To answer the question, is Forex trading gambling, we have to break it down by the very definition of what it is to gamble. But before we do that, I want to share a brief outline of the way I used to think about trading and gambling.
Understanding Forex Trading
In a previous lesson, I wrote about price action and confluence. Forex trading is the ultimate form of gambling. We get to review past price action before putting on a trade. The key is finding the right Confluence Factors that stack the odds in your favor. All of these factors mean a higher probability that this trade will make us money, and it did.
We can learn something from casinos. Then wait for the strange look they give you. Do you think trading is gambling? You can argue that people who do not have those skills, and there are many of them are gambling. But the few that have acquired the skills and know what they are doing are NOT gamblers. So you are not credible as a trader. You should not be trading. Sorry you feel that way, Justin. Wagering of money on an event with an uncertain outcome with the primary intent of winning money — that sounds like trading to me.
Every business gambles to some degree, not just the trader. Hey Justin, If you think that way, you can say parents looking after their children and providing them with everything in theire capacity believing children would look after them in return when they will be needed and when the children ditch their parent to be in old age homes, the parent were gambling.
An entrepreneur who confidently relies on his hunch and abilities to grow a business is gambling. The investors who invest in companies and shares are gambling.
Nonetheless the very individual who is working hard to get a dream job is gambling because most of the time the aspirant does not end up with dream job or to make things worse even jobless. All of these people know nothing more than the history known to them and they are gambling with their time, money, resources.
When I started Forex trading, i started with demo accounts and I traded without doing any analysis. I ended up blowing my full account. It s been 2 years now and I am still in the process of learning, because I dont want to gamble.
How do I do that. Not trading based on emotions, trade purely based on facts, get news updates constantly, follow mentors, research, back test. And I am able to make profit now. Those who think it is a serious business or investment venture and do everything necessary for its success, your success is guaranteed. So why do some people manage to maintain an edge in gambling, or an edge in trading? But folks, if you can loose, it is a gamble, period!
I am surprised that we are arguing over this. If you are a trader, tell me if your results have improved from the last time we had this exchange. You see, to become a good doctor, students are required to go to school for almost 10 years.
Well, why do people think that trading, which when done well can make you a billionaire, does not require any formal training? In fact it does, but nobody will provide that training because once you are good at it, you keep the knowledge to yourself. And if you were right then all the investment banks that have trading desks are also gambling. Is that what you think? How do you not realize that any human endeavor at which one can become better over time is not gambling?
If you have not, please do. And once you have. Sit down, get yourself a good computer and start learning to read price movements.
Get familiar with Elliott Wave theory. Develop some good common sense. If you are really serious about it, you will soon develop a different mindset.
Until you do though, I am afraid you will continue to lose your hard earned dollar because in fact before you get a serious training you are nothing else but a gambler. And those who are not in it to gamble will take your money.
Investing, trading, to me is not gambling, as you own shares in the company concerned. You put your money in a Bank or Building Society and get a fixed rate of interest. You invest in the stock market hoping to make more than in a Bank or Building Society knowing that you are taking on greater risk. Investing in a share one takes into account the fundamentals of the company, how well it is run etc.. Gambling is like E G throwing a dice or a game of roulette, where you have no control at all.
If we did not have Banks and private people investing in companies, our civilisation would not be so far advanced. Alex, this post is about trading, not investing. Those are two very different things, especially when referring to fiat currency.
Is there anyway around this? I have one important question regarding Forex Trading. Elias, the point of this post is that you need to trade like the casinos by stacking the odds in your favor. Trading is not gambling, it is possible to make money in the market, only those who know the market how it is moving. It seems you missed the point of the post, which is to trade like a casino by stacking the odds in your favor.
The similarity to gambling is that the outcome of one individaul trade is unknown and ramdom. You can try to increase proabilities with more confluencies, but it is still ramdom. Serious traders make money via a series of trades with proper Risk Reward. There is no way to guarantee your trade will be a profit. If you define gamble as taking on risk in the hope of a desired result, then yes, opening a new restaurant is a gamble.
