Whether expert traders or novices in the game, a lot of people struggle to make a distinction between trading and gambling. After all, most of the highs and lows of the stock market are the direct results of stock investors throwing the dice with crossed-fingers. To a lot of investors, it is a matter of going with their gut, picking a stock based on intuition and then hoping – and praying – that the share price goes up.
Of course, there are a lot of gamblers in the stock market who wear a fancy suit and pose as professional investors. However, there are a few distinctions to be had between the two, and that is exactly what we are going to do; we are going to draw the line so that you know the differences.
The Tactics of Managing Risk
The ideal principle is the same across both; it is a matter of minimizing risk while maximizing profits. However, the way in which this principle is adopted is different. Investors look at diversifying their investments as a means to minimize the chances of any potential loss. Gamblers don’t. Instead, gambling involves weighing up the chances of winning against the risk factors, and so the odds have to be favorable before they put any money in.
Limiting Your Losses
Gambling has no means of stopping – or even limiting – your losses. It is a bet and once you have made that bet it is closed. Your fate is sealed. Let’s say you bet on a football match, and you lose; that’s it. There is no way of limiting the damage. This is not the case with investing, whether that be stocks of trading binary options. Instead, investors have certain […]