With the popularity of the Robinhood trading app, many people are stuck at home day trading on their phones! Nothing wrong with this other than you could be gambling your life savings away. There are a few ways to tell if you are gambling vs. really investing. Gambling is essentially letting your gains be up to chance while investing you have a higher degree of success than 50/50. Gamblers sometimes can get a streak of winnings as so can a person trading stocks. I have put together a few signs that can let you know if you are investing vs. gambling.
How’s it going everybody this is bt bush today i’m going to talk about some signs you should watch out for to make sure you are not gambling especially on the robin hood app now every once in a while i would have someone tell me something that they’re investing in usually it’s some hot stock that they read on news and you know because i make these finance videos
They ask me is this a good stock to buy or not naturally i cannot really give recommendations if you should buy this or not i don’t have a crystal ball where i can tell if a certain stock is going to go up in the future the way i invest is more in terms of what has a higher probability of success if it has below a 50 chance of success then i completely ignore
I don’t invest at all if it has a 51 chance of making money or higher then i may invest in it of course the higher probability in my view that it’s going to make money the higher a chance that i’m going to invest in that company today i’m going to talk about the signs that you need to watch out for to make sure you’re not just gambling on robinhood this video
Is brought to you by weeble weeble is a free trading app it is similar to robin hood for sure however it does not gamify things just as much in fact if you sign up for this account and deposit a hundred dollars you can get two free shares of stock just for signing up check out my referral link down in the video description below now i know robinhood is a really
Popular trading app a lot of millennials are using this but first let me start with the confetti whenever you do something good that is a step closer to making robinhood money they sprinkle you with the confetti it’s kind of like a slot machine or maybe a game where it gives you a positive reinforcement of some kind of sounds maybe some nice explosion and not to
Say that this is not a good thing because you want to enjoy yourself while you are trading now it’s putting confetti on an app illegal per se but it’s using the same psychological triggers in order to get you to use the app more the more you use the app the more money that they make one thing that’s just slightly shady about robinhood is that they don’t specify
Where all their income comes from if you do a little bit digging around you’ll come across this quote the company generates significant income from payments for order flow a common although controversial practice whereby a broker receives a compensation and other benefits for directing order to different parties for trade execution the fact that they make money
This way is controversial indeed personally i don’t really care how they make money i just don’t like it that they don’t spell out how they make all their money it’s almost like they know they’re doing something kind of sketchy and then because it’s a little sketchy they try to hide it and vary and not let anyone know we’re talking about robin hood is because a
Lot of people don’t even realize that they are gambling on robin hood that’s why i want to make this video now sometimes it’s really obvious that someone is indeed gambling on robinhood using all the money in your account buying one single stock and then sell and then you rinse and repeat a lot this i am pretty certain is roughly gambling now these are signs and
Not definitive indications of course you could be a day trader and you know what you’re doing you’re looking at the momentums and therefore maybe you are buying one single stock on and off and perhaps this is not gambling at all because you are making consistent money over time it becomes gambling if the chances of your success is basically going in blind you don’t
Know if the stock is going to go up or down you might think it’s going to go up but you have no reason to think that it’s going to go up like via technical trading i’ve done this long time ago and i just want to stop you guys from doing this because you could be doing a lot of buys and sells and it kind of makes you feel good you’re like oh wow i put all this money
In you know 10 minutes later you saw that you happen to make a lot of money and then 10 minutes later you buy again and it drops and then you lose money generally if you’re gambling if the stock stays relatively flat and you just go in blind and buy and sell overall on average you most likely won’t lose or gain any money but if you happen to gamble with the stock
That is going down and if you’re not doing any kind of shorting you’re just buying and selling you are going to lose money generally on average another sign that you might be gambling is if you listen to your uber driver and they have some special stock tip about neo they say oh my gosh this stock is so hot you gotta buy it and then maybe you just take a look at
This stock and you read an article or two and then you agree with the person and then you buy yourself as well buying on a stock tip is indeed very close to gambling because you’re not doing your own research for me personally when i look at a brand new stock that i’ve never heard of i have to research it for you know over a month or so and i like to watch the
