Is stock trading a sin?

[Seaweed]

buy/sell stock....u build nothing ?? touch nothing...see nothing...leave nothing...only money...in simple..it is speculation...someone told me this...I think about it....quite agree....nothing physical built....nothing physical move...its a gamble...and that's how to make it big with nothing....

[Thargor]

Between making money from stock trading and no money due to doing nothing....

 

I am not sure which one is more 'sinful' of the two...

But I will take money anytime....

[Stockman]

trading is not a sin but pouring all your family investment in stocks is certainly a sin .one should trade within one limits to invest

Edited January 30, 2010 by Stockman

[OmOm]

As above, my mom seems very negative abt me trading stock lately, i been trading for over a yr and nv ill treat her and i give her 2 k +/- per mth consistently from my trading but she keep nagging and say its like gambling etc, such money earn already not gd, such money take already muz return back in other ways etc many funny reasons. Ask me to stop.... But to me its like buying low selling high kind of biz, juz like what every legal biz man is doing, buy an item at low price and sell to a willing party at higher price legally. I dunno whats wrong with that.... I am someone easily affected by words esp from my parent, now her words make me very low morale and lose all my confidence and drive to trade again. 1 hr plus later trading start, i feel very down now to trade, all mood is gone.

 

Bro, I used to do stock trading before and I made money from it. Today, I no longer trade stocks other than buying IPOs and earning the dividends from these counters. I have also donated away the money that I have made from the stock trading to certain charities. The reason for this is the understanding that I have gained over the last few years about the practice of stock trading.

 

Your mom is right in a way. Unlike other forms of trading businesses which involves end-products which serve a purpose to the final purchaser (e.g. rice, meat, eggs), there is no value creation in stock trading. The value creation comes at the beginning of the trading chain, not at the end (unlike other trading businesses). The value creation at the start of the chain is only during the IPO process where the owners of a company sell their shares on the open market in a bid to raise funds for company expansion. The moment such funds are raised and the equivalent shares floated on the trading platforms, there is no further value creation.

 

Basically any money that you make through stock trading comes from another person's loss. This loss can be from someone's purchase (and subsequent sale to you) in the past or it can be from someone's purchase (and subsequent sale to another party) in the future. Someone has to pay for your gain and unlike other trading businesses which involve physical products, the last person holding the stock is the one who bears the brunt of the damage. This usually happens when the stock goes to zero for many different reasons such as the company going bankrupt, nationalisation, etc.

 

This understanding is not something that you will hear from many people. The reason for this is because the world today has painted stock trading as a legitimate form of investment. The man-in-the-street additionally will not spend time thinking about the chain of events and actions which take place for stock trading, and therefore will not and (even choose not to, for those with greater awareness) understand the implications of stock trading.

Edited January 30, 2010 by OmOm

[Skunk]

Bro, I used to do stock trading before and I made money from it. Today, I no longer trade stocks other than buying IPOs and earning the dividends from these counters. I have also donated away the money that I have made from the stock trading to certain charities. The reason for this is the understanding that I have gained over the last few years about the practice of stock trading.

 

Your mom is right in a way. Unlike other forms of trading businesses which involves end-products which serve a purpose to the final purchaser (e.g. rice, meat, eggs), there is no value creation in stock trading. The value creation comes at the beginning of the trading chain, not at the end (unlike other trading businesses). The value creation at the start of the chain is only during the IPO process where the owners of a company sell their shares on the open market in a bid to raise funds for company expansion. The moment such funds are raised and the equivalent shares floated on the trading platforms, there is no further value creation.

 

Basically any money that you make through stock trading comes from another person's loss. This loss can be from someone's purchase (and subsequent sale to you) in the past or it can be from someone's purchase (and subsequent sale to another party) in the future. Someone has to pay for your gain and unlike other trading businesses which involve physical products, the last person holding the stock is the one who bears the brunt of the damage. This usually happens when the stock goes to zero for many different reasons such as the company going bankrupt, nationalisation, etc.

 

This understanding is not something that you will hear from many people. The reason for this is because the world today has painted stock trading as a legitimate form of investment. The man-in-the-street additionally will not spend time thinking about the chain of events and actions which take place for stock trading, and therefore will not and (even choose not to, for those with greater awareness) understand the implications of stock trading.

