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Stock Market

Is stock market gambling?

Is stock market gambling?

This is a very basic doubt everybody gets whenever they hear about the stock market, in fact, it took me 1 year of research to really understand that it is not gambling- BIG NO.

When I started trading/investing I had zero knowledge about the stock market, whenever people used to talk about buying/selling, bullish bearish, stop loss, everything used to go out of my mind,
I dint know where to start(‘ll come up with videos in an organized manner on from scratch how to start trading/investing in stock market, right from opening an account ).

I started taking courses,¬† meeting professionals and used to take trades based on somebody’s tip and the result was always negative, Its a known fact that 93 + percentage of people lose money in trading, Yes u heard it right majority of people lose money, and interestingly its not people only from India, its across the world, so its obvious why people think its gambling.

So then I started thinking if 93+ percentage people are losing money where is this money going ??? !!!
it’s going to rest 7% and now you think who are these 7% people ??? why are they making money even when the majority is loosing, and these 7 % people are making huge money.

Let’s get back to the main topic now GAMBLING ??

In my view, IF there is a probability of losing complete capital or money or investment you have without any logic just by assuming¬† then I would say it’s gambling. Now u may get a doubt that “In the stock market also there is the probability of losing 100% capital – you will come to know the difference shortly”

Now a Quick question for you, which business doesn’t have this probability ??
keeping your money in banks ?? fixed deposits or any business or buying properties ???

The answer is NO, every business has the risk ” BUT ” very important thing is RISK FACTOR, how much risk you are going to take, for instance FD has very less risk of loosing capital, there should be a world war or bank should get completely locked up for your capital to become zero. so here risk factor is very very less, same time reward or profit you get is also very very limited.

Let’s take one more classic example “Mango business”, its a very lucrative business especially in south India. I have seen people taking loans, selling houses and they buy mango farms, and sometimes they double their profit within no time or lose out completely, Now I would say it is completely gambling since there is a probability of losing out most of your capital and there is no logic in this business. sometimes mango rates suddenly goes up and sometimes it’s pathetic, here what would have been logical is instead of completely investing your money in mango farms if you would have invested part of it say 30% then if you lose out 30%, still there’s is a chance for you to invest next time and say you make 60% next time again your capital is back + profit, risking 30% is very high I just gave an example.

Another example lets say casino — there was a research on gamblers mind, how they think n all, interesting almost every gambler has the same pattern of thinking, If they lose first game they double up their money, for ex if gambler bets 10$ and loses, second time he bets 20$ because mind starts controlling them, it keeps telling them you were almost there next time definitely you will win so make it double, so the third time it becomes 40$ eventually they will lose all of their money, it’s highly addictive, it’s not so easy to come out, OK so here is the point how casinos make money, mathematically there is a probability that if you gamble continuously at least one time you will win and since you are doubling up your bet every time then mostly you will win provided if you have enough capital(money to take bets more number of times), BUT there is a catch, in casinos they also know this probability, so they don’t allow a single person to continously double up their bet and only a few series of bets he can do so majorly most of the money goes to casino owners.

so the probability of making money becomes negligible so it’s GAMBLING

so in my view, finally to term anything as gambling it should pass the following conditions

1. There should be no logic in what you are doing
2. in one shot you will have to lose all your money

Now let’s get back to the stock market

why I say the stock market is not gambling ??
1. Technical analysis and fundamental analysis helps us to predict prices (so logic is involved)
2. The very important difference I found in a successful stock market professional when I was doing research in the stock market is — DISCIPLINE, immature traders or people who are new to stock market they search for one strategy which gives them 100% target – “Believe me there is no such thing called 100%” whereas professional traders always have a plan, they don’t always trade, they trade only when all their rules are in place,
before entering they calculate worst case scenarios, and they never gonna risk more than 5-10 % (1-2 percentage would be very safe) , Instead of worrying about profits, they worry about losses, they think on how to bring down the loss, and when they make a profit they make it double the loss.

“Professional traders concentrate on money management + risk management + stick to very well backtested strategy no matter what ”

Can you really make money in trading ??

Yes I make 5-40% per month of my capital because I stick to my rules no matter what’s the outcome of the trade, because I know this is how mathematically u can win.

New traders will have all these doubts, what is the stock market, how to start, which plan to follow, what is money management, what is risk management, very soon I’ll come up with videos on all these stuff, u can back test and stick to it- right from which broker to select, candlestick analysis, and exact plan on how to trade for a complete month everything I’ll bring in step by step.

The only key to achieve success in the stock market is by making money consistently which you can do only by discipline and not by taking others call.

Thank you so much

By Shueb Mohammed