One of the main questions that always comes up in most conversations regarding forex is “Isnt Forex trading just another way of gambling”？ This looks like a straightforward question with a simple answer, but it requires a deeper analysis into the two to conclude that they are entirely two different things.
Forex trading and Gambling
Since the Forex market is uncertain, one can say there is some form of gambling involved whenever you open a forex position. This is usually a very dynamic market, and even after years of careful study and analysis, no one can predict with certainty how a currency pair will move. One can only rely on analysis tools and past projections, but they too cannot be certain. With every Forex position you enter, you will always be exposed to the Forex risk. This is a type of risk where you are exposed to the markets dynamic nature and are unaware of how it will perform in the coming days or even hours. Regardless of the amount of technical or fundamental analysis you conduct, the Forex risk will always be present, and this shows some amount of Forex gambling in every trading position you take.
One of the most distinct differences between a gambler and a Forex trader comes out when making a “play.” A gambler is always uncertain of their chances of winning, and unless they are using foul play, they always tend to believe the odds are stacked against them. Their chances of winning are always lower compared to those of the house, or they are similar. However, a forex trader tries to come up with different trading strategies that will shift the odds in their favour. They can use different analysis tools to predict market trends and open a position that is bound to be profitable for them. They are certain that they are bound to come up with a profitable overall position after some skilful trading patterns. This shows the major difference between a Forex trader and a gambler.
Participants in these two markets are also very distinct and have different attributes. Here are some of the major attributes that set them apart.
#1. Numbers
The main reason people venture into these two lines of work is primarily to make money. Everyone wants to make a good investment, either in placing a bet or taking a market position that will generate a positive cash flow for them. The amounts of money circulating in these industries are very different. The forex market sees daily trading of over 5 trillion dollars from traders from all over the world. The amounts involved in the gambling industry dont even come close to that. This is a major differentiating factor between these two industries.
#2. Participants in the industry
Any line of business has its people who take part in it. These can be major or minor players, all of whom come together to make it all a success. The participants in the Forex market are mainly retail traders. These are individual investors in different parts of the world who develop their own trading strategies to outperform the market. Another participant in the large financial institutions such as mutual funds and banks. They help establish the legitimacy of forex trading, and with such big players, you are assured that it is legal. Gambling, on the other hand, faces many legal hurdles as it is prohibited in some parts of the world. Its participants are confined to illegal underground activities that make it all questionable. This is also another difference between them.
#3. The tools used
Although Forex trading comes with its own uncertainties, whenever you make any position, you are usually well informed on why you did that. There is numerous software that helps you to analyze the market correctly and different guidelines on how to open and close trade positions. These tend to vary depending on your trading strategy and your analysis method. When using either technical or fundamental analysis, you can observe the market trends for several days or even weeks before finally settling on a position. This shows that there is no lucky trade, and they are all informed by proper market research. These tools help a Forex trader to become better and make successful trades. In gambling, however, there are no such tools. There are no trends to study and make an informed decision. This leaves everything to chance, and that doesnt seem to be a good idea.
#4. Emotions
After some time in gambling, most of the players become addicts. Research has shown that this stems from the emotions involved in gambling. Whenever a gambler is walking into a casino, their primary aim is to make money. This clouds their judgment and makes them unaware there is also a possibility of losing money. Since there is no way to make informed bets, and they all depend on luck, it might not be their lucky day, and they lose all their money. Rather than dissuade someone from gambling, it tends to push them further as they will come back again and again until they are addicted. In forex trading, however, it is quite different. In the training process, one must learn how to separate their emotions from the decisions one makes. A trader must learn to separate greed and fear to make better decisions and open profitable trades. This ensures there are no emotions involved, and a trader can choose to walk away any time.
#5. Strategies employed
Just like in any line of business, engaging in the forex market is very uncertain. Some say that traders can be on a losing streak for months, but you realize they made their trades without any strategy in mind on proper evaluation. These are mostly traders who have bought into the narrative that forex trading is gambling. A trading strategy is the key to achieving your long-term goals. Before committing any money on any trade, first, make a proper analysis and evaluate whether it will help you reach your final and desired position. This will allow you to make more informed decisions on whether to engage or avoid. You can make use of the various components of the tools such as Stop Losses to ensure you close trades at the right moments. Gambling, on the other hand, doesnt involve any strategy as it is left to fate to decide whether you will win or lose your bets. This is a major and very distinct difference.
Takeaway
Before engaging in the Forex market, you should always know that it can get treacherous. There are numerous risks involved, and they can result in financial ruin. On the other hand, diligent and well-planned trading strategies will generate good rewards and help you become a professional in the long run. You should not base your entire strategy on short-term goals and ambitions, and you will get better with time. You should always have these aspects in mind, and always remember that forex trading is not gambling. When you accept this, your decision-making becomes better, and you can learn to develop strategies on how to make profitable trading positions. Forex trading is very different from spinning a slot machine.
Leave a Reply