There are several main differences between day trading, investing, and gambling. Even if they seem to have similarities, they are very distinguishable.
The Differences Between Day Trading, Investing, and Gambling
Day trading is similar to both investing and gambling in many ways. However, they are not the same. Day trading involves quick reactions to market changes. Trading is the act of purchasing and selling securities. Investors are also traders because they execute the activity of buying and selling investments or securities. However, for investors, trading is a rare transaction, and they derive more value from identifying a good opportunity, purchasing it at a low price, and selling it at a much higher price later on. Besides, traders are not investors.
Traders seek to profit from short-term price differences in the market. They don’t take a lot of risk on each trade, so they don’t get a lot of return on each one. Traders are quick to act. They consider what the market is saying and then respond.
Investing is the act of putting money, with the expectation of generating a profit. It is primarily a long-term action. Good investors conduct a deep research before investing their money. It is because they understand that the payoff will take a long time. Investors frequently invest in things that are out of favor because they believe that others will recognize the value and respond in kind over time. In contrast to day trading, investing is slow progress.
Gambling is completely related to luck. It does not have any relation with markets or making research. However, it also requires risk. Muslim investors should avoid gambling in investment. Betting in any form of asset is prohibited. Gambling or maysir may be in the form of guessing or forecasting by requiring advance payment. Thus, Islam insists that the investment is not a tool of gambling or maysir.
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