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« CAMBIOR: Up 18% today | Main | GOLD: A rough ride »
Wednesday
Sep132006

Spread betting: A gamble that failed

You just can’t trust the Australians can you? I go to sleep and overnight they let gold fall below my stop loss level!

No, can’t blame them. We got it wrong big time and lost the bet.

My son compounded matters by asking me what the difference was between gambling and investing? Not now Junior I’m still in shock!

Well my poor answer was that gambling is to take a risk or a chance in the hope of a better return and investing (sounds so noble) is to employ money into stocks in the hope of a better return. There, now both of us are confused.

In a way they are both types of investment, however the bet contained a stop loss to limit the damage but that also means that you have lost your stake. On the other hand an investment into stocks generally means that you do not have a stop loss and the stock can keep on falling, however you continue to be the rightful owner of the stock even though it is now trading at a lower price.

Gambling and investments and volatile so be careful and don’t go too mad even when it looks like a dead certainty.

Well I guess that it’s back to the drawing board.

13 September 2006

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Reader Comments (1)

Which teaches a lesson I've learned the hard way as well: do not trade metals derivatives with automated stoplosses. These markets will skyrocket, but the corrections will be severe and often happen overnight.

September 13, 2006 | Unregistered CommenterJoey

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