How Buying and Selling Stocks is More like Gambling
Trading is very similar to gambling: risk and volatility are only some of the few similarities. It’s time to see the reality of trading by learning the connection between two sectors that don’t usually collide.
Gambling vs trading
Gambling is the act of placing money on the unknown outcome of an event. In other words, it is an activity that involves wagering or ‘investing’ real money on the chances of an occurrence happening.
Trading represents the action of purchasing and selling shares of different companies with the intention of making profit. This activity usually takes place within a stock market.
Irrespective of the platform used, people everywhere have a general motive for gambling: increase their balance with more than they had invested. The same goes for trading.
Although stock market traders wouldn’t want to admit it, there are many similarities between buying and selling stocks and gambling. You will see why investing in the stock market and expecting a short-term profit is just like playing pokies at an online casino.
Knowing the stock exchange
A stock exchange is a secondary market where securities like bonds and stocks are traded. Stock exchanges create an environment where existing shareholders can transact with potential buyers.
To understand the relation between the stock exchange and gambling, you need to know the stock market and how stocks are bought and sold.
How to invest in the stock market?
- Open an account with a broker;
- Determine stocks to buy;
- Decide the number of shares they want to buy;
- Select an order type;
- Place an order with your brokerage;
- Buy and sell stocks to build their portfolio.
Sounds easy, right? It may be. However, the challenge is in making money through the stocks you hold or purchase.
The stock exchange is highly volatile. To make a profit faster in this market, one must learn several strategies akin to a player practicing a basic Blackjack strategy to gain more funds.
The risk involved
Risk is always an essential factor present when you gamble or invest money in the unknown outcome of an event. When playing a game of chance in the casino, you only have two results: winning or losing.
The level of the risk increases or decreases depending on factors like:
- Choice of game
- The player percentage
- House edge
- Your expertise
- Other players at the table
The stock market is one of the riskiest ventures in the world
You don’t have any guarantee of making a profit with the shares you purchase. Besides, the company’s activities can significantly impact the value of the stock.
For instance, if the company has a falling out with its investors or gets caught in a legal mess, it can render you, a shareholder, into loss. Irrespective of the research and work you put in before buying the stock, at the end of the day, you still hope on mother luck like a gambler.
The volatility of the market
The market itself is volatile, and when you trade on it, you submit yourself and your finances to its ongoing and abrupt changes.
Unlike the online casino sector, you can’t avoid the market’s volatility by avoiding or buying certain stocks.
How does iGaming look in terms of volatility?
Online casinos feature several highly volatile games that can impact your bankroll over a few plays. Some of these high variance games include Roulette, Video Poker, and a good number of online slots.
However, as risky as they are, there are ways to circumvent or avoid playing them. Most online casino games’ volatility rates are clearly stated before you play them. New slot titles often come with descriptions that detail their variance. So, you can choose not to play them and still have a great time at the casino.
There is no respite when trading stocks
A stock’s value can rise and fall many times over a period.
The stock exchange is primarily ruled by uncertainty with several influences like:
- Inflation or deflation rates
- Industry changes
- Tax changes
- Domestic and global events
Budget and time management
One of the essential advice experts give you when betting is to have a budget. Since the stock market is more like a gambling platform, this advice works well when trading stocks. It is essential to know how much you are willing to risk and when to quit.
For gambling, it might be signing out after experiencing a winning or losing streak. However, it means taking a break off trading after purchased stocks tumble or selling at peak value in the stock exchange. Also, like gambling, you can’t chase your losses in an uncertain market.
Research is essential
Another factor that connects the stock market with gambling is the amount of research required to profit.
An example is when a punter researches the two teams playing a match before wagering on who would likely win. If the sports bettor stakes on team A to win, it’s obvious the bettor was informed by the results of his earlier research.
Likewise, to have an edge in the stock market, you need to read up more on the stocks you want to purchase. You want to know about the company’s strengths, financial history, stability, etc. Although research doesn’t guarantee a win for the punter or investor, it gives them an advantage over other players depending on luck alone.
High addiction tendency
Trading in the uncertain stock market with its price fluctuations comes with the stimulation, thrill, and excitement associated with casino games. Studies have shown that a person can get addicted to investing. This is very similar to gambling addiction as it triggers the same actions.
When a trader makes a profit or several small wins, it can lead to the brain releasing ‘feel good’ neurochemicals like serotonin and dopamine. These feelings often result in excessive trading and severe addiction that can damage a person socially, financially, and mentally.
You need to learn essential strategies and play for an extended period to get better at a particular casino game. Likewise, becoming a good trader requires a solid background in mathematics, research, analytics and other skill sets.
While it may be true for every venture in life, knowledge and experience are essential for gambling and the stock exchange.
However, the gambling industry is more suitable for newbies since many casino games are based on chance and do not require any skill to play and win.
A large bankroll brings better results
When playing progressive slots, players are often advised to bet the maximum to have a higher chance of hitting the jackpot. However, to consistently bet high, you must have a substantial bankroll. The reality of the stock market is not far from this.
The more money you have, the better your chances of making a profit on the stock exchange. While online casinos have several features like welcome promotions and other incentives that can help improve your bankroll, you can’t enjoy these on the stock exchange.
Trading in the stock market is like gambling since they share many similarities. When you buy stocks for profit, you are directly betting on an uncertain outcome.
Whether you are a gambler or trader, you need research, knowledge, and experience to become a master in your field. Gambling may even be better than the stock exchange. Why? Because it has higher winning odds and players tend to rely on it more as a recreational pastime. Above all, the gambling environment has plenty of special features and incentives to offer!