 

what u have said is mostly correct....but u think most people care? :(

 

[Freestylers09]

Sad to say,world works in this way..even in a company tat paids u,its lead to loss of another party,just tat not as serious

 

pple who loss alot is usually those who r greedy,let big boys makan as they like such most,easiest to lure in n corner them

 

 

[Skunk]

Sad to say,world works in this way..even in a company tat paids u,its lead to loss of another party,just tat not as serious

 

?? What he said is totally different lol nevermind....

[Freestylers09]

I know what he mean,u never notice my signature lol

world work this way in various aspect of our life,not only stocks,dont u think so?Chain reaction..economy also cost by such chain reaction on human greed 2 years ago

 

the later part is i add on in my opinions on why most pple will lost in stocks,seperate issues

 

greed in chinese is call 贪 top u see a 人，centre a 心，below a 贝， there 人心让贝盖 lol

Edited January 30, 2010 by Freestylers09

[OmOm]

what u have said is mostly correct....but u think most people care? :(

 

There will be those who have the ability to understand. For these, my sharing may help to lead them to understanding.

There will be those who understand. For these, my sharing may help to prompt them to ponder further and perhaps care.

For those who cannot, do not nor care to understand, there is no harm done through just spending a few minutes sharing.

[OmOm]

I know what he mean,u never notice my signature lol

world work this way in various aspect of our life,not only stocks,dont u think so?Chain reaction..economy also cost by such chain reaction on human greed 2 years ago

 

the later part is i add on in my opinions on why most pple will lost in stocks,seperate issues

 

greed in chinese is call 贪 top u see a 人，centre a 心，below a 贝， there 人心让贝盖 lol

 

Indeed brother. Greed and fear have always been part of human nature. They bring about growth in civilisation and in turn bring about destruction to it.

[1fast1]

I suppose the crux of the matter is whether you consider legalised gambling to be a 'sin'. There are some people who consider even occasional plays of the lottery to be sinful. If you fall into this category, then, yes, some sort of market action can be considered sinful as well.

 

Let's take what's commonly considered "gambling" first. There are people who rail against those who bet on horses or play cards, calling them immoral. The consensus amongst most of the "gambling is sinful" camp seems to be that horse pool betting and blackjack are sinful activities. In fact, some of this camp will condone a little occasional 4-D, TOTO or Sg Sweep action as harmless fun.

 

If you think about it, this is completely ass-backward logic. It is possible to devise very good systems that allow you to consistently profit (in the long run) from both horse betting and casino blackjack. And the proliferation of successful "professional gamblers" who make a living off both of these activities is testament to the realisation of the possibility. Like all forms of successful "trading" (using the term generically here), getting off the ground as a pro-gambler involves careful money and risk management and lots of theory (concepts such as the Kelly criterion) and due diligence (learning a system such as tracking the history of the horses or learning to count cards). These are not "flashes in the pan" - they earn their money.

 

In sharp contrast, the "simple lottery" is a complete waste of money. Statistically speaking, there is no way to predict what number is going to be drawn next based on known priors. The fanciful metaphors for this sort of lottery (more likely to get struck by lightning multiple times, etc.) are actually quite literally true. If any sort of gambling might be sinful, then THIS is definitely a no-no, because you might as well burn your money. The funny thing is that most people, even those who consider "hardcore gambling" to be sinful, regard this as a harmless bit of fun - and this is the strange thing to me.

 

Oh, if you believe that you can get an edge from spirits or mediums or whatever, then I have two things to say to you. First, I refuse to believe that sort of thing works. Quoting personal or hearsay anecdotes at me wouldn't help, because anecdotes make for terrible statistical data. Second, if you dabble in that sort of thing, you're unlikely to believe in the concept of "sin" (in the Judeo-Christian sense) in the first place, so all this is irrelevant to you.

 

Now, to trading. Strange that people make such a bold distinction between "investing" and "trading" - to me, they're different sides of the same coin, a very arbitrary difference, if that. A lot of it comes down to your personal market philosophy. If you believe you can beat the market with active trading and some form of technical/fundamental analysis, then good luck to you - because none of these systems have been proven to give consistent gains over the long term, especially when you include overheads such as commissions. That's why efficient market hypothesis/random walk theory has such a strong hold on many economists. If you accept that the market is generally highly efficient then you have to concede that predicting stock moves becomes, at best, a game of chance - and this is gambling. Sinful or not, you decide.

