Just to remind you in case you forgot, previous article has a question (kinda, open book question) on whether you are entering the stock market as Investor or Trader?

Close your eyes and say loudly what you have chosen.

What did you hear? An Investor? Or Trader? Still confused?

I appreciate if you are almost cursing me. To me that means you are thinking!! I really want you to revisit the feeling again at closure of article and I hope wisdom dawns on you by that time 😊

You have been told/heard from so many known/unknowns that making money in stock market is simple (even government thinks so, hence long-term taxation introduced sometime back). And here is someone coercing you to choose a domain out of the two. Why?

Because unfortunately, the bigger world out there is different and looks something like this

• 

Who’s S?

S believes in easy things & easy money. S need tips from people, from TV, from friends, from everywhere. Basically, most of us are S. We are in constant lookout for some hints/tips where money can be made. Any relevant names for S? Correct, S is a speculator. Period.

Now you know why one after another Ponzi scheme work and fool people. Its nothing but the lure of easy money.

Also read : New to Stock Market : Part 1 : As Investor or Trader?

Speculators are so much big in numbers that one can safely assume that they will be omnipresent. Below I try to show you the approximate pie area occupied by Speculators as compared to Investors & Traders

Don’t tell me World is not fair!!

I can envisage a shocking realization for most of you.

Does above realization reduce our chances of making money or does it make it riskier?

No, in fact this many numbers of Speculators will make stock markets inefficient meaning Investors & Traders with right systems in place can make use of stupidity of large number of people to make money.

You see at times unfair world is advantageous!!

One can safely assume the swapped positions for speculators & investors/traders in above pie chart in terms of probability of making money. Let’s try to see the point rather than estimating accurate probability.

So, what you and I can do

1^st step is to realize that there exists a big speculator in us and we will NOT FEED him.

Remember for once and all, Speculating and gaining money from market is as good as playing in Casino and hitting a Jackpot. Yes, people get lucky in casino and so are people in stock market by speculating. But unfortunately, how many will remain rich, that’s a question to answer before proceeding further.

The house wins in casino and investor, traders , brokerage houses wins in stock market. Only Once in a while speculator wins in casino and stock market.

One can still argue that probability of making money with speculation is not zero and we need only one stock to click despite many bets being failure. I don’t deny that tiniest possibility but do stick a note on your ego/laptop/mobile

Speculation will destroy my wealth unless I’m super lucky

By speculating not only you can lose your money but might also put your survival at risk. I just don’t want to talk about the hit on your confidence levels in other fields as well as a side effect. I hope I have made my point clear and that is

Don’t tread the path of speculation

Wait!! You still did not the got the answer whether you choose the right domain!!

You can choose to be an investor or as a trader. Nothing wrong or right about it. Both are separate ways of making money and requires different skill set.

Investing requires you to understand the industry, company, its balance sheets, quality of management and a bit more.

On the other hand, trading requires you to be converse of the technical tools and a better control over your emotions apart from many other things.

In both cases, you need to do your homework well before putting your hard-earned money. Rewards are worth of effort being put and so are the risks on downside.

You must make sure that right systems are in place to reach the data point you need to make decisions.

Let’s begin with (newly) dawned wisdom and start rewarding ourselves.

What are the further steps? Let’s seek answers in next article