Most life endeavors are gambles if you stop and think about it. It is a big gamble in running any business. I am a business owner myself and I have made a huge lost before in running a restaurant. There are situation that you have either no control or little control or lost control. A major sign that someone is a gambler is when their mood swings start to fly all over the place. The person can be high as a kite one day and then completely depressed the next. This sort of behavior comes from the highs of placing winning bets, only to be replaced by depression from big losers.
Trading if not treated as a business can have the same effects on your relationships. You will start to find time with your family as a distraction from your very important task of performing more and more market analysis. Your family will not know which guy they will encounter after each trading day. Some days you are completely normal, while on other days they would rather have dinner with a sociopath versus dealing with you.
Trading should have no impact on your emotions. This is always the first sign of a good trader, the ability to stay completely flat in an environment that is filled with raw human emotions such as fear and greed.
Trading effectively boils down to a number of fixed rules that govern how you conduct your business. This concept of rules applies to the market, because the market is a living and breathing entity, where no one can predict her next move.
This level of chaos can drive a man insane if he does not equip himself with clear boundaries of how to engage with the market. Over time, if you are finding yourself abandoning rules in order to place random bets in the market, you are in trouble. This is a clear sign that you are no longer concerned with establishing a rationale for your trades and have instead opted for the ability to just place trades whenever and wherever you want.
This sort of behavior is similar to the gambler who is not concerned with calculating odds, but would rather just stay in the game and place bets. Let me qualify this a bit, because I would say I am one of the most passionate people when it comes to trading, so I get it if you dream about charts at night. Do you find yourself only talking about the market with everyone you encounter?
If you find yourself no longer having any desire to enjoy the smaller things in life, you could be heading down the path of losing yourself by focusing on the market so much. This is very similar to the behavior of a gambler who completely shuts out the entire world to focus on their game of choice. Simple tasks like putting your kids to bed or even eating will be too laborious. If you are trading poorly, odds are there is at least one person that will know this fact.
Either because you share this bit of information because of your loving relationship and great communication between each other, or they will know because of the shrinking joint account balance. At some point your spouse or close friend will confront you about your losses. This confrontation will likely be awkward as they will not have a firm understanding of how the market works, but on a common sense level will know that whatever you are doing is not working.
When confronted a trader that is gambling will deny everything no matter what. The gambler will likely take it a step further and begin attributing their market losses to some inefficiency in the market. If really pressed, the gambler will likely act out in such a fashion that the close friend will probably avoid discussing trading or money with them ever again to avoid future conflicts.
Does this sound like something that has happened to you before? Are you any different from this fellow?
Before you enter each trade, have you determined where you will exit a position if you are wrong? You should at a minimum have a mental stop where you will exit a position if it goes against you too far. You are no longer fighting the market or making the newbie mistake of letting your losers run way against you. Stops will often be the one thing that separates a winning trade turning into a loser due to some unforeseen even in the market. Stops are the same method that good gamblers use when betting in casinos.
They come into the casino with a set amount of money they are willing to lose. Then once up for the day or on a particular game, they have a set amount of money that if they begin to give back money to the casino they walk away. This ability to walk away a winner is the actions of an investor.
If you find yourself giving back healthy gains for losses because you are not willing to put in stops, you are just gambling. Hoping for some larger target or profit zone. Most people that trade do so sloppily. Where the line begins to cross between sloppy investing and outright gambling is the frequency of the violations of the questions mentioned throughout this article.
You have to be honest with yourself.
That is why, as a trader, your mindset should be akin to that of the CASINO and NOT the gambler, who merely focuses on one event (or trade) at a time.. Casinos are profitable year, after year, after year, despite having a business where the outcome of each card laid down, dice roll, or slot pull is unknown each and every time. Forex Trading Versus Gambling Published: November 6, by Forextraders Numerous attempts have been made to simplify trading in the forex market, and while a degree of success has been achieved in this area, trading forex is more than installing a trading platform, funding an account and clicking a buy or sell button on your computer. By Jay Meisler. Is there a difference between forex trading and gambling? I have been asked this question on more than one occasion and it is a good one as it can make the difference between.