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Forex Trading Like Gambling

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The Forex market is one of the most liquid and largest markets in the world with volumes of over $6 trillion per day. But this leaves many people thinking? Isn’t it just like gambling? Well, today I’m going to help clear this up for you and help you understand the differences between Gambling and Forex trading – it’s a bit of a grey area.

Forex trading is generally not like gambling although sometimes, people can use Forex as a method of gambling by not using the proper risk management strategies and/or trading recklessly. In order to trade profitably, Forex traders must take adequate precautions and learn to trade the market before participating in it.

In order to better understand the differences between trading and gambling, we have to first look at what each term actually means.

Trading Can Be Like Gambling When it comes down to day trading in any market, you're dealing with odds. We've looked at situations like the Canadian dollar or emerging markets that had a favorable economic picture with which you could buy a stronger currency like the British pound or euro. The similarities between trading and gambling Let’s look at some of the similarities between Forex trading and gambling. Most obviously, there is no guaranteed outcome as to what’s going to happen. In both cases participants put money into the marketplace, and then hope they’ll make money instead of losing. Like gambling, the deeper emotional game of forex is about dampening both the endorphin rush and the fight or flight response. Perhaps at the end of the day, while forex and “having a flutter” are different intellectual exercises, both pastimes may be predicated on the same basic emotions: the fear of loss and the excitement of acquisition.

What is gambling?

According to Wikipedia, “Gambling is the wagering of money on an event with an uncertain outcome“. Most people are pretty aware of what this means; it is essentially the act of risking your money knowing that you could lose it all.

What does Forex Trading involve?

IG, one of the world’s leading Forex brokers says that “Forex trading, also known as foreign exchange or FX trading, is the conversion of one currency into another” but what does this actually mean? It means that when you trade Forex, you are thinking that the other currency will be worth more/less in the future.

So, what’s the difference between them?

Forex trading like gambling no depositForex Trading Like Gambling

Naturally, there are many ways in which the two are similar and different, and most of the answer lies within how you commit both acts (Forex Trading & Gambling).

Trading without knowledge is gambling

I know – it’s a pretty bold statement. But trading Forex without any prior knowledge may as well be classed as gambling. After all, you are looking to make money on the back of an uncertain event (remember the gambling definition above?) without any knowledge of how to prevent a total loss.

Gambling is riskier (untrue)

Is Forex Trading Like Gambling

Many people assume that traditional gambling methods are more risk-averse, but in my opinion, the can be of equal risk. There is such a thing as betting safely, some people develop strategies and use something called bet insurance to make their bets less risky. On the contrary, some Forex traders are highly risk-averse by using high leverage and no risk management tactics.

Trading can be profitable, betting rarely is

It’s true, traders have more chance of being profitable than bettors due to the sheer nature of the industry. Arguably, there is more skill involved with trading and therefore, more room to improve. To add to this, it is important to note that with each trade, like gambling, there is a winner and loser – so in that respect, it can be seen in a similar light.

Tips to trade safely (and not gamble)

In order to ensure that you trade Forex safely, and not gamble with your money, here are a few tips to get you on the right tracks.

Use stop-losses

A Stop Loss order is a way of preventing further loss on a losing trade. These orders ensure that your capital is safe if a trade goes in the opposite direction to where you expected it to go.

Manage position sizes

Using all of your capital on one trade is a sure way to gamble on the Forex market. By doing this, you are risking all of your money on one trade which could lose out – it’s no different to putting it all on black down the casino. To start off with, try trading with 5% of your capital on any one trade, this is a good way of keeping risk down and trading professionally.

Forex Trading Like Gambling Losses

Do your research

This goes without saying – the most knowledgable earn the most Forex market. Try reading a Forex beginner’s guide to start with, and then expand your knowledge using YouTube and other similar online resources (I found this mix the perfect way to learn how to trade Forex profitably and safely). The learning doesn’t stop there though. After you’ve learned how to trade properly, you’ll still need to keep up to date with the latest economic news as this is the basis of most profitable Forex trades.

Conclusion

Trading Forex can be nothing like gambling, or it can be exactly the same – it all rests on exactly how you do them. There are traders who resemble gamblers, and there are gamblers who resemble traders. In order to trade Forex without gambling on the markets, make sure you get proper technical and fundamental analysis training as well as using risk management techniques when you get round to trading. Anyway, best of luck with your journey!

Forex Broker ReviewsGamblingReviews of the Best FX Brokers

Forex Trading Like Gambling Real Money

There’s no doubt: Forex trading is becoming increasingly popular around the world. More and more people register at a Forex broker and try to trade with currencies. But it’s more like testing their luck when they start trading because most new traders actually gamble and don’t trade seriously. They open positions due to emotions or feelings just like a Roulette player “thinks” that the next number will be 17. A Forex trader without enough knowledge and experience just acts like that. He “feels” USD must rise against EUR today.

Obviously Forex trading leaves no room for emotions and feelings like that. And there’s no doubt that everybody who trades accoridng to feelings will go broke sooner or later. At least in the long run. In the short run, even monkeys that push buy or sell buttons can win. And monkeys are statistically able to make big winnings for a longer period of time. The law of large numbers is what it is: it needs large numbers and not just a few of them. All in all, a monkey will trade with negative expectation especially when you consider spreads but that doesn’t deny the possibility that you can win a decent amount with pure guessing for a certain period of time. But the reverse is also possible: successful traders can make the right decisions and still take loss after loss. That’s the reason why you need enough capital to trade. See also our article about Forex bankroll management.

So if you want to answer the question whether Forex trading is gambling or not, you have to pay attention to the decider. Who’s actually trading and for what reason does he trade? An inexperienced trader that starts trading without the necessary bankroll and knowledge can also go to the next casino and play Roulette or any other game. That means he’s gambling while trading. But hey, that’s ok. Not everybody wants to make a living trading Forex. There are people that think it’s exciting and they are looking for a rush. And with this point of view, Forex trading offers even better winning chances than most casino games. Especially at times with high volatility it’s possible to make $ 5000 out of $ 50 with pretty good odds.

This point of view is no mistake as you can see. But there’s a problem when a trader thinks he’s trading with a positive expected value while he actually doesn’t have an edge. That means he’s gambling without knowing it. This case can be rather expensive. While thinking he’s making the right trades, he will scapegoat the variance and thinks he has to finish in the black figures sooner or later. But he won’t break even and his capital is gone. However, this case is not possible when he takes trading seriously and pays attention to important things like having the right bankroll (trading capital) and learning how to trade. If you have enough trading capital and control your risk, you won’t go broke. But you also have to work hard on your trading skills because if you don’t, you will go broke no matter how large your bankroll is and how small the leverage is you’re using.

There’s no doubt that there are professional Forex trader but there’s also no doubt that there are those monkeys that are gambling. The result is pretty clear: You can call pretty much everything a gamble. Buying funds or stocks can also be gambling. Some people buy stocks according to their personal preferences like buying BMW when driving a BMW. It’s also possible to gamble while trading currencies. But it’s possible to make money trading Forex and that’s why you can’t state it’s a “game” of luck. You can do it for the thrill, for fun or you can try to earn money. Both are possible and both is ok as long as you know what you’re doing.


Continue reading here:
• Forex Trading Risks
• Forex Bankroll and Risk Management
• FX Trading: With These Four Traits, You Lose Money
• 8 Reasons for Forex Trading
• How to Learn Forex Trading

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