Speaking to between 80 to 100 Australian share traders every day gives us an amazing perspective on our own trading and members challenges.
We’ve heard most share trading problems over the last five years from your stumbling blocks, reason you’ve stopped/started, failed, gave up, profited or lost everything.
But gambling is a recurring theme that even the most experienced traders display. From the language they use, how they trade and most dangerous of all, what they do.
There are a few signs you are gambling, even if you think you’re not, many of us are and do not even realise it.
Here are 6 gambling habits we see EVERY day…
- Going ALL In: if you’re putting all your money into a single stock this is the number one reason most people lose their trading capital. Trading more money multiplies the “win”, but also multiplies the risk. It may seem great now but there are literally a 1000 reasons why the stock would do the exact opposite of what you expect.
- Free Tips: free tips are worth what you paid for them, they are generally provided with an agenda behind them or through good intentions from friends who want you to come on the journey with them. If you are not doing the research yourself or paying for properly researched information don’t expect to be given free gold.
- Buying Cheap Stocks: Penny Stocks are the lottery tickets of the share trading world, but pay out even fewer times. They are cheap for a reason, stop looking to buy “bargain stocks” if they lose 9 times out of 10 (and they do) there’s no bargain to be found at all.
- Big Money on Short Term Trades: heard some hot news? Did you put a wedge on it doing what it says it’s going to do? A famous quote by Benjamin Graham says – “In the short run, a market is a voting machine, but in the long run it is a weighing machine.” This means that difficult to predict market psychology or sentiment as this drives the market in the short term, not common sense or even proven numbers making it difficult to predict its movements.
- Following the crowd: you can get swept up in what everyone else is doing, mostly by the time you find out it’s too late to make anything out of it. If you’ve read a trade is worth getting into on a public trading site it’s already too late to profit from it. Unfortunately most people come in when the movement is losing momentum leaving them with shares bought at the top of it’s worth with a loss waiting to happen.
- You’re Always in High Risk Stocks: always making high risk trades, penny stocks, speccies or volatile industries like mining, iron etc as high risk is high reward right? NO. HIGH RISK IS ALWAYS HIGH RISK! It’s only occasionally high reward.
Other signs of gambling includes trading as you “need money”, or are wanting to “make money fast”. If this is you then it will help you make all the wrong decisions at the perfect time to lose your trading capital, especially if you combine this with any of the above “trading methods”.
And of course using money earmarked for other things to do it with, or worse getting loans or finding ways to make a trade via credit cards is a major red flag.
If you trade like this please stop now.
Take stock and change the way you trade, this will also change your results and reduce your blood pressure.
The problem is that you “won” and took some profits like this at some point, and because it worked for you this has now become how you trade.
When you lose, and you will at some point, it will be big and it could take you out of trading completely.
Now, let’s watch Dave talk through the difference between penny stocks and high-value medium-risk, 3 YR Growth stories.