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Horace M. Monroe

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When a company starts declining, there is not much growth potential left, unless a miracle happens. The returns on the existing plan also start to reduce until the entire business is shut down. As an investor, you should see the future of the companies in advance based on their management. You should be continuously monitoring the growth of the company that you invest in. The moment you realise that the company is declining and there is no hope for further growth, you should take out your investments.

No matter how loyal you are to your invested company, if your goal was to make money from your investment, you will have to make better decisions. It becomes difficult for declining companies to reward their shareholders. When the investors have thousands of options to choose from in the market, it is senseless to stick to a declining share.

With the three signals mentioned below, you will be able to study your company’s condition and make better decisions.

Declining Revenue

If a company’s revenue has been declining in the past few years, it is a sign for investors to take our their money. Revenue of a company is their best income statement, and if their top line statement is not showing any progress, then it is time to switch the investment. Not only a declining revenue, but a flat revenue is also a sign of caution for the investors. The company can only increase its profit if they are generating more revenue. The flat and declining revenues is a sign of poor management and a weak operation. Also, if you find out that the revenue of the competitive company is growing at the same time, then your company will not be able to hold for long.

Declining Revenue

Negative Profit Margin

Profit margin is net profits/net sales. It is realised for a time frame that determines how much a percentage of sales has turned into profits. If the profit margin for a company is gone negative, it shows that the company is unable to make regular profits from its business. Most of the time, the companies lose their market share to their competitors and so make lesser profits. It is a sign that investors should be able to see in advance to take out their investments before it is too late.

Profit Margin

Big Dividend payouts

Dividend payouts determine the ratio between the total amount of dividends paid to shareholders and the net income of the company. You can calculate this by dividing the dividend per share by earnings per share of the company in a year. If a company has a constant dividend, it is a healthy sign for the investors. The problem arises when the company starts paying more of its net income as dividends. This means that the company is not retaining enough income, and the investors should back out at this moment.

Trading and gambling have often been looked at from the same lens many times since both involve risks and benefits and involve money. The investment is also based on a similar construct of “Outcomes”, whether it is a poker hand or forex news. We all have gambling tendencies that we use at different times in our lives, with or without money. It is the hope that we put on chances which give us an adrenaline rush of making the right prediction. In the forex market, it is much more than chances and depends a lot of the progress of the economy of currency and other international factors.

According to the definition of the word “gamble”, it is the risk of losing in a game or bet to achieve something. When we consider this definition, both forex and gambling involve risks and losses. At some point, you are meant to face losses in forex as it is a part of this business.

Forex and gambling

Even after so many similarities, the forex professionals still want to convince us that forex is not gambling at all. The only people who will try to convince you that forex is not gambling are the ones who want to sell you’re their products while promising up to 98% success rate. The truth is that even the large banks and hedge funds gamble all the time when they trade. But there is a big difference how they and the 99.9% of the retail forex traders gamble. Their luck depends entirely on probabilities. It is a calculated gamble that can pay better than casino games and sports bets.

How do probabilities work?

The probabilities in forex trades depend on the odds of the market that are in your favour. Traders invest their money on the trades which offer higher odds of winnings. It is also known as stacking the odds in your favour. The more confluence you have in your favour for any trade, the higher chances you will have to make money from that trade.

Forex

Is forex trading gambling?

Yes, forex is one of the most played forms of gambling. The only difference is that we can get to review past price action before investing money. It is similar to seeing the dealer’s hand before making a bet in blackjack. This advantage will only work when you know how to use it to your advantage. The key to knowing this is to find the right confluence factors that can stack the odds for you. There are plenty of factors that influence the odds, such as trends, moving averages, resistance, and economy of the currency.

The goal for a forex trader should be to learn trading like the casino operator runs his business. Both casino owners and forex traders should know that they will lose money to some customers or trades, but it is the cost of doing business. With the best odds stacked in their favour, sooner or later they both will experience profits.

 

 

Gambling and investing in the market is often assumed as the same thing due to many reasons. The most common reason is that both require investing money on the outcome and taking chances on something which is in progress. While gambling can be related to betting in casino games or sports, when it comes to trading, gambling becomes a much more complex version of itself. The beginners who have no clue about the market while investing are gambling.

How is gambling a part of trades?

Inarguably every person has gambling tendencies of some level. Some like to make bets for a dare while others push themselves in the compulsion of playing casino games. Even if they do not want to admit it, there is a gambling impulse in everyone that makes them take risks in their choices from time to time. It is when we discover the motives behind our actions, we will be able to change the way we look at gambling. When one gets indulged in trading, it is the tendency of gambling that makes them put their money on the trades without proper research. If the trade becomes successful, it becomes a part of investing, and the person will naturally become a professional market participant.

professional market

Social proofing

Many times it happens that people get involved in trading due to social pressure. Some people may not have an interest in trading or investing, but due to everyone around them talking about trading, they invest anyway. They may invest in showing respect to the trading group or when they do not want to feel left out in the talks. There are several variables in the market, and any misinformation among investors can create a gambling scenario.

