Most of the time it happens that when we buy a stock it starts falling and when we sell a stock it starts rising. Even if we set a stop loss, it hits the stop loss. This happens with almost everyone associated with the stock market. Ever wondered why this happens.
Is stock market a business or gamble?
Is this perchance or coincidence? Sometimes it happens that market is green and all the stocks are growing but the stock which we have taken is stagnant. It may move sideways, or it may even fall at times but this happens only with the stock which we hold.
To many people ‘Investing in stock market is like gambling’. To one who invests in stock market without any knowledge maybe it’s a gamble. People who have invested in stock market and have lost money, label this as a gamble.
And, 90 per cent of the people who trade ignorantly in stock market still call it a gamble. Many consider it as a secondary source of income through gambling.
Undoubtedly stock market is not a gamble. Elements of fate and luck do not have a role to play in the share market. You need to be like a player in stock market and understand that share market functions on a certain set of rules and principles. Just as a business or your job demands time, requisite qualification and commitment, so also is the stock market.
An investor who wants to put money in stock market should first identify the stock diligently. Secondly, he needs to study and analyse at what price he is going to buy the stock. He has to examine the fundamental and technical analysis of the stock.
He needs to evaluate the risk reward ratio of the stock. Then, he should arrive at the price at which he needs to buy the stock and will also set up a stop loss simultaneously. In spite of the analysis done on his part, maintaining a stop loss is imperative to minimise his loss as well as to protect his capital. This kind of analysis is required in any field of work.
But the problem is many don’t consider share market as business. That is a false perception. Share market is definitely a business which functions on a set of norms and principles where profit and loss are part of it. Our psychological attitude towards stock market is incorrect. This indeed is a business which has its prerequisites. (The author is a homemaker who dabbles in stock market investments in free time)