Morality of day trading stocks?

Investment Questions and Chats Stocks
#1

Imagine you wake up in the morning and find that a certain stock is buzzing due to positive news. It is several percentage points up in the green & has higher than usual trading volume. It’s what all the day traders are trading. If you purchase the stock, aren’t you causing its price to increase in two separate ways?

  1. you buying stock means there is less available supply of that stock in the market > reduced supply > increased cost.
  2. you buying stock causes increase in trading volume > increased volume alerts others to buy > as more and more people buy, the price gets driven up even higher.

This chain of events causes the stock price to artificially inflate. The price is now 10% higher than what you purchased it at. You are happy with this profit & sell the stock. In other words, just by purchasing the stock, day traders are causing inflation of the stock price, and then selling a few minutes later to make a profit. Are there any moral…(thus halal/haram) issues with this? Am I overthinking this? Is this just how the nature of business works?

#2

@Mufti_Billal & @Mufti_Faraz_Adam, any thoughts?

#3

Would somebody be able to answer? Thank you in advance!

#4

This is just how the nature of business works.

To address your two points.

  1. If there is less available supply in the market once you buy, does the supply not increase back when you go to sell? There “reduced supply” will increase when you go to sell the stock. Does that decrease the cost as per your formula?.

  2. Increased trading volume does not necessarily alert others to buy. Prices can fall on increasing volume.

All in all, simply buying and selling stocks is the same as buying and selling any other product on the internet. The only moral/islamic issue around buying/selling is that stock exchanges operate on a delayed settlement date (T+2), so one should ensure that they are selling their stock after settlement.

#5

Thank you for taking the time to answer @M_E!

  1. Yes, selling the stock would contribute to a decrease in its price as per the formula. Is there anything wrong with that?

Wikipedia says “Day trading can be considered a form of gambling”. Do you think that is true? Suppose 20 years from now, there is no T+2, meaning settlement is instant. If a person purchases a stock because they think its price is trending upwards based on their analysis (news, volume, price action, indicators, charts), is that gambling? Or again, is this just how trade/business works? Thank you!