 

The only sort of market action that's proven to give consistent returns over the long term is buy-hold investing, especially of counters that represent the market, e.g. index-linked ETFs. In the long run, the market moves up (at least until the next recession), so you can use this axiom as a fairly safe hedge against inflation. Money-management remains important, and it's good to have a diversified portfolio, and set stop-losses to all your purchases, so you have peace of mind. Once this is done, most of the "random walk" chance element is removed, so your expectation become positive in the medium to long term. Most would consider this sort of thing to be "investing", and not gambling. But keep in mind that any sort of equity trade involves someone taking a contrarian position - so if you've gained, someone else has to have lost (or at least lost "potential gains"). If you consider that sort of thing to be "sinful", then you have your answer.

 

Even IPO purchasing involves this to an extent. A company tries to raise capital by declaring an IPO. "Investors" who buy IPOs at a non-preferential price are basically betting that the market is being unduly pessimistic about the prospects of the company - that the company is ultimately going to do much better than the IPO price indicates. A lot of the time, these IPO buyers are wrong. Even if the company doesn't go bust in a few months, the stock price might come down to more sensible levels after a few weeks of active trading, which means that they would've done better to adopt a more cautious "wait and see" approach. But let's consider the "win-win" scenario of a company that makes steady gains after the IPO - the company gets rich, the investors get rich. Surely, this can't be "sinful" right? Well, if you think about it - this is basically usury (and usury is considered sinful by some). You're basically lending a fledgling company money, and taking part ownership of it as collateral. The gains of the counter are a form of "interest" on your "loan". I suppose bond-investing is even closer to a form of usury. The interesting thing is I understand that Islamic law (which condemns usury) actually condones investing as long as the "creditor" shares the personal risk of loss along with the company (and this is what happens when you buy a stock at IPO, and to a lesser extent, when you buy a bond). So this might not be considered a sin - but again, it depends on your personal belief system.

 

Mind you, I'm not talking about myself here. I don't believe in a god, a soul, or in sin. So none of these things are a problem for me (I just laid out my views to show how people can be inconsistent in their belief systems and personal philosophies). But if you believe in all or some of the preceding, and you also hold that gambling is sinful, then you'd better be leery about getting into the market as well - at least with some sort of active trading. For the sake of philosophical consistency.

Edited January 30, 2010 by Turboflat4

[Skunk]

I know what he mean,u never notice my signature lol

world work this way in various aspect of our life,not only stocks,dont u think so?Chain reaction..economy also cost by such chain reaction on human greed 2 years ago

 

the later part is i add on in my opinions on why most pple will lost in stocks,seperate issues

 

Company pays employee is not "company lose, worker win"....it's win-win...company win the worker's time and effort, worker wins cash...although some win more than others. In the regular economy, whenever u buy something or use a service, u don't "lose" money, u have exchanged your cash for something u desired. So both sides win....again, some win more, some win less, but everyone wins.

 

In stock speculation, when u "win", someone else must "lose". It's like at a Blackjack table during CNY, when u win, it means your uncle/aunt/bro/sis has lost. Nothing "real" is created for the economy.

[Freestylers09]

alamak,what i mean is company ultimately earn clients or consumer $ from sales, its the consumers who lose the $ in buying the items..clients might not get back the sales when they selling to others..

 

but items will depreciate ,stocks might gain..do u know business is the riskiest investment than all form of leverage?

though stocks are not so real?

 

u get what i mean?LOL

 

 

Edited January 30, 2010 by Freestylers09

[OmOm]

Thanks for your sharing. Your post highlights one half of the equation, specifically the pre-event aspects - the cause. This covers the gamut of intention and motivation. However, it does not cover the post-event second half which is specifically the effect(s).

 

All actions, in spite of the underlying intentions and motivations, have effects. Like a stone that is cast into a lake, regardless of how much force you apply in casting the stone, there will be ripples that are formed when it breaks the surface of the lake. This is due to the physics of the system that we are in.

 

The definition of sin varies across cultures, religions and beliefs. However, for the sake of discussion, it will be necessary to put some form of meaning to it. Within the context of our discussion, I would propose defining sin as the connotations that one's thoughts and actions have with regards to general vices in humanity i.e. sloth, greed, gluttony, lust, envy, wrath and pride. Thus the degree of sinfulness is directly proportional to how much sloth, greed, etc is generated in oneself and in others through one's actions and thoughts. The more one's thoughts and actions results in himself or others tending towards the vices, the more sinful the actions and thoughts.

 

Stock trading is almost no different from selling someone a magic stone who then in turn sells it to someone else. At the end of the day, someone will end up with the stone and will have no way of unloading it onto another person. Like a game of musical chairs, that chap ends up bearing the major cost of the whole chain of trades.

