People generally have a perception that trading is a very high risk activity as it is a short term exercise unlike investing, is a long term plan. Is this the case in reality? The answer is it depends.
Trading can be very risky if one does not have a clear objective. You will probably tell me I got to be kidding. Everyone trades to make some money. It seems so obvious, doesn't it? However, sometimes this might not be the case. Some people MUST have some positions for them to look after everyday and they are just not willing to close the deal no matter there is profit/loss. Some people keeps buying the same share because they had lost money and he just want to win it back from the same share to "revenge". Sounds weird? These people do exist because EMOTION easily takes control most of the time.
People without a trading plan will always get confused in the market. Ask yourself several questions:
1. Have you determined what stock are you after? Why do you end up the decision?
2. What’s your entry price? Why do you choose it?
3. When do you retreat? i.e. Have you set your profit margin/stop loss?
If you can answer these questions, congratulation, you are on the right track! If not, what do you think is the difference between trading and gambling? If one can make money consistently when gambling in the casino, he must have used card counting strategies to maximize his winning chance.
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