I love trading and I love investing. I think it’s one of the most exciting business ventures you can undertake. But there’s something that genuinely bothers me about trading stocks and why I tend to avoid them completely. In fact, there are a LOT of things that bother me about trading stocks, and I’m sick of it. I’m honestly starting to avoid them.

It’s not that I don’t see opportunity and profit potential in the equity markets. There’s millions to be made every year whether the market goes up, down or sideways. The fact of the matter is, stocks just aren’t as effective of a trading tool as exchange traded funds, so I’m hardly going to trade them at all any more.

Exchange traded funds are a hell of a lot better, and safer. I don’t need to undertake unnecessary systemic risk every time I get into a trade. Every time the P/E ratio, debt to equity ratio or earnings reports and dividends on a stock go south, regardless of the trend formation, the stock crashes. Here’s an example:

You’re looking at an example of what equity traders refer to as catastrophic gapping on GTX Incorporated, a pharmaceutical company. Normally, a stock trades at or around the closing price of the previous day. Sometimes, however, that just doesn’t fucking happen. We call it gapping, and when your stock gaps to the point where you lose 20 percent or more of your equity in the trade, we call that catastrophic gapping.

Catastrophic gapping is just one example of the systemic risk inherent in trading stocks. It’s caused by an overnight news release after trading hours that completely changes the outlook for the company. It really, really sucks on ice because you can’t do anything about it. Your stop loss wouldn’t even trigger if you had one, because by the time your platform calculated the trigger, your stock would already have crumbled well below your stop loss price. You’d have no choice but to sell GTXI at a staggering 45 percent loss regardless of how your stop had been positioned.

This sort of thing doesn’t happen very often, but it’s just plain stupid to expose yourself to it in the first place if you ask me. This particular example occurred because GTX Incorporated failed to get FDA approval on a drug to reduce bone loss on men with prostate cancer. The news release was overnight and literally flattened the stability of the stock before anyone had a chance to get out.

With exchange traded funds, you are buying a prediversified basket of stocks, so if one of them happens to crash, you will not suffer a significant loss in the fund. That amount of security alone is enough to trade funds over stocks any day. It also helps that because of lower systemic risk and more diversification, you are looking at fewer false breakouts in trend reading, an awesome incentive for technical traders.