 

Due to the advent of technology, it is possible to do stock trading on platforms that cross borders. One's stock trades immediately affect the lives of numerous individuals all over the world. When he earns from a trade, it means that someone (or a group of people) would have lost money (in either the past, present or future) that resulted in his gain. Thus one benefits from the trade gain through the loss of others.

 

The enormous network of connections between individuals created by electronic trading platforms translate into huge effects by one's simple action of clicking a buy or sell button on his screen. Coming back to the concept of sin, one would see that the gain or loss of money through a trade often results in a negative outcome. When one gains from a stock trade, he looks at it as easy money and would likely spend it more easily than money earned through blood and sweat. When one loses from a stock trade, the temptation to "recoup" his losses is very strong and he gets drawn even deeper into the whole trading process. Although not everyone is subject to these to a large extent, this is a common line across most people due to human nature.

 

The effects of a single seemingly innocuous trade thus are far-ranging and are heavily cast in vice due to the way the ripples form across human beings participating in the same trading realm.

 

I suppose the crux of the matter is whether you consider legalised gambling to be a 'sin'. There are some people who consider even occasional plays of the lottery to be sinful. If you fall into this category, then, yes, some sort of market action can be considered sinful as well.

 

Let's take what's commonly considered "gambling" first. There are people who rail against those who bet on horses or play cards, calling them immoral. The consensus amongst most of the "gambling is sinful" camp seems to be that horse pool betting and blackjack are sinful activities. In fact, some of this camp will condone a little occasional 4-D, TOTO or Sg Sweep action as harmless fun.

 

If you think about it, this is completely ass-backward logic. It is possible to devise very good systems that allow you to consistently profit (in the long run) from both horse betting and casino blackjack. And the proliferation of successful "professional gamblers" who make a living off both of these activities is testament to the realisation of the possibility. Like all forms of successful "trading" (using the term generically here), getting off the ground as a pro-gambler involves careful money and risk management and lots of theory (concepts such as the Kelly criterion) and due diligence (learning a system such as tracking the history of the horses or learning to count cards). These are not "flashes in the pan" - they earn their money.

 

In sharp contrast, the "simple lottery" is a complete waste of money. Statistically speaking, there is no way to predict what number is going to be drawn next based on known priors. The fanciful metaphors for this sort of lottery (more likely to get struck by lightning multiple times, etc.) are actually quite literally true. If any sort of gambling might be sinful, then THIS is definitely a no-no, because you might as well burn your money. The funny thing is that most people, even those who consider "hardcore gambling" to be sinful, regard this as a harmless bit of fun - and this is the strange thing to me.

 

Oh, if you believe that you can get an edge from spirits or mediums or whatever, then I have two things to say to you. First, I refuse to believe that sort of thing works. Quoting personal or hearsay anecdotes at me wouldn't help, because anecdotes make for terrible statistical data. Second, if you dabble in that sort of thing, you're unlikely to believe in the concept of "sin" (in the Judeo-Christian sense) in the first place, so all this is irrelevant to you.

 

Now, to trading. Strange that people make such a bold distinction between "investing" and "trading" - to me, they're different sides of the same coin, a very arbitrary difference, if that. A lot of it comes down to your personal market philosophy. If you believe you can beat the market with active trading and some form of technical/fundamental analysis, then good luck to you - because none of these systems have been proven to give consistent gains over the long term, especially when you include overheads such as commissions. That's why efficient market hypothesis/random walk theory has such a strong hold on many economists. If you accept that the market is generally highly efficient then you have to concede that predicting stock moves becomes, at best, a game of chance - and this is gambling. Sinful or not, you decide.

 

The only sort of market action that's proven to give consistent returns over the long term is buy-hold investing, especially of counters that represent the market, e.g. index-linked ETFs. In the long run, the market moves up (at least until the next recession), so you can use this axiom as a fairly safe hedge against inflation. Money-management remains important, and it's good to have a diversified portfolio, and set stop-losses to all your purchases, so you have peace of mind. Once this is done, most of the "random walk" chance element is removed, so your expectation become positive in the medium to long term. Most would consider this sort of thing to be "investing", and not gambling. But keep in mind that any sort of equity trade involves someone taking a contrarian position - so if you've gained, someone else has to have lost (or at least lost "potential gains"). If you consider that sort of thing to be "sinful", then you have your answer.

