Stock Market trading has been compared to gambling a lot over the past few decades. This is not just limited to new retail investors and traders who have just joined the stock market but also applies to veteran investors. Value investors and fundamental analysts who only compare the company fundamentals to make any investment decisions think of stock trading as a way through which people gamble their lives away. Can you even blame them? Stock trading and gambling actually have a lot of similarities. Both are highly addictive, fun and most people who engage in them lose their money. Also the fact that most people do stock trading like a gambler doesn’t really help the case. Do you know whether professional traders use news or charts for trading? To know more, visit – Should you trade based on news or chart?
The reason why Stock trading is NOT gambling is because most professional traders who have a well-defined trading system are profitable. This means that if you have the discipline and follow the rules, you too can consistently make money in the stock market through trading. I am going to call this type of trading as professional trading. Professional trading is a business and just like any other type of business, there will be ups and downs along the way. And just like any other business there will be losses and there will be profits. The objective of a professional trader is simple – Lose less money and make more money!
Sounds very simple, right? If you lose less and make more money then you will overall make money. The objective of a professional trader is not to make money from every trade but instead to make money in an overall sense. Following stop-loss with a strict discipline ensures that you do not lose a lot of money on bad trades. So when you add up your winning and losing trades, you overall make money. Combine this with the risk management required for trading and you have yourself a winning system which will consistently make money through trading.
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