Trading is not a zero-sum game and it takes a certain degree of awareness to deal with it. In particular, one aspect must be taken care of, let’s see which one.
Who earns on the stock market? It might seem like a rhetorical question, and indeed it is! The answer is trivial: who invests in assets that subsequently increase their value.
And if we considered the Stock Exchange as a pure game of chance we could answer: whoever bet will prove successful.
So, trivially, all stock market operators, and the so-called traders, are in a spasmodic search for a method that is able to predict the future. Knowing the future, you can invest (or bet if we consider it a gamble) on the asset that will subsequently prove to be more profitable.
"Let me guess and I’ll make you rich", is a saying as old as the world.
But this method that everyone is looking for does not exist, of course we are talking about a legitimate method, we must exclude fraud or in any case illegal behavior.
Investing in the stock market does not mean gambling, it means carrying out economic/financial analyzes and reaching conclusions that we believe can give gains in the medium/long term.
Only in this way will it be possible to have capital gains, therefore it is necessary to make careful assessments to understand if the market is pricing the various securities correctly.
It is different if you operate using leveraged derivative instruments, the investment, in which case it really becomes very similar to a bet.
And so since the "bet" is a game, the first thing to check is that it is a fair game.
Here we enter the statistical, probabilistic field, a game is considered fair if the different parties have the same mathematical expectation and the mathematical expectation is calculated simply by multiplying the potential winnings, i.e. the potential gain, by the probability that it occurs.
Trivially, the game cannot be fair because to operate either a commission is paid or one operates with a higher spread, in short, a widening of the bid/offer prices which in fact equals the payment of a commission.
Normally these fees are low, but we must bear in mind that those who trade in leveraged derivatives often execute several operations so these fees add up.
So let’s see if it makes sense to ask ourselves whether it is more convenient to invest in the stock market in the conventional way, or to operate with leveraged derivatives.
Unfortunately there is no answer to this question. But I can undoubtedly give advice to all those who want to try their hand at the financial markets.
You must know how to manage risk, which means that you must be able to calculate the risk you are running because one thing is certain: there is no (lawful) gain without having taken a risk, often without our knowledge.
This is a fundamental aspect, the markets, sooner or later, will take away from you what you have earned unduly, i.e. without having calculated the risk involved.
Original article published on Money.it Italy 2022-12-16 08:02:00. Original title: Il segreto per guadagnare in borsa? Saper gestire un aspetto particolare
