Everything, I guess, once heard the theory of cunning near-market traders that while the position is not closed, no loss. Truth, if the price goes in the right direction, then they are, at the same unclosed position, believe that profit, everything is just like that. But that's not what we're talking about.
Once upon a time in the distance 2005 year me too, being a green rookie, came to the conclusion that the game on the stock exchange is different from the casino roulette, and by this, has an advantage over him due to the fact that in roulette a losing deal is the loss of a certain amount of money, but on the stock exchange if the price went in the wrong direction, then you can just sit out and close when the position comes out in plus. This example is widespread. — here, for example, the text from the site of one of the near-market greeters:
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…If you mispredicted the market and it went against you — this is NOT IMPORTANT. This is not a loss yet, only if you do not take it YOURSELF.!
Why not need? Because the market — not roulette and not a totalizator! If you bet on red at roulette, and black fell — ALL. This is the end. The bet is lost and nothing will be returned. But if you bet on the growth of the market (bought a share), and she went down — NOTHING is lost. This is just a TEMPORARY decrease and you can turn the TIME factor in your favor. And unlike roulette and tote, unlike all other gambling games — only on the exchange there is a TIME factor…
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But the thing is, that this comparison of a casino and an exchange is simply simply incorrectly framed, deliberately, with selfish intent or unwittingly, due to inexperience. Actually, it's all a little different.
In the casino. Let's admit, we have 100 000 Dollars. We bet on roulette 1 000 to red and lose. We fix the fact that we now have left 99 000 Dollars. Further, we continue to place bets also on 1000 Dollars.
Now, the same on the stock exchange. We open a long position on the exchange with the volume 100 000 Dollars. The price goes down and now the equity of the account becomes 99 000 Dollars. This, by analogy with a casino means that a bet was made on red, but black fell. The choice appears — fix a loss (stop playing) or continue holding the position. And further holding of the position already means that WE MAKE A NEW BET on red. But again we are unlucky and the equity of the account drops to 98 000 Dollars. This means that black fell again and we lost the bet. 1000 Dollars. And again there is a choice — fix a loss (stop playing) or continue holding the position (put on black). Etc, let's say that the price keeps falling and falling (drops out black), and we all hold and hold a long position (constantly bet on red).
I.e, holding a position for a long time is not just one bet on red, as perkolnochniki write, and a constantly repeating set of bets on the same red color. And, to go to zero or a small profit, after a long string of failures, we will have to guess red many times in a row.
It turns out that if we compare roulette with an exchange, then it is necessary to normalize the expenditure of funds. If we place bets at the casino 1000 Dollars, then on the stock exchange, for comparison with roulette, we consider the step of the equity price 1000 Dollars. And not as distortingly propagandize to us circum-market deceivers :)
