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Tom Stein wrote:
> Someone had asked me my comments on the day-trading stuff they had been
> seeing on CNBC.....Don't you just love how they follow up a piece on...
> day-trading as gambling.... with a commercial featuring a kid who lives at
> home being grounded from flying his helicopter..............
>
> Anyway.....I thought I would forward my response to the RT forum...........
>
> 1)In our society the difference between gambling and investing usually
> depends on the outcome.....if you are making money....you are
> investing....if you are losing money....you are gambling........
>
> 2)My guess is that over 90 per cent of the public believe a stocks' price is
> based upon its' earnings.......that is only half of the equation.......they
> don't understand the concept of P/E ratio.........ie:If company A earns 1.00
> and trades at a market P/E of 23, then it is priced at 23.00........IF the
> market P/E becomes 14...which is entirely possible.....that company would
> have to increase earnings by 65 per cent just to maintain its' 23.00
> price....more likely is that the price would drop to 14.00 IF it just
> maintained its' earnings.
>
> IF gambling implies misunderstanding the game....then I guess most people
> who are in the stock market are gambling
>
> 3)Day-trading is NO different than long term investing.......both take
> tremendous discipline and a STRATEGY to enter....exit....and use
> stops...........IF anyone is not using a defined strategy that includes
> entry, exits, and stops....then they ARE gambling whether their time frame
> is 10 minutes or ten years...........
>
> Tom Stein
> comfut+AEA-.msn.com
Here are my definitions:
1. Gambling - Guessing a random outcome for financial win or loss, i.e. flipping
a coin, betting on roulette, etc.
2. Speculating - Educated guessing, i.e. betting on sports teams, or stocks, or
commodities, where one has some substantial information as a basis for their
bet. .
3. Investing - Taking a calculated risk whereby one takes a position that gives
them a decided advantage toward financial gain. Buying US Govt. Bonds and
holding them to maturity is an investment.
Buying bonds for a day because you think the chart pattern looks good is
speculating. Buying bonds for an hour because you want to trade is gambling.
Regards,
Norman
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