Gambling on the stock exchange
Not everyone understands how investing works: as a result, many people believe that investing is the same as gambling. However, by investing smartly, you can achieve consistently good results on the stock market. On the stock exchange, you can trade shares, commodities and cryptocurrencies, among other things. Not everyone applies a clear system: by gambling you can of course, through pure luck, also make a profit on the stock market. But whether this is wise…
What is the best way to bet on the stock market?
When investing, you always have two options: you can buy a stock, commodity or index fund or short it. When you buy something, you get a positive result as soon as the price rises and when you sell something, you get a positive result when the price falls.
If you were to gamble and open investments entirely randomly, there is a 50% chance that the price will move in the predicted direction. However, you have to take the transaction costs into account: if you gamble and do not apply a smart strategy, you could lose money in the long run because of these costs.
It is therefore not advisable to gamble on the price developments of stocks. It is wiser to investigate the stock you consider buying. In this way you can control the odds so that you can achieve a positive result sooner.
Before you start gambling or investing, it is advisable to open a free demo. This makes it possible to discover that stock trading is more than just gambling. Would you like to know where you can try investing for free with a demo? Then take a look at our overview of best brokers:
How do you make a good bet?
If you really prefer to open an investment blindly without a strategy, it is best to do so when important news comes out. When the SNS Bank went bankrupt many people went short on SNS stocks. As a result of the bankruptcy, the stock was suddenly valued at a value of $0, which meant that everyone who went short on this share earned an enormous amount.
Without leverage, the return would have been 100%, but if you had used a leverage of one in five it would have given you a return of 500%. Speculation can be quite profitable, but do not forget that this type of gamble is also extremely risky. Had you bought the stock you would have lost 100% on the position!Opening a short position: You can make money when the price of a stock falls.
The extent to which someone gambles on the stock market varies: there are few people who buy and sell stocks at random. Speculators buy shares in the hope that something at least slightly likely will come true. During the coronary pandemic, for example, you saw many investors buying shares in the companies that developed vaccines. At that time, it was not yet certain which companies would succeed in delivering a successful vaccine. If they do, however, it would boost the stock price.
Speculating or taking a deliberate gamble on a stock can therefore be sensible in some cases. However, you must understand the risks involved. With this type of investment, you can easily lose your entire investment.
Beware of a gambling addiction!
Beware of a gambling addiction when you start betting on the stock exchange. There have been many cases of people becoming addicted to making investments, and they have lost a lot of money doing this. It is important to keep in mind that it is impossible to win consistently by gambling. Therefore, only gamble with money you can afford to lose!
If you want to achieve consistently good results, you will still have to apply certain selection criteria. Investing on its own is not a game of chance. By analysing the charts with technical indicators, you can predict the direction of the stock price. If you can handle risks well, it is possible to achieve good results.
Investing in stocks does not have to be the same as gambling. However, there are certainly some similarities: for example, in both activities you have to make a choice that involves risk. Also, both gamblers and investors apply risk analysis. Reducing risk as much as possible to maximize profits plays a role in both activities.
However, there are also clear differences: gamblers take the risk of losing their entire investment, whereas this is generally not the case with investments. With an investment, you can limit your maximum loss by using a stop loss.
Moreover, the emphasis when investing in shares is more on the long term; this can easily be many years. If you invest money in the stock market on a staggered and regular basis, there is a good chance that you will achieve a positive return over a long period of time. However, if you only gamble, you will only lose more money in the long term.
Finally, an important difference between trading stocks and gambling is the setting. Gambling is considered as a form of entertainment, while investing is a more serious activity. The bells and music are therefore left out when you start investing with a broker.
Why is it better to invest?
When you have to choose between investing and gambling, it is better to opt for investing. When you invest, you run a lower risk than when you gamble. For example, you can spread your risks over different investment products, and you can limit your maximum loss by using a stop loss. As a result, your losses will increase a lot less quickly when you invest than when you gamble.
Another advantage of investing is the lower amount of stress you experience. When you gamble, the tension around the outcome causes a lot of stress. When investing, this tension is much less present, as the emphasis is more on the future.
A final argument in favour of investing is that you have much more control when you start investing. You can decide for yourself how your money you invest. In the casino you have no influence at all: you have to choose from a limited number of games, and you have to abide by the rules of the casino.
Is gambling on the stock exchange a bad thing?
There are many concerns about people gambling on the stock exchange. This is because some people may not realize that you can lose a lot of money by investing money. If many people gamble on the stock market but believe that they are smart and are going to make a lot of money, it can be a bad thing. It is therefore important that brokers inform customers sufficiently about the risks of investing.
Do you really want to learn how to invest well?
Do you really want to learn how to invest well? Then it is important to immerse yourself in the various analyses. You can make use of fundamental analysis and technical analysis. In fundamental analysis, you mainly look at the financial figures of a company. With technical analysis, you try to predict the future price development of a stock by looking at the chart.
Do you want to learn how to be more successful with trading? Do you want to change from a gambler to a real trader? Then use the button below to learn how to trade better:
When I was 16, I secretly bought my first stock. Since that ‘proud moment’ I have been managing trading.info for over 10 years. It is my goal to educate people about financial freedom. After my studies business administration and psychology, I decided to put all my time in developing this website. Since I love to travel, I work from all over the world. Click here to read more about trading.info! Don’t hesitate to leave a comment under this article.