Other factors that push gambling influence

There is a learning curve in gambling that any investor will have to go through if they do not want to gamble on their trades to expect lucky profits. This also depends on how the person approaches the financial markets. How one person approaches, the market will be determined based on a successful trader. There are two traits of traders that determine the gambling tendencies in traders.

gambling influence

Trade gambling for excitement

It is common in the beginners in trading to listen to their heart and emotions while trading. Losing a trade can easily provoke them to make poor decisions for themselves. It also creates a topic of discussion in social proofing about the loss in trades of the entire group. For a person who is making trades to be in the social circle, it is easy to tell that they are trading in a gambling style.

Trading to win

The other type of traders uses a methodical and systematic way to make investments. They want to win the trades at all costs and do thorough research about the stocks or currencies before investing. Good traders always take their losses as a sport and analyse further to make better decisions in future. But not having to enough wins and a series of bad decisions ending up in losses confirm that the trader has entered the method of gambling.

Stock market secrets do not remain secrets for long as the traders and investors are always finding new ways to crack the stocks. If you are not among the first few to learn about the new tricks of the stocks, you are already way behind in making profits from those tricks. However, there are some basic stock market secrets that every beginner trader should know about. These five stock market secrets will help you make better trades.

Focus on the business quality

The main rule of investing in the stock market is to focus on the quality of companies rather than getting lured by attractive shares. Think in terms of buying the entire company instead of simply following their brand. Find out the company’s need in the market and think for the future. You will need to consider the products dealt with by the company, overall sales, consistency of sales, competition of the product, competitive strength of the company, and customer management. If you find a company that can satisfy all the criteria mentioned above, then you can successfully trade in the stocks.

Business quality

Make long term investments only

If you are willing to invest in a stock for ten years, you are good to go, but if you want short term benefits, stocks is not the best option. You can day trade in forex to earn benefits of short term trades. Stocks market investments require time to nurture, and if you take out your money too early, you will regret the decisions later. If you believe that you can beat the stock market game in the short term, you are still a beginner. Most of the rookies cannot resist the urge of buying and selling in the beginning, and that is where they make the worse decisions in stocks.

Never stop checking for more stocks

Investing is stocks is not picking from just ten stocks. There are thousands of companies out there. You will need deep research of the market to find the companies that have just started growing. You will need to analyze at least a thousand stocks before investing in one. Once you find a promising stock, wait for the price to become available at a bargain.

Research about the management

Find out how well the management of your chosen company is using its resources, manpower, and material. This management efficiency will reflect the return on equity and return on capital for your investment. If the management fails to use its resources well, it is highly likely that the company will collapse sooner or later. Any wastage of resources should be taken as a warning signal by you.

Stay away from hot stocks

Hot stocks is just an attention-catching activity that the market offers time to time. It is when the market comes on the news and becomes volatile. You should not be interested in the market when everyone else is, instead you should be interested when no one else is bothering. It is not advisable to chase hot stocks. You should be investing in the funds or stocks that have performed well consistently in the past and will do so for a long period.

Trading involves high risk and demands a lot of patience which is quite often missing in many new traders. There is no one guaranteed method of earning higher returns, but it comes with practice in the live market environment. Even though all the strategies have some loopholes and risks, you can use the best basic tips to get better results from the share market.

Invest in few stocks for experience

The cardinal principle of smart trading is to start with only a small group of stocks (10 to 15) until you gain some knowledge and experience. Share trading can be multifaceted as you need to learn the fundamental triggers, news flows, technical levels, etc. It will be difficult for you to manage a large number of stocks with so much research to do. You must also commit a higher capital when the conviction level becomes higher. It will only be possible when you spend more time and effort on only a handful of stocks.

Invest in few stocks

Focus on high momentum stocks

You will need to be consistent in trading and trade frequently to stay active for any quick opportunities. It will help in developing a momentum stock collection. The momentum of a stock is the speed and intensity of the stock to news, triggers, and chart patterns. For example, investing in a big stock will not provide the momentum to the trader as the big companies have already reached close to their caps and do not develop more gaps. Instead, you should be focusing on high momentum stocks which can offer long term momentum.

Trade high beta stocks

Stocks can be aggressive or defensive. The stocks which have a beta of less than one are called defensive sticks while the stocks with a beta greater than one are called aggressive stocks. Trading becomes much more profitable when you bet on stocks which have beta more than 1.5. These stocks will also have high momentum, which will work in your favour. High beta works in both ways, so you need to think of strategies that can minimize the risks while giving you the best profits.

Beta stocks

Learn the short side of the market

Short trading is often labelled as a risk that traders take. The short sellers play an important role in the stock market as buyers. Short sellers play on the selling side when they feel negative about the market. You can sell in the forex market and buy back the game day. Similarly, when you want long term investments, you can choose the future or put options. The short side of the market has low crowd as most of the investors play on the long side. You can benefit from both sides if you make the right choices.