So I have been looking into this stock trading thing a bit more, and with the way a lot of people seems to be "gambling" in the stock market it gave me a tought, "stock trading is actually very similar to online poker", but you know what? In some respect you have a better chance of winning with online poker.
"Trading stocks is not gambling", I hear you say. Well you might be right, although to be fair a lot of people seems to be treating it as such. Nevertheless whether you are a day trader or a value investor, the stock market does have a lot of similarities with online poker. That is especially true now with the ability to trade online.
The first similarity between the two is that for every winner there is also a loser. The wealth flowing around the stock market is a bit like energy, it can not be created or destroy (this is a very simplified model by the way) it just changes form. In this case the wealth changes back and forth between two forms, money and stock. Since wealth cannot be created if you increase your wealth, that wealth essentially comes from someone else and vice versa. For example if you bought a stock for $50 dollars, sold it for $100 dollars and the stock goes back down to 50$, you might make $50 profit, but someone has lost $50.
The first aspect as to why online poker is better is the way you pay commission. With online poker you only pay commission when you gain wealth (when you win). With online trading though, you pay commission everytime you buy and sell stock, regardless is you are making a profit or a loss.
The second and more important factor though, is that stock trading is not really "fair". With online poker, every player has the same amount of information. It is up to how well you use that information and play your hand that will determine if you win or lose. So winning or losing is down to you being the better player, fair and square. Of corse luck is a part of it but it also is in stock trading. With stock trading however, the playing field is not really level. As a small independant investor you have far less acess to information compared to the big boys in the loop. This is not even taking into account their ability to manipulate the market, as well as using illegal information to give them the upper hand. On top of all this they all have better financial tools than you do that gives them many advantages like being able to execute the trader faster.
Hmm...maybe I should have opened an online poker account instead of an online trading account.
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