I often receive the question is
stock trading gambling?
So today we gonna talk about
that.
So, is stock trading gambling?
Well this depends on two
things.
The first thing is how you select
a stock that you want to invest in.
And the second thing is how you
manage the trade.
Let's talk about the first one.
Picking a stock.
Many people pick a stock based on
a hot stock tip that they get
from a friend
or from a Web site might be
a marijuana stock
or a biotech stock right.
So they get the hot stock tip
that there's something about to
happen.
I want to show you something really
scary.
Take a look at this.
So let's go to Google
and just google hot
stock tip
and see what's coming up shall we
sell hot
stock tip.
Here we go. Let's see what we have.
Oh wow.
Look at the first one here 17
out of 19 stocks rose.
Fantastic.
Let's take a look at this.
So here we go.
All right. Latest alerts.
Let's go right there.
Oh my gosh. The first one
for sure.
This must be a marijuana stock.
So that's what everybody is crazy
about these days.
So let's check it out.
Because they say it went from nine
cents to forty seven
point nine cents so four hundred
thirty two percent gains.
Let's take a look at this.
So we go to finance
dot yahoo dot com
and enter the symbol MJNA
and a so.
So this MJNA...
and
Here we go.
Medical Marijuana
Inc.
What can possibly go wrong right.
Let's take a look at this.
So here we're bringing up the charts
on full screen.
Now let's take a look at this.
Oh now that's
odd.
Look at this. Didn't they say wait wait wait
wait what did they say.
This is the chart over the past two
years.
We're looking at the chart over the past two years
and it has been trading at 10 cents
for the past two years.
What did they say?
It went from nine
cents to 48 cents?
Well that's interesting.
I don't see that at all.
Do you see this?
So is this how you pick
stocks?
Have you ever experienced like this what do you think about
this? Leave a comment right below
and let me know what you think about this.
But let's take a look at the next pick
here. So the next pick is
VMRI let's do this.
V.M.R.I.
So we're looking it up V.M.R.I.Just
Double checked Valmie Resources Inc.
no idea what that is we're looking at the last
two years year.
That's what we're looking at.
So right now it's trading at
one cent.
Wow look at that
that is very interesting.
Didn't they say that it went to six
dollars six
dollars. I don't see this.
Now if you pick a stock like this then
of course stock trading
is gambling.
Here's how I pick a stock.
I'm using a scientific approach.
I am using indicators
and in another video I will show you exactly
how I do it.
But if you are relying on the hot
stock tip then most
probably you are gambling.
Is this making sense?
If so leave a comment
below and say yes this
is making sense to you.
Now the second important factor whether
you're gambling
or not depends
on how you manage the trade.
And what do I mean by this?
When managing the trades,
there are two things that you need to keep
in mind.
First of all when do you exit
the trade with a loss because
losses happen when trading.
And secondly when do you exit
the trade with the profit
here is my rule of thumb.
I never risk more than 2
percent of my trading account on
any given trade.
What does this mean.
Well let's say you have a ten thousand
dollar account if you are entering
a trade your risk two percent
of ten thousand dollars which
is two hundred dollars.
So if you lose on this trade you lose
two hundred dollars while big
deal right. You still have nine thousand
eight hundred dollars left.
So this means that you still have enough
money to enter the next trade.
But what do most people do they just
don't set a stab loss
and let the trade go down
down down down.
That to me is gambling.
Now the other way to manage
the trade is
with the profit target.
You want to take profits while
they're there.
And here is the golden rule that
I like to use for every dollar
that I raise.
I want to make two dollars off
for every hundred dollars that is
I want to make two hundred dollars.
Or like an hour example for
every 200 dollars that are
risk. I want to make 400
dollars.
Now the beautiful thing if you
follow this principle if
you apply the Golden Rule
you'll make money even if you are wrong
half of the time.
Hard to believe?
Let me prove it to you.
Now let's say you're risking 2 percent
of your account on any given trade
and if you have a ten thousand dollar account
it would be 200.
Now you also apply
the golden rule meaning that when you risk
200 dollars you're trying
to make 400 dollars.
Making sense?
Now let's say that you're placing 10
trades half of these trades
are losing trades.
So what does that mean?
How much do you lose on your losing
trades while five trades
are all losing trades in on these five
trades. You lose 200 dollars each
means that you lose a thousand
dollars.
Now the other five trades
are winning trades
and let's say on those who you make
400 dollars each.
Because that's our profit target.
So five times 400
dollars is two thousand dollars.
Now take a look at this how much money
do you have after ten trades?
Right! It's a thousand dollars!
And look at this,
half of your trades worth losing
trades.
Now can you see how this
is a scientific way
to approach the market?
If you risk less on your
losing trades than you make
on your winning trades.
This is how you can succeed
in trading.
Now again,
losses are part of our business
as traders
and we want to make sure that you limit your losses.
And then you also take profits
while they are there because
these days profits can
disappear quickly viewer
experience that you had a winning trade
and then it turned into a losing trade.
If so leave a comment
below.
So in summary is stock trading
gambling.
It all depends on how you approach
it. It is gambling.
If you're relying on a
hot stock pick from a
Web site or a friend of a friend
or I don't know how ever
you get your hot stock picks.
And secondly yes it is
gambling if you do not limit
your losses
and if you do not know when
to take profits.
However, if you have a proven
way on how to pick
stocks
and you have a proven way
how to exit a trade by
keeping your losses small
and taking profits
while they're there,
then stock trading is
no longer gambling because
then you have a plan.
You have a trading system
and when you follow it the chances
of making money in the market
are much higher than relying
on the hot stock tip
as we have seen.
Hope this helps.
Did you enjoy it?
Leave a comment below to let
me know what you think.
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and I'll talk to you soon.