Different people have different opinions about stock markets. There is a section of people who consider working in stock market is like a high class gambling.
Then there is also a set of people who earn their livelihood by trading in stock markets on regular basis.But it is also a fact that you can’t survive by solely relying on gambling.
So what actually stock market is? What is difference between gambling and investment?
People know that there is a stock market where share prices keep rising or falling. There is a lot of risk in playing in markets, it is like gambling where you never know the direction of share price movement etc etc.
The point of these people about not being able to know about the direction of price movement is right to some extent. Sometimes markets just surprise everyone and start behaving opposite to our expectation.
This is also not without a reason because the market has come to know about some news much earlier than us and starts reacting to that news. The news may be good or bad for the market. Consequently, market may rise or fall.
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Is Stock Market Gambling : What A Mistake !
Talking about the share price movements and market movements, it is not dependent upon a single factor. And at least it is never a gamble. You should be able to differentiate what is gambling and what is investing in stocks.
Gambling is just betting on something out of speculation only. It is based on your luck only. You may win or loose. There is no basis to bet on something uncertain.
You can do gambling by betting in casinos or horse racing or other sports.
Investment is the process of buying some asset today with a hope to make profits in future when the price of that asset has increased.
Investing in stocks or in any other assets are based on certain minimum research. You have to look at the fundamental factors of a company. Then you pick a stock for investment.
The fundamental factors related to working of a company which effect its share price over the medium to long term. These factors include good or bad corporate results, corporate activity in the form of expansion or contraction of business or any factor which affects company performance. We can know better about that by doing the Fundamental Analysis for that stock.
Similarly, in the short term periods, the stock and market moves are influenced by technical factors.
We as technical analysts,can predict the stock movement to more accuracy by doing the Technical Analysis.
We study the technical charts of various stocks. Technical Indicators are applied on these charts. This gives the almost precise target price for a stock and also a stop loss to exit out of market to keep our risk minimum.
Technical Analysis works on the principle of ‘ History Repeats Itself .‘
By using technical analysis or fundamental analysis before jumping into the markets, you increase your success rate in the markets substantially.
It is not that it is always 100% correct but even if you are correct 60% of the times, you are going great in markets. If anyone is going 100% correct, it is most probably sheer luck and not a skill.
You can take better investment decisions on the basis of Fundamental Analysis while Technical Analysis is best for short term trading. Combining both analysis can be even better for starting an investment.
Now we come to know that stock markets and share prices don’t keep fluctuating by themselves. There are a lot of factors which are playing behind the scene. We need reading and analysing these factors carefully so that we can play the markets with success.
You should keep the phrase out of your mind that stock market is gambling. Actually market trading is a business which requires sufficient knowledge and skill to succeed. Experience also has its role to play while working in stock markets.
Finally, we can conclude that if we don’t know anything about stock markets, then it is gambling. When we learn about the markets and apply our knowledge then it is investing and trading.
Knowledge brings consistency in successful trading or investing. In gambling, you can never be successful consistently. Approach markets always as a business.
You might want to read why trading is the best business in the world as well. Keep learning!