We always get a question in mind “Is Forex trading same like gambling”. So let’s look into why they are different.
We need to understand that there is some percentage of a gamble when opening up a Forex position. No expert, no matter how long they have been trading and analyzing the Forex market, can tell you in full certainty what the US Dollar will do today. There are so many tools that can be used in order to help you make a more educated decision, but do not be fooled by so called Forex experts when they tell you they have it figured out.
Let’s compare a professional gambler who plays the odds with a casual gambler who hopes to make money if he gets lucky and measure the results. Similarly, there is a difference between a professional trader who relies on discipline ,a systematic approach and prudent money management with a trader who relies on luck as much as skill to stay afloat. Of course, there is also a gray area in between these two extremes where many retail traders reside
- Numbers: Before we get into morals, ethics, legal issues, and legitimacy, let’s all just focus on the reason anyone gambles or trades Forex; money. Also, there is absolutely no comparing the amount of money traded daily in the Forex market to that of the gambling arena. In fact, we are not aware of any industry (ok maybe there are a few exceptions) that handles so much money on a daily basis. Depending on who we ask, there are anywhere between 2 and 5 trillion dollars traded daily in the Forex market. We cannot find exact statistics about how much money passes through the casinos daily, but I am pretty sure the numbers do not compare.
- Tools: While there is a risk factor involved in Forex trading, we are not totally in the dark when opening a position. We can find various schools of thought that dedicate much time and resources trying to eliminate as much of that risk as possible. Forex is not about luck. We can watch and analyze the Forex market for days before opening a trade. Also keep a close eye on the currency you are looking to buy, and only then, based on your studies, make your move. There are no such trusted tools in the gambling world, which leaves you in the hands of luck or fate. Either way we would not want to depend on chance with my hard earned money.
- Emotions : One of the main disadvantage with gambling, as we all know, is that it causes addiction. If we think about this for a second, the reason is because people let their emotions get the best of them. People step into casinos with nothing in hand but their desire to make money. When they do not fulfill this desire, they keep trying and it is not long before they have lost all their money, which usually leads them to gamble even more, and often more aggressively. This is of course a major problem. In forex trading, the first rule any trader knows is to leave their emotion out of the equation. Trade objectively and scientifically,set your trading goals, and always stick to them.
- Strategies: It is true that a very high percentage of traders end up losing, because they trade blindly and with no strategy. This is the biggest mistake a trader can ever make. Always before you trade a penny, you need to make some serious decisions about your trading goals and limits. Also stop your losses and take your profits based on trading strategies and not weak human emotions.