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Cryptocurrency Trading Bible: Winning in Sideways and Bear Markets

Traders Magazine Online News, June 7, 2018

Daniel Jeffries

All trading is gambling.

Some people refuse to believe it but that doesn’t change it.

As a society we’ve managed to dress up the big stock exchanges with an air of refined superiority. It’s not a game of chance or a numbers racket. It’s “investing.” [IMGCAP(1)]

“Real’ investors like Warren Buffet look down their noses at more volatile derivatives markets and cryptocurrency because they’re not civilized. Surely he’s right and the New York Stock Exchange is not the same as trading Bitcoin on Poloniex or playing Poker in Vegas? The major markets have high liquidity and lots of players, circuit breakers and quarterly earnings reports so it’s got to be different, right?

Investopedia certainly doesn’t want you thinking investing is gambling:

“Gambling…is a zero-sum game. It merely takes money from a loser and gives it to a winner. No value is ever created. By investing, we increase the overall wealth of an economy. As companies compete, they increase productivity and develop products that can make our lives better. Don’t confuse investing and creating wealth with gambling’s zero-sum game.”

That’s nice. Except it’s wrong.

The markets are a zero sum game. When you win, someone else loses. When you lose, someone else wins. The market matches people all across the world in the most massive zero sum game every dreamed up by the advanced monkeys we called humans.

And it sure feels good to say we’re contributing to the overall health of the economy by putting our money into companies but that really has nothing to do with anything. Of course investing in projects and companies has deeper societal value than the roulette wheel but that doesn’t change one simple fact:

When you put money into the market it’s not because you’re supporting the company out of the goodness of your heart or because you want to see the overall economy booming.

You’re doing it because you hope that you’ll get more money out than you put in.

Whether you’re betting it all on a hand of Poker or the next biotech stock powerhouse you’re playing a game of chance.

What you’re doing is guessing that you know the future better than anyone else. You believe that the company you’re investing in will continue to create good products and it will go up in value and give you your money back and then some.

But you don’t really know.

No matter how many analysts newsletters you read or quarterly reports you pour over, there is no guarantee the company will continue to do good. How many times have you read this in the fine print of anything you’ve ever put your money into?

“Past performance is not indicative of future results.”

In other words just because something did well in the past doesn’t mean it will keep doing well. A billion variables could tank that company and cause you to lose every red cent. Whether it’s a battle of board members, a black swan event, a changing market place, a failed product launch or a terrible rash of turnovers, anything can cause a company that made money yesterday to stop making money today.

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