Li_Guang_Sheng Verified user Srs member badge

Differences Between Gambling and Investing in Stocks

This week, on National Day, I would like to write on above topic because I see a lot get burn by contra on recent sell down on pennies. There is nothing wrong in playing contra, which to me is a type of gambling, but there are strategies for gambling. Entering a contra trade blindly with no game plan is suicidal. Most people fall into traps of letting losses run while they take their profit fast. You need to follow people who trade contra well with stop loss point like brother @ongbeeheng, @Stockcham, @contraboy, @bensontan , just to name a few. If not, most of the time you get burn trading through contra play especially in the long run as most retail trade contra in and out without a plan. Most of the people who make are people who are discipline, and seriously I admit I am not one who is discipline enough when it comes to trading. Seriously I admire them and their abilities.

Investing and gambling are seemingly alike in the sense that they both involve risk and choice. Both an investor and a gambler must decide how much money they would like to risk depending on the situation at hand. Most traders especially on platforms like Forex risk around 5% of their capital trade. However, when comes to investing, traders base their investment plan on the information available on the market forces.

Investors diversify their asset classes to spread the risk. Through spreading risks, the adversity of the loss expected is minimised or even avoided. Gamblers just like investors must also assess the amount of capital they intend to play with. In their case, pot odds serve as a good guideline to determine a suitable amount that they can risk to maximise the returns without jeopardising their finances.

Gambling and investing, however, differ regarding the risk management options. Unlike gambling, investors have quite a variety of options that allow them to prevent unwanted loss of the risked capital. For instance, if you invest some capital and it drops by 10%, you still have a chance to sell your stock to somebody else before a further loss occurs and as such, you get to retain 90% of the risked capital. On the contrary, if you place a bet and your prediction is not accurate you lose everything. Another major difference between gambling and investing in stocks is the time factor. Investments can go for years, but gambling lasts for a short span of time(contra).
Despite the fact that both gambling and investing involve risk of capital for future profits, there are more differences than similarities. Gambling is based speculation while investments rely on good information and a suitable investment period to maximise the returns.

So if you cannot make it through gambling on stocks, maybe changing to a long term investing mind set may not be a bad idea. The worst is keep trying to recover what you have lost previously, and dig a bigger hole to get yourself bury into. DO NOT BORROW from banks or loan shark to gamble on shares. That is the last thing to do. Once you have a deficit, sometimes is hard to come back. Psychologically straining. Have to think for your family as it is hard t start afresh if lose everything, Sometimes in life you can no longer recover back from setback especially if you are not young.

For further discussion and debate. This thread is not to induce buying and selling. Nor to condemn contra or encourage long term investment, as there are people who do well be in playing contra or investing in shares. This thread Is just for education purpose only. Please do your due diligence when buying and selling of shares and seek your financial advisors for clarification. All the best and Happy National Day to all.

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48 people like this.
bensontan :

If u trade short term or contra is better know this and apply on it.
1) must have TP and STRICTLY ON SL
2) risk and rewards try min 1:2
3)try to win more and lose less
4)learn to let profit run instead of keep switching counters
5)control ur trade don over trade, may be 2-3 stocks will do,
6)focus ur stocks don care others stocks that are moving to create the emotion for urself.
7)don buy weak stocks , if strong stocks u don know how to win, weak stocks where u know how to trade le...
8)don chase stocks
9)when prices up don kan Cheong spider
10) don prices move up u quickly sell and prices down u hold tight tight.
11)control ur position sizing, don just look at the price eg only 0.02 for the stock, and u can buy for $10k so u bot it 500 lots. Yes if price up every pip u gain $500 but every pip down u also will loss $500, if drop 3 pips are u can tahan loss $1500? so manage it.
12)Don too focus on contra, always prepare to pick up in case it take longer times to move up so that u only focus on prices movement will do and not need stress with times limit.
GOOD LUCK!
DYODD

div1g4in :

Some advice for contra players (as well as for myself).
1) Always stick to the plan (EP, TP, SL) and don't last min change plan.
2) Lose less = Win.
3) Don't keep thinking how to recover back contra losses, instead focus on how to get good trades setup. Good setup plan, money will come by itself.
4) Learn to READ charts. Keep reading until it burns through your brain.

div1g4in :

Reply to @chiarenjie : that's normal. I'm also still learning. hitting stop loss more. control your emotions then. I having same issue as well.

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sUp3rb0s :

Thanks and happy ndp!

Agree totally with ur advice in not digging a bigger hole. After losing money, I also tend to want to pump my remaining cash back into some counter, hoping to override the prior losses without thinking too much. Need to train ourselves to have a strong mentality to prevent such rash acts :-)

Li_Guang_Sheng :

Reply to @sUp3rb0s : Experience that b4. Think back full of regret.

jefferykuai :

Thanks again for the advice, much appreciated.

theintelligentinvestor :

For me, if you buy a stock for its' potential future earnings with a margin of safety, then it is investing. Any other reason is speculating.

durian_kia :

happy ndp.
well, for me the risk is intrinsic for both. the payouts are multiplied by its probability of occurring.
except for the time factor, there isnt any real different between both.

ergkmaslowcari :

I s like a PIZZA . DELIVERY TO ME IN A BOX. IS SQUARE. its 4 ANGLES BOX.
WHEN OPEN UP, IT'S ROUND, NO ANGLES PIZZA.
When going to eat,I had to divide up into TRIANGLES, HOW MANY PIECES ? big or small depends how to stomach up?
Like Stock, how to stomach up the share?

ultramanrex :

they just need the anti gambling hotline . I don't think stock market is a good place to.gamble. you fork out so much yet the returns are so little. or wipes out initial capital​

for 4D or ToTo I or football.bless in more out. even if u lose you won't lose ur pants. I am not advocating gambling.

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