IS DAY TRADING ONLINE GAMBLING?
Day trading is the act of buying and then selling a stock in the same day. Real day traders may buy and sell dozens to even more than a hundred stocks in this fashion in one stock market session. Sometimes they may keep the stock for as little time as a minute or so before selling it back again. All this happens during the span of one day, each and every day, and thus the term “day trading” was born.
This type of stock trading was made possible with the emergence of the Internet and when people learned how to buy stocks online. Before online trading, no one ever did this to my knowledge. Low cost trades and trades that could be made in seconds never existed before the Internet and both contributed to this new breed of stock trader.
The question is though, is day trading really just another form of gambling? Currency trading is another similar thing that might be considered suspect unless you really know what you are doing. Day traders don’t know a thing about the companies they buy and sell. They don’t care about the fundamentals of a company or whether it has any exciting new products in the pipeline that might drive the stock up. They are, after all, only interested in the stock for a very, very short period of time. That short of a time period can hardly be called “investing” in the stock and they are most certainly not buying stocks for their retirement.
Day traders only care about stock trendlines and other such indicators that they believe tell them that a stock is going to go up in the morning or up for a short period of time. They subscribe to any of dozens of online software tools and chart services that supposedly supply them with this minute to minute information. It is through this stock analysis software that they make their decisions of what to buy, when to buy it, and when to sell it. Sometimes the whole process can happen within a minute or so.
Day traders never want to end the day owning any stocks. They want to get in and out during one session and go to bed at night with the books closed. The whole idea is to make a quick score and get out. If they were to not sell a stock and actually own it overnight, they might be susceptible to a bad story coming out and the stock going down while they were powerless to sell it.
Obviously, when you own stocks for that short a time period, they can’t go up that much and so day traders hope to make their money on volume. Most would prefer to make multiple trades a day involving many stocks and the sum total of their efforts would be a positive one and make them a sum of money that is worthwhile. Making money in this fashion is difficult and NOT for beginners which we have all seen in the past years. There are many stories of day trading in the news and how many have made money and yet many more have lost a lot.
The gambling aspect comes from the fact that these stock purchases and sells are being made for short periods of time and based on nothing more than charts and maybe some other data which can be questionable. If you analyze a company and like it’s prospects, many good things can happen over the long term. However, what happens to any companies stock for a minute’s or hour’s duration is certainly not predictable most people would think.
What is gambling and not gambling is something that many people disagree with no matter what the industry. There is a big debate going on about poker and whether it should be considered gambling or a game of skill. Likewise, betting on horses is deemed gambling by most but others believe there is a large skill factor involved there as well. With day trading, it may never be officially classified as gambling because it involves the stock market which is such a central component of our economic system. However for many, learning how to trade stocks for beginners and day trading certainly cannot be called “investing”. ”Gambling” is a better choice of word that might be closer than anything else to correctly categorizing what it is.
