You tell your friends you’re a stock trader. But are you really?
Even though it’s quite popular today, dominating the so-many-lists on “how to make money”, the scope of stock trading is quite large and wide.
It is much more than just buying low and selling high… something you will realize through stock market education courses.
And per this extensive and unambiguous definition, you might not necessarily be a “stock trader”. Instead, you might very well be a gambler who’s in the game solely for money.
You’re Reactive > Proactive
One of the foremost signs that you’re actually gambling is that you’re constantly changing the rules of the game.
Very reactive to the events, every so often, you’re pushing your stop-loss positions, you’re tweaking your trading style, and you’re buying into the FUD. Fundamentally, that’s not how you trade stocks.
The right strategy is to have a very well-defined plan that stretches into years and even decades — not weeks and months.
Gamblers have a short-term approach. The professional and smart traders have a long-term approach.
The Problem of Emotions
Another distinction between the two is their emotional state.
Acting emotionally is one of the biggest trading mistakes. But that’s what gamblers do. When they lose money, they increase the size of the bet to recover the loss. And when they win, for more, they push the boundaries and bet higher.
In trading, that’s not the luxury you can afford. With a few exceptions, like during sudden economic collapse, traders must walk along a straight line, indifferent emotionally.
Recommended Read: Are your emotions limiting you as a stock trader?
Another big, and rather destructive, sign that you’re not trading but gambling is that you’re chasing money.
Money, itself, isn’t wrong. However, there’s plenty of flaws in chasing money. One, it makes you short-sighted. And like hinted, it’s a mistake. In stock trading, taking small losses is often a part of the larger picture of success.
However, if you’re money-oriented, you will never be ready for such small losses. Hence, depriving yourself form success.
Also, although this might come as clichéd and ambiguous but, really, the easiest way to fail to make money is to focus too much on making money.
If you want to be a profitable stock trader, you must follow a system wherein your progress to the top includes plenty of highs and lows. You will not always “always” make money. If you’re a gambler, this is something you will have a hard time getting your head around.
So, are you a stock trader? Or are you a gambler?
Identify who you are.
Stock trading is many things. But one thing it isn’t is a place for gamblers. If you’re carrying that gambler-like mindset, with almost full certainty, you will lose.
Shift your approach. Form the right expectations from the market. Learn. Enroll yourself in the right stock market related courses. Learn some more. Experience wins. Experience losses. Grow. Build your portfolio. Follow the right process.