Why is trading gambling?
If a person trades for excitement or social proofing reasons, rather than in a methodical way, they are likely trading in a gambling style. If a person trades only to win, they are likely gambling. Traders with a "must-win" attitude will often fail to recognize a losing trade and exit their positions.
Day trading is often compared to gambling due to the similarities in risk and uncertainty involved. Both activities involve making speculative bets on the outcome of certain events, whether it's the movement of stock market prices or the roll of a dice.
When a day trader takes a profit or even gets excited about a potential profit, the brain releases feel-good neurochemicals like dopamine and serotonin. As such, you can become addicted, just like with casino gambling or using illicit drugs.
Slower profits versus quicker profits
In the process, he ends up losing all the profits made by him on the first day and more. That, in a way, describes gambling. Profits appear to come fast but more often than not they are a mirage. Trading, on the other game, is a game of skill and discipline.
Investing and gambling both involve risking capital in the hopes of making a profit. In both gambling and investing, a key principle is to minimize risk while maximizing reward. Gamblers have fewer ways to mitigate losses than investors do. Investors have more sources of relevant information than gamblers do.
In activating the brain's reward system, over time the brain becomes reliant on this type of stimulation in order to induce pleasure. The brain becomes conditioned to want to trade financial instruments for excitement, euphoria, and wellbeing.
Most trading scams start on social media or through messaging applications. If you receive a call from someone out of the blue or if you meet someone online who introduces you to a trading website you've never heard of, it is highly likely that it is a scam.
One of the primary reasons why many traders ultimately quit the financial markets is the common mistake of blowing their trading account. There are three main reasons you blew your account. You risked far too much on certain trades. You did NOT adhere to strict money management principles.
So, day trading is not gambling, but both often come down to chance and can lead to significant financial losses and problematic behaviors.
All of this can induce reward pathways in the brain. When a day trader makes a profit or even gets excited about a potential one, the brain releases so-called feel-good neurochemicals, such as dopamine and serotonin. This can cause you to become addicted, just like with casino gambling or using illicit drugs.
Are traders professional gamblers?
But gambling is not necessarily “bad” or “evil.” Indeed, professional traders are essentially professional gamblers. It's all a matter of cultivating the right mindset, the cold and focused mindset of a professional gambler.
It requires a significant amount of research, analysis, and understanding of financial markets, as well as the ability to make informed decisions based on that information. On the top of it, the stock market can be volatile and unpredictable, and there are no guarantees that any particular trade will be successful.
One of the key aspects of the gambler's mindset is the ability to manage impulses and resist temptations. In the world of gambling, it's easy to get carried away by the excitement and thrill of the game. However, it's crucial to exercise self-control and avoid impulsive decisions that could lead to undesired outcomes.
Selling (Writing) Options: Buffett's preferred options strategy revolves around writing (selling) options rather than buying them. By selling options, he collects premiums upfront, which can generate income even if the options expire worthless.
Why Is Day Trading So Hard? Day trading is challenging due to its fast-paced nature and the complexity of the financial markets. It requires traders to make quick decisions based on real-time information, which can be overwhelming, especially in volatile market conditions.
Gambling Takes Less Time to Provide a Result
As soon as the game or event takes place, you know if you won or lost money. That's the complete opposite of investing in the stock market. For investors, it typically takes years or even decades to reap the financial rewards that you're looking for.
While this is quite difficult to achieve, it is definitely not impossible. There have been many cases in the modern world where investors have become rich through their investments in stock markets. Let us take a look at how investors can make the most of stock markets to become rich through long-term wealth creation.
Skilled traders can and do make money in this field. However, like any other occupation or career, success doesn't just happen overnight. Forex trading isn't a piece of cake (as some people would like you to believe). Think about it, if it was, everyone trading would already be millionaires.
Many people have made millions just by day trading. Some examples are Ross Cameron, Brett N. Steenbarger, etc. But the important thing about day trading is that only a few can make money out of day trading and the rest end up losing their entire capital in day trading.
70 Trades is a respected forex broker in 2017, it's not a scam. They are one of the most promising brokers in the country. I had negotiation with them for quite some time now.
How realistic is day trading?
In summary, if you want to make a living from day trading, your odds are probably around 4% with adequate capital and investing multiple hours every day honing your method over six months or more (once you have a method to even work on).
Day traders usually get paid on commission when they buy and sell stocks for their customers. In other words, every time they sell stock and end up profiting from it, they receive a percentage of the profit. They also can make a salary if they work for an agency such as an investment bank or hedge fund.
Most new traders lose because they can't control the actions their emotions cause them to make. Another common mistake that traders make is a lack of risk management. Trading involves risk, and it's essential to have a plan in place for how you will manage that risk.
If a trader has good technical analysis skills, he can easily make money in day trading. But most people who fail at day trading either lack the required skills or just trade with luck while skipping risk management. This lack of skill and luck in the game results in huge losses for them.
Too much panic in the market
One of the basic reasons traders lose money in intraday trading is due to panic. In the stock markets when you panic, you actually subsidize the other trader who does not panics. Profits always flow from the trader who panics to the trader who does not panic.
