Is Stock Market The Same As Gambling?
keywords – Stock Market, Gambling, traders, share market, investors
Most of the traders say that the stock market is also a gambling. Some of the traders will do trading like gambling, just buying the shares and selling without knowledge. This may lead to loss. Trader’s should not think that both stock market and gambling are the same.
Stock market is not a chance of winning or losing like gambling. You have to buy the share and sell the share to make a profit.
What is a stock market?
Stock market or share market is a place where investors or traders buy and sell the shares of companies. Stock exchange is a centralized place where the investors can buy and the sell the shares of government and other companies.
What is gambling?
Gambling is the activity of betting money in a game. Examples for gambling are betting in a horse race, playing in a casino where you will either win or lose.
How does the stock market differ from gambling?
Let’s see how the stock market is different from gambling for the below reasons.
Ownership of stock
On buying the stock or share, the trader will also become the owner of that company. The company’s profit will be shared with the trader. Buying a share is nothing but claiming for the assets of the company. The trader can buy more shares of a company to get the ownership of the company. But most of the investors don’t like to get the company, instead they will claim for the profits. But in gambling, the ownership will not be given to the player.
Value of the Company
To find the company’s value in the future is a difficult task. However, the trader should make a study of present value and profit made by the company. The price of the stock depends on the current value of the company and its profit in future. The price value of shares will be changing randomly.
In some cases, investors will buy the shares of low value companies believing that the company will earn profit in future. While playing casino, you cannot say that you will lose today and will win tomorrow. Based on your luck, you may win or lose daily.
Facts and figures in trading
There is no way to predict a market. Suppose a trader is going to invest in Gold, he cannot predict that the share will increase by 20% and will get profit. The market may rise or fall. So the investor has to study the previous trading and should analyze before buying any share.
Based on the information, a good trader can predict when to come out of the market and when to buy the shares. The investor can assume, at what price the shares should buy and sell without loss or with minimum loss. The safer point will be known to the trader to minimize the loss. In gambling, you cannot do any research work. You won’t get any data to predict the game is about winning or losing. Based on the rules, the game is played.
Techniques in trading
There are many scientific techniques and algorithms available for trading. The techniques are tested and limited with a disciplined approach. To make a trade, a trader requires logic and reasoning skills. Trading charts, trends are used to study the market and help to make a trading decision.
If the market is going down, then the trader can come out of the share with minimum loss. In gambling, you don’t have any proven techniques to get profit. Here, once you lose the game, you have to lose all your money.
Zero Sum game
In gambling, only one person can win the game and all the remaining persons will lose their money. Many gamers have lost their money in gambling, which makes a change in their life.
But trading is not a zero sum game; here all the traders can earn at least minimum profit if they trade with knowledge. Suppose you have bought a share and are not gaining, then you can sell the share anytime without any loss.
Trading with Risk Mitigation strategies
The trader can limit his loss through risk mitigation. Unlike gambling, here when you suspect the market is going down then you can use the stop loss. Using stop loss the investor can stop trading and sell his shares to reduce the loss. But in gambling, you cannot come out of the game in between.
Time limit
In gambling, there is a time limit to play the game. Once the game is over, you can’t play anymore. But in investing, there is no particular time limit. The trader can buy the share and can hold it for many years. You can sell the shares when you want. The traders will get dividends from companies if they hold the share for many years.
Profit in Trading
In gambling you will become addicted to the game, if you win the game and earn profit. The next time you play, the chance of winning is not sure and the money will be lost. When investing money, you will get profit slowly so you would like to trade.
Conclusion
Stock market is investing money to buy the assets of the company and sell them to earn a profit. Gambling lies on the luck to earn a profit. Gambling is either winning or losing the game. Thus, we can conclude that the stock market is not like a gambling.
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