long term they will go up only. My advice would be to either learn the basics of investing or invest in mutual funds.
• Half Knowledge Investors: These guys do pick good companies and invest at the right price but fail exit at the right time. The reason they fail to keep themselves updated with knowledge. My advice to such people would be to keep reading business newspapers and blogs that will definitely help. 

Surprised to see a good stock picker with knowledge of valuation in the category of the gambler. Let me explain:

XYZ bought the gold coins from a reputed jeweler with quality certification. Came home and forgot to keep the coin into a locker. The next day he handed his cloths to dry-cleaner without checking pockets. What is the probability that XYZ will benefit from the price appreciation of gold even after buying a certified one? Once an investment is done it should be protected and nurtured no matter which form of investment it is. 

Companies are working in an even more dynamic environment hence their performance has to be checked quarter by a quarter even if you have bought them for holding longer.    

That's it from my side.Please feel free to comment your thoughts.

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