February 17, 2010

Trading is Gambling, Period.

I was a stockbroker and a trader.  The best clients, those that generated the most commission, were always trading their account, buying stocks they thought they knew something about only to sell them shortly thereafter.  These days with flat fee accounts, there is no commission incentive but trading is still a terrible strategy.

Here's what happens.  You buy a stock because you think you know something about a company, their products or services, the mgmt, etc. (all of which doesn't matter unless you plan to hold it for a long period of time, more than two or three years).

The stock then goes up and you sell for a quick profit, great.
Or it goes down and you hold it, waiting for it to return your buy price, sometimes it does and you sell.
Or it goes down a lot and you are stuck.
This is a terrible strategy.  At the end of the day, your account is full of losers, not winners.

Trading is gambling, period.

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