Why trading is the most interesting way of making money and the riskiest one too?
In this article, I am going to explain with some amazing examples…
Generally, the stock market is there to raise some investment by some companies so that they can use it to build or scale their businesses.
But no business is getting built in one day neither they can make anything significant in one day. Is not it?
But, we people are sometimes very impatient.
We want results fast.
Day-Trading fulfils the demands of the people. It gives us a quick return.
How does it happen?
Day-Trading is a zero-sum game.
What does it mean?
It means if someone has to win someone else has to lose. Money does not get created over here.
Imagine, You paid ₹50 to buy a bar of chocolate and now you are selling it for ₹100. It is easy because you changed your money into another form(chocolate) and now that you are changing it back to money again but with a profit.
So, you converted your money into a physical product to hide the monetary value of the raw product and got a 50% profit by selling it at a higher price.
However, when it comes to money you can’t say, “Hey I am giving you ₹100, you give me ₹200”. Nobody is fool enough to do that.
This is what the market does.
It fluctuates the value of the money that you have traded, with the certain rule that the value of your money changes in seconds.
How does the chart move?
In the long term, chat moves based on the growth of the company but the market does not have enough data to predict the company each second. So, in short term, it regulates based on the investments made by the investors.
Jeff Bezos, in one of his interviewees, said, “sometimes the market goes down even if the company is making profits”
Then who regulates the market?
It gets regulated based on demand and supply by the investor only.
When people buy more, demand for the stock increases, and when people put more the demand for the stock decreases and go down.
Why there is buying and putting of both options?
If there would be only buying and selling then what if the majority would be on the positive side, from where the market will get money? or if the market goes down all of the people will start taking out the money and it will result in no money in the market.
What are the two options?
- BUY (you put money when you feel the graph will go up)
- PUT (You put money when you feel the graph will go down)
That is why it also gives you the opportunity to invest money in PUT. if you believe it is going downward.
It means you can make more money even if the graph is going down.
This is how the stock market manages to keep its door open for money by giving both options. You can invest any time, just guess whether the graph is going to go up or down.
Can it be manipulated?
Of course! small-cap businesses can easily be manipulated by someone who has large money. But it is hard to manipulate big business.
What makes it interesting?
You don’t need to change your money to some other substance to get more profit but can directly trade money with money. but it comes with a risk that money is not get created here.
It means when you trade your ₹100 with ₹200, someone traded his ₹200 with ₹100. and the same thing can happen to you as well.
But yes, it is worth playing once. Play with your own risk