Is Forex Trading Gambling?
The main question always is if Forex trading can be seen as gambling? I think you have figured this out but let us look at the differences and similarities and you can make an informative decision.
Before we start let us look at what is gambling?
The main definition for gambling is the risk factor in the transactions and the risk of losing your money or bet. The second is to get involved in a game that you can win or lose your money and the last part of the definition is that you risk anything in order to gain something
Now the similarities will be discussed.
Similarities of Forex trading and gambling
- The first thing to take into consideration is that in both you are looking to gain capital in the shortest time possible.
- Another similarity is they both are unpredictable during play and that you need a certain amount of luck when playing.
- With both of these options, you will take a fair amount of time to be successful, some longer than others.
- Both are similar in the fact that someone has won a reasonable amount in the beginning and now they are looking for a continuation of this lucky draw.
- Forex traders and casino players have both a number of highly skilled players, even if it has developed over time in most instances.
- Trading and gambling can be seen as highly mathematical games if you are proficient enough you can raise your chances of winning by developing this skill. Poker and trading, for instance, Poker is a skilled game with chance and trading require a lot of skill if you are to be successful. You need to look at the odds.
- If you look at novice gamblers and novice traders, both operating on a level where there is no game plan. Gamblers will just play and get excited when they win before they have mastered the skill behind it. The same will apply to the novice traders, they will try their luck until they have done some research and understand the charts.
Gambling and Forex trading differences
- The amount in value differs tremendously. Roughly 2-5 trillion dollars are traded in Forex daily and gambling is no match for those figures.
- Large financial institutions support the Forex trading system. Although traders do not trade directly with banks, more on a retail level. When you look at the legal aspect, Forex is a more authentic practice and is backed by the law, whereas gambling is mostly avoided by big retail brands and not associated with doing business.
- When you look at the available resources, there is much more information that you can use to analyse your position in Forex. You can watch your commodities and read and study the analyses of experts and according to that result make your decision to buy into a Forex deal or not. With gambling it is more based on luck and fate, although you are able to study the game and the rules to the T, there is no guarantee about your next move. Every game is a gamble and all about house and player stakes.
- The Emotional level player and trader in the two fields differ. When you walk into a casino, your main aim is to make as much money as possible. And you will go to any extent in order to try and make up for a loss or a bad round. With trading, the first skill you are learned is to strategize, have a look at the facts and trade according to this pattern. This takes the emotional connection out of the equation. You will stick to your game and if you lose, you will not try to bet or trade a ridiculous amount in order to try and make up for it.
- Strategies are a very important part for both of the fields; however, you are most likely to be more successful in the trading business as in gambling. In gambling, you can know the rules and how things work off by heart, but there is still a huge element of chance in there. Most players win some and lose a lot as the stakes of the house is mostly in favour. However, with trading, you are trading according to the strategy and you should have a plan B in place should the first option not work out. This will definitely help you to avoid the trading dips and you will be making an informed decision.
Forex trading and gambling should be seen as a business
Before you start on a project, you normally need to have a look at the resources available and do some homework regarding the new subject. That is exactly what happens in the life of a Forex trader. They have access to the price action and the confluence information ; thus, you are able to trade when the stakes are in your favour. By trading with an open mind and with the knowledge that you might lose some and then win some as the odds are stacked in your favour. Even if you are not able to see the computers hand beforehand, the casino knows that they will make a profit at the end of the year irrespective of anything else, because of the house always having the upper hand in the stakes. This makes gambling for casino owners a successful business.
As casinos have a clear understanding of the risk involved, they do set the limits of the tables in order to keep the odds in their favour. As a trader, you should practice the same method in your business. Decide on what your capital will be and according to that, manage your trades and amounts thereof in order for you to still have your capital intact for most of the duration, this will ensure that you turn the odds in your favour as you will only bet on those trades that have an edge.
If you are to ask the question to a few different people you will get a few different answers. Yes to some extent trading is gambling, as it is a risk involved and you are betting in a certain way as you expect a certain outcome. Other experts might say no trading has nothing to do with gambling as a vast amount of research and strategy goes into a successful trade and the fact that trading is more trustworthy than gambling.
However, it does not matter how you look at the two different entities, it will always be a positive experience to the one that beats the odds.