 

Even IPO purchasing involves this to an extent. A company tries to raise capital by declaring an IPO. "Investors" who buy IPOs at a non-preferential price are basically betting that the market is being unduly pessimistic about the prospects of the company - that the company is ultimately going to do much better than the IPO price indicates. A lot of the time, these IPO buyers are wrong. Even if the company doesn't go bust in a few months, the stock price might come down to more sensible levels after a few weeks of active trading, which means that they would've done better to adopt a more cautious "wait and see" approach. But let's consider the "win-win" scenario of a company that makes steady gains after the IPO - the company gets rich, the investors get rich. Surely, this can't be "sinful" right? Well, if you think about it - this is basically usury (and usury is considered sinful by some). You're basically lending a fledgling company money, and taking part ownership of it as collateral. The gains of the counter are a form of "interest" on your "loan". I suppose bond-investing is even closer to a form of usury. The interesting thing is I understand that Islamic law (which condemns usury) actually condones investing as long as the "creditor" shares the personal risk of loss along with the company (and this is what happens when you buy a stock at IPO, and to a lesser extent, when you buy a bond). So this might not be considered a sin - but again, it depends on your personal belief system.

 

Mind you, I'm not talking about myself here. I don't believe in a god, a soul, or in sin. So none of these things are a problem for me (I just laid out my views to show how people can be inconsistent in their belief systems and personal philosophies). But if you believe in all or some of the preceding, and you also hold that gambling is sinful, then you'd better be leery about getting into the market as well - at least with some sort of active trading. For the sake of philosophical consistency.

 

 

[OmOm]

The consumer of rice and eggs benefits from the trade because they serve as food and nutrition to him. He is the end-point in the chain of the rice and egg trade. For the end-point of the stock trade, the last guy does not benefit at all because the end-point usually comes about due to a zero-isation of the stock on hand.

 

alamak,what i mean is company ultimately earn clients or consumer $ from sales, its the consumers who lose the $ in buying the items..clients might not get back the sales when they selling to others..

 

but items will depreciate ,stocks might gain..do u know business is the riskiest investment than all form of leverage?

though stocks are not so real?

 

u get what i mean?LOL

 

[Freestylers09]

ya..but there's always willing buyers and sellings..end of the day..as usual,big fish eat small fish,small fish just have to be careful.

 

it's a very tactful mindgame and stragegy combine with a flawless plan to execute

 

they happy wan who up,they make them up,who down,make it down..

 

its all about demand supply only..

 

if they want to push and no greedy buyers go buy to makan their one to chase higher and buy high,how they can distribute nicely? rite?

 

 

just speaking on how i feel.

[Freestylers09]

The consumer of rice and eggs benefits from the trade because they serve as food and nutrition to him. He is the end-point in the chain of the rice and egg trade. For the end-point of the stock trade, the last guy does not benefit at all because the end-point usually comes about due to a zero-isation of the stock on hand.

 

i feel there's no end unless kana suspend

 

i encounter b4 how come i bought at tip of resistence without momentum already and tot die,stuck there

 

who knows Some Call Buy news out, help me push 20% in next 2 days

 

maybe i am still new,muz learn more

 

the one who buy from me,might have chance to get rights etc,end up have better gain if up?

 

there's always no last guy i feel im shares,if not economy will not b able to achieve what is it today...

 

all i can say is,do within limits,thats the safest ,if lose,also lost the limits

Edited January 30, 2010 by Freestylers09

[OmOm]

You are wise and have a high degree of awareness. The cloak of money has shrouded the entire financial industry's shadowy workings. The root of the troubles of the world today lies in the design flaws of the monetary system. In the past when barter trading was the only way the economy worked, everything had an expiry date and no one could hoard anything. A chicken farmer produced just enough to feed the community and the community reciprocated by providing him other consumables or services in exchange. Today, the concept of money allows hoarding to take place and that has resulted in the great divide between the "rich" and the "poor". When the disparity grows too large, what generally follows is devastation and a collapse of civilisation. It has happened to many civilisations and it will happen to ours as well if there are no changes made to the foundations of our civilisation.

 

Company pays employee is not "company lose, worker win"....it's win-win...company win the worker's time and effort, worker wins cash...although some win more than others. In the regular economy, whenever u buy something or use a service, u don't "lose" money, u have exchanged your cash for something u desired. So both sides win....again, some win more, some win less, but everyone wins.

 

In stock speculation, when u "win", someone else must "lose". It's like at a Blackjack table during CNY, when u win, it means your uncle/aunt/bro/sis has lost. Nothing "real" is created for the economy.