Price movement of that particular stock for a short while at least a month or so before i would jump in with real money there’s a fine line between gambling and investing because sometimes when you’re gambling it may look like you are investing because you can just as well buy a stock make money and then the second time around you also make money and you could
Be pretty consistent with this in a bull market you could make money you know in the past 10 trades or so and then you start to think that you are investing but in fact this is probably just pure luck let’s say you made money the first year are you gambling let’s say you lose money are you gambling so the question here is are you only gambling if you lose money
The answer is even if you make money you could be gambling the difference between gambling and investing is if you can make consistent gains if you know for somewhat good certainty that you will make money in a certain time frame one way is technical analysis and i’m not very good at this so i choose not to do active trading another way to make consistent gains
Of course you can just buy the index and just hold it forever the third way which is harder than the second is go and value the company yourself you have to look at the valuation of the company how much profit it’s making if the future profit looks like it’s heading up what the market sentiment is as well just putting everything together to value the company and
Buy at a lower cost than is actual intrinsic value let’s go through a little thought experiment here let’s say there’s two people if they both bought 100 shares of xyz at the exact same price why is it one an investor and one a gambler let’s say the investor is very good they have like 90 chance of success they know this stock is gonna increase in value however the
Gambler have no idea where the stock is gonna go they buy into it and it just so happens that this gambler makes money just the same as the investor so why is one an investor and one a gambler because the gambler might be doing things kind of blind they might buy this stock that happens to do well but then later on they’re gonna buy another stock that doesn’t do
As well now even as an investor you’re never going to hit things 100 of the time so when you’re investing you really have to calibrate your success rate how good is your track record investing in individual stocks is certainly more risky than if you go and buy an index fund it is generally accepted that the herd stock went up a lot because of robin hood traders
In fact robin hood used to share the popularity data on their platform they would show how many users actually buy into hertz let’s say and even though hertz went bankrupt people kept on piling in they see that other people are piling in so more and more people piled in up until hertz went up 100 or so as a result of this crazy gambling and a lot of people lost
A lot of money on this robin hood will no longer share popularity data this is as of august 10 2020 just about three months ago this is what robin hood has to say moving forward our web platform will not display the number of customers who hold a particular stock on robinhood now for me this is a valuable piece of information because when you can see the market
Sentiment how popular certain stocks are on the robinhood platform this is just another tool you can use in order to buy a certain stock when you see that it’s popular you might be buying it because you think other people are gonna pile in some more but this is kind of like playing with fire because you don’t know when the whole thing will come crashing down you
Can buy into it sort of gambling on purpose but i would certainly consider this a speculative trade and i would go really lightly when i buy into something like this now what kind of sentiment would i call this this is the millennial robin hood sentiment basically this is what the millennials are buying because they’re using this platform but with robinhood not
Showing the number of users holding a certain stock will likely reduce the spikes in these bankrupt companies like hertz overall this is probably a good thing even though it takes a tool away but showing the popularity on their website is probably a positive feedback loop people on the robinhood app sees that it’s going up they buy into it the popularity goes up
Even more more people buy into it so you can see how it just sort of sell feeds now if you go on robinhood you can still see the 100 top ranked stocks however they are not ordered but you can order in other metrics you can sort the columns by the name symbol prices today’s price change the market cap analyst ratings but not by popularity so you don’t know which
One is first over here anymore so basically this whole popularity thing is basically useless to me now one of the most obvious signs of your gambling or not if you’re just buying the company based on the name only and you don’t really know how much profit they’re making you should able to know where most of their revenue comes from if you’re just buying from
Amazon and you don’t know that they have an amazon web services that makes them a significant income then you’re probably just buying amazon simply because you use it thanks for watching this video don’t forget to give me a like comment down below let me know if you are gambling on this platform remember it’s not actually a bad thing to gamble but it’s a bad thing
To gamble your entire life savings you can put a small amount of money and you know just to have a little bit of fun and as always don’t forget to push that subscribe button and ring that bell icon thanks for watching you
Transcribed from video
Signs You Are Gambling on Robinhood By BeatTheBush
