Depending on the procedure used for making these investments, Stock market investments can be similar to gambling. However, if your investments area unit nonmoving in basic analysis. Then they’re the results of ball-hawking judgment and thence can’t be known as gambling.
However, many traders invest in the stock market as if it was a game of chance. It is discovered that they choose random stocks either due to their own want. And fancies or because of the recommendations obtained from some equally whimsical third party. This way stock market can be looked at a game of chance as very little attention is paid to the underlying fundamentals. Large numbers of experts on finance would agree that this is a bad idea.
You will expose the pitfalls of the philosophy that encourages people to time the market in this post.
Chance of Failure is high
If you do market timing then it is a flawed strategy. And you need not look beyond probability to prove that. Firstly let us consider the fact that mart timing embraces two decisions. The first decision is regarding when to get into the market and on the other hand. Next decision is regarding getting out of the market.
If you ignore the important details and simply calculate the probability. Then there is only 50 percent chance of getting one decision right. Hence, there is only 25 percent chance of getting both the decisions correct. It would be not wrong to conclude that one out of four bets will make money. Whereas three will lose money.
Traders who believe in market timing have no idea that the odds are heavily stacked against them. Actually, there is very few probability of making a profit.