Today we shall dispel some of the misconceptions about trading and investing that a lot of the public has about these subjects. To be sure this is going to be an extensive long conversation that we simply can't fit into an article. Thus, our goal will be to be as much concise as possible with emphasis on the more fundamental aspects, of our conversation will be on trading and investing. First, we will break from explaining what it is and actually first explain what it is not. That is because when we understand what trading is definitely not we can combine with our understanding of what it is to be able to get a more accurate understanding of what it means to be a trader and what it means to be trading in the market.
So, to start with let's define what trading is not, it is not gambling, for there is a massive misconception about trading being something that is more akin to gambling as in just general luck is all that is involved in trading. The truth could not be farther from it. To just iterate the fact that trading involves skills, if you're depending on luck you might as well just start gambling because eventually you will lose your money. Trading requires patience, trading requires knowledge, trading requires experience, trading requires you to challenge yourself and overcome difficult situations with the context of making correct decisions in demanding situations with the ultimate goal of making the maximum amount of money possible at that moment in time.
What is more important to understand is when we say trading it is not like gambling. What it really means is the psychology, the underlining behaviors, the underlying motivation of trading versus gambling are absolutely not only different but in fact are opposite of each other. In gambling the biggest factor to winning is luck obviously there are some skills involved because how else would some people consistently keep winning at gambling. In opposition to that the biggest aspect of successfully trading are the skills, the experience, the knowledge, that one can bring to the table and combine all these factors together and act in order to realize success in trading. Now to be honest luck is involved, just like in almost every facet of life you have to have lady luck go your way at least a little bit. In order to maximize your chances of success, trading is no different compared to other occupations. In trading luck is important except that in terms of relative importance skills, knowledge, experience is far more important than luck. Thus, if you have mastered the basics of trading you may get unlucky sometimes but your skills and ability will let you shine through and you will find success more often then the few times you might get unlucky. So, this encapsulates the distinction between gambling and trading and where they differ. Hopefully that going forward this has Illustrated to anyone who has the notion that trading is like gambling and this has disabused them of that idea.
Now let's explain and define what trading really is, for many the notion of trading in the stock market brings pictures to them of Wall Street, all the news media, of computers and lots of excited people screaming around computers. The notion that you have to keep in your mind is that trading is essentially all about finding price inefficiency. So therefore, the idea is assuming that you have found a stock that the market is valuing at a certain price which you think is lower than its fair market value. Given that what you do is you buy that stock and simultaneously you hold it till the market rebounds and the stock price goes up and reaches what is your expectation of its fair market value. Thus, the idea is as most people in a tongue and cheek say is to buy low and sell high. While in straight English that may be the case, to explain how this is going to work out and what is the basis of buying low and selling high you have to familiarize yourself with finding pricing inefficiency.
Another way of putting it would be to say that Trading could also be called speculating. Why speculation? Well, you are speculating about the possibility of different prices happening to a certain stock over a certain period of time. What's speculation? we are speculating into the future whether a certain stock’s worth will be higher or lower in the future. Without dwelling too much on this topic, I would recommend everyone to go to cnbc.com or bloomberg.com for a better education on trading stocks. There are heaps of resources out there that you can use to better yourself as a trader.
One of those resources that nobody thinks about but can be vital, very vital to the success of a trader is what kind of tools do they have to work with. That is, given the vastness of the trading and investing, and the markets in general it truly helps to have tools that can take off some of the workload off your shoulders. In trading the best tools that you can have are what's called trading platforms and the best trading platform out there is called Thinkorswim. Trading software like Thinkorswim is so very useful is because it enables the trader to trade efficiently and quickly in a seamless fashion. More importantly with Thinkorswim you get a platform that does a lot more than just enter trades for you, you can research the market, you can pre-plan future events and future trades, you can analyze markets, you can look at historical data you can use charts and indicators that will help you trade and make money, these are all just some of the reasons to use this software. We hope that this article has helped you the reader to get a basic understanding what's required for someone to be a Trader both from an intellectual perspective but also from a logistical perspective. We highly recommend you do your own research and now as always good luck with your Trading we wish you have massive profits.