Chapter 4
Investing, Trading, and Gambling
IN THIS CHAPTER
Taking on risk and getting a return
Investing for the long haul
Trading for the day
Gambling it all away
Managing the risks you take
Day trading isn’t investing, nor is it gambling — at least not if done right. But the lines among the three can be thin, and if you know where they are you’ll be in a better position to follow your trading strategy and make more money. And if you can avoid the trap of gambling, you’ll be better able to preserve your trading capital.
The difference between investing and gambling is the risk and return tradeoff. In investing, the odds are generally in your favour, but that doesn’t mean you’re going to make money. Some day traders end up gambling, and then the odds are moving against them. And unlike in the finer establishments in Las Vegas, no one is going to bring the failed day trader free drinks to help ease the pain. A lot comes down to personality; if you are on a casino’s “do not admit” ...
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