The Stock Market Casino
Is trading in stock markets a luck business ? or does it require skills ? How many investors remain making profits for a long time or become rich and stayed one ? I know you might tell me that Warren Buffet is the man ! But was he lucky or does he posses an outstanding skills in investing?. I think he has the two factors, by being lucky and a man of craft.This will open a new discussion called: “Probabilities” and I’m no expert in that field, but i know some basic knowledge that I can use now to validate my arguments.From my experience of 7 years of securities trading in US market I know for sure that most traders depend on luck. They are in the market like gamblers in Casinos . They are trading for the thrill. Of course there is an exception here , and I mean the sophisticated investors, traders and institutions.
Every one of them (the 2 teams) are looking for the profit. But how do each one of them look at the trading process ? Like I said gamblers and yes I call them so because they depend on luck and probabilities are so different than the professional ones ! But in What way ? The professional do their best to filter the securities by choosing the right bargain . I didn’t mention the long process of filtering , you may ask me why ? Because at the end of financial calculations , investors face a critical phase : that is the decision making phase to pick the hot stock. While the gamblers don’t get involved in the previous process, all they are after is the quick profit and the thrill of trading and sometimes the fear of losing. Some gamblers certainly go through a process which is obviously different than common security analysis. What makes both different is the mentality of each one. The investors group use skills finalised by sophisticated decisions. Gamblers however, value profit without knowing the mechanics and fundamentals of stock markets.
Both teams are exposed to luck and losing money, as no one can anticipate the markets surrounded by many economic and political influences . We live in an enigmatic and uncertain world anyhow. No matter how skilful you are , you can not control the consequences . You can get lucky if you are good and gain money. Still you can win many trades while being merely lucky with no skills at all. For example by following experts advice or getting to know insiders. I know many investing-coaches who claim that they are experts in stock markets but still lose and close many of their own portfolios . Despite that they continue giving lectures and courses. I call that a foolish act because these morons are fooling themselves and their clients. I’m sure you have seen them every where and not just in the finance industry. What was the reason for them for not being able to beat the market ? Was it of their lack of technical knowledge ? I doubt it. Was it because of the “Market Efficiency hypothesis” theory ? Which states that you can not beat the market by using technical analysis or manipulating the insiders information to profit before every one else ? I don’t believe in that theory , because in reality there are plenty who profit from the markets by using technical charts and insiders secrets.
All I can say is that there are winners and losers in securities markets and its irrational to categorize their actions into “The seven habits of Highly effective or ineffective investors” book . because even if you apply those habits , it does not mean that you are isolated from risk and uncertainties. I still trade despite of what I just said and I did not write this article to put you off trading or investing. My point is to illustrate that investing is mainly a probability game, however with a spice of skills it can become a non-gambling profession.
