You've probably heard a thousand times that trading is the same as gambling in a casino. But is stock trading gambling? You'll need to continue reading to figure that out.
As popular as stock trading has become, people still aren’t sure if doing that equals gambling. Of course, turning money into more money may sound similar to gambling, but is it truly gambling?
To give a reliable answer and once and for all learn the truth, we’ll explain to you the main differences between these two activities. Based on that, by the end of the article, you’ll have the answers, plus some extra knowledge that might be very helpful for you in the future. So let's see, is stock trading gambling?
Is Stock Trading Gambling?
The stock market and stock trading are absolutely different compared to the casinos and the different gambling games. Gambling relies entirely on luck, so you never know the outcome, but stock trading requires a person to be a bit financially educated and make rational and well-informed decisions.
Also, trading stocks is a lot safer than gambling. The house almost always wins when you gamble, and losing your money happens very quickly. But, the gains can be huge when you decide to put time and effort into researching and studying the stock market.
So, is stock trading gambling? Simply put, stock trading isn't gambling, but it can easily turn into that by doing reckless stuff without thinking.
The Differences Between Stock Trading and Gambling?
Stock trading and gambling differ in more than one way; you can see the differences below.
Ownership
The ownership you gain when you buy a stock is the first thing that makes stock trading and gambling different. To be more clear, when you buy a stock, even if it's just one stock, you're the stock owner, which means you can do whatever you please with it.
Very often, owning stock means owning a small part of the ownership of a company. That can also give you the right to vote and be included in the decision-making for that company. So, that's in no way similar to gambling.
Risk
The risk is present in both stock trading and gambling. But what makes these two actions different is that you can calculate the risk when trading with stocks if you pay enough attention to the company and its stocks.
Also, when you own stocks, you can get a dividend for holding the stock, but that depends on the company policy. With gambling, that's not the case, but things are more black and white, meaning that you either win or lose, making the risk a lot bigger.
Available info
You don't need any particular information about gambling besides knowing the rules of the game you want to play. The same thing can't be said regarding the stock market.
To succeed at stock trading, you should constantly follow the stock market changes and the work of the company whose stocks you own. Of course, before doing that, you should know the basics of the stock market, but you can easily find everything you want to learn online, on different forums, using apps, or by reading reports.
Skills
Most gambling games don't require any skills, but you'll need many skills to become successful at stock trading. A good eye for detail, good analytical skills, and using a proper trading strategy are crucial if you want to do well in the stock market.
Gaining these skills isn't as difficult as it might seem when you first read them. Remember that once you master them, stock trading will become an easy thing and your new favorite activity.
Timing
The timing has nothing to do with gambling, while it has everything to do with stock trading. Gambling is an activity that requires very little time compared to stock trading. Stock trading and this kind of investment can take a long time, as long as you want to. That refers to days, months, or even years, but in the end, the risk is smaller, and the gains are bigger.
Diversification
Another huge difference that indicates that stock trading and gambling are two entirely different things is the result of implementing diversification. For example, if you change and bet on different gambling games, you increase the risk of losing the money you've bet even faster. But that's not the case with stock trading.
Diversification when stock trading and investing in different stocks creates opportunities to increase your capital and decrease the risk.
When Can Stock Trading Become Gambling?
Even though the lines between stock trading and gambling are very clearly defined, there are cases in which they can get blurred. It can happen accidentally to go from stock trading to stock market gambling.
However, knowing when that can happen is important because you'll be able to avoid that from happening.
You use free tips
Never listen to other people's advice, especially when that advice comes for free. There’s a big difference between getting advice from a professional who charges for their expert opinion and free advice. So, never fall for free advice.
When it comes to trading stocks, always research and stay informed about the changes in the stock market. Also, listen to your gut; that's the only thing that matters. If you make a mistake, you'll learn and grow from it, so you'll be even better the next time.
You don’t use a reliable service to help
While it's the right thing to only listen to your common sense if you’re not quite sure what you’re doing, turning to a reliable service like FoolProof Options is always a good idea.
This reliable company offers services that will guide you no matter your expertise level. You might be an absolute beginner or an experienced trader who needs a little push in the right direction. Who can give you better guidance and advice than the former experts from Wall Street?
You'll be alerted and notified of every change in the stock market and receive a full trade plan with many advantages for only $97 per month.
You don't diversify
When it comes to stock trading, you must diversify. You should buy different types of stock, or even better, from companies of different sectors. Investing in different stocks will greatly reduce the risk of losing your money.
So keep that in mind and avoid investing everything you have in one stock only, no matter how sure you are in it. That is very similar to gambling, and the effects that can come out from it can be disastrous.
You invest everything you have, and all you think about is trading
Don't invest all of your finances blindly. This is the biggest red flag if you've taken things too far with stock trading. Also, that's a big sign of stock trading becoming similar to gambling because people who gamble usually invest everything they have in hopes that they'll return the money they've lost.
Being obsessed with that results in becoming overly sensitive and too emotionally involved in stock trading. Trading on the stock market actively can mess with your emotions, and losing your calm can happen easily.
Don't allow that. Stay calm as much as you can. Cool-headed decision-making can go a long way.
Conclusion
Is stock trading gambling? It's clear that stock trading isn’t gambling, but it’s also easy to notice that it can quickly become a gambling obsession if you're not careful.
So, be careful and patient, and think well before making any decision. Rely only on yourself and your own opinion mostly. Don't get too emotional; try to be as rational as possible if you want the best results. Stock trading can make a huge difference if you learn to do it correctly.