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“I've lost trading buddies because of this question”

by , 11 July 2018
“I've lost trading buddies because of this question”
Q. “I often hear trading is just like gambling where over 90% of gamblers lose their money just like traders do. Why is trading not like gambling?”

A. I’ve gotten into many heated debates about this topic. I have even lost trading buddies, just because of this question.
There are many ways I can explain how trading is not like gambling, but I just want to highlight this one key principle.
When you place a bet on a gambling game such as roulette or poker – You lose all of your money when you lose the bet.
The same goes with when you bet money on slot machines. Every time you lose, you lose all of your money you put in.
With stock trading, it’s different. When you place a bet on a stock, and the stock doesn’t go your way, you can close your position and get a portion of your initial investment back.
This is the key difference.
When you gamble, you lose all of your money on a bet when you lose.
When you trade stocks, and the trade goes against you, you can control the amount of money you lose and claim back part of your investment.
Q. “I can’t decide whether I want to trade using a Bar Chart or a Candlestick price chart. Timon what is the difference between the two and why do you choose Candlesticks?”
A. The best way to explain the difference between a Candlestick and a bar chart is to compare both price charts.  

Bar charts also known as the OHLC (Open-High-Low-Close), shows you the market activity (buying and selling prices) for a given time.
Bars have a high price, low price and two small ticks.
The open tick is on the left side, which shows you the opening price.
The close tick is on the right side of the bar, which shows you the closing price of a market.
You get three types of bar charts.
  • Up bar: The close tick is above the open tick
  • Down bar: The close tick is below the open tick
  • No bar: The close tick is equal to the open tick
A Candlestick chart is similar.  
Each Candlestick shows you the market activity that took place during a certain period.
Unlike bar charts, the Candlestick, has a body which gives the candle its colour. 
A body is basically the range between the opening and closing price, as you can see in the above chart.
I prefer Candlestick charts because they’re easier on the eye. 
With Candlesticks the colour of the Candlestick will instantly tell me whether the price moved up (bullish candle) or moved down (bearish candle) during a specific time.
Whereas, with bar charts, it’s trickier to tell whether the price moved up or down as I have to zoom into each bar to see where the small open and close ticks are.
You can read more about Candlesticks and why I use them, by going here…
It’s ambitious. But it just might work…
Q. “You sent out a Richemont CFD trade the other day to Red Hot Storm Trader with the entry price of R122.90. I just want to ask, how is the Richemont CFD priced and do I need to look at the share price when I trade CFDs?”
A. No, you don’t need to look at the share price when you have the CFD price.
You see CFD prices are created and designed to mirror the underlying market.
This means the price of the Richemont CFD and the underlying Richemont share price is almost identical.
There is only a slight difference in the bid and offer price, by a few cents. This difference is known as the spread, which is where the broker makes their money. 
Always remember, “Wisdom yields Wealth”
Timon Rossolimos,
Managing editor, Red Hot Storm Trader

“I've lost trading buddies because of this question”
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