This is a question that gets asked all too often. If you’re looking to step into Forex you probably have seen it being thrown around, or perhaps you’ve asked it yourself.
In this piece we discuss the similarities and differences between the two and decide what it is that can distinguish between these two and how the trader actually does have a role to play in their future in the market.
If you’re only here for the answer and not interested in reading too many words then we can make it easy for you- no, it’s not a gamble.
However, if you’re genuinely curious about the subject and are interested in dissecting this comparison and really understanding the matter, read on.
Why this comparison?
The fact that this question gets asked so often must mean that there is some level of truth to it perhaps. And to be fair, there is.
This comparison exists because if one went out to look for them similarities will actually arise. Some of them are listed below.
- The market seems to be doing what a casino does-getting people to invest in the hope of making money. Odds are not guaranteed. The market can take any direction at any point.
- Some emotions, or maybe most emotions, behind the participation are the same. The main ones being hope and greed. When things start moving in a bad direction the loss can bring forth similar emotions as well.
- The moves others make can affect your trade.
- The illusion that you can quadruple the amount you’re investing in a day or two if you do it right.
- Some people might think it will give them the same kind of thrill one gets from gambling
How is this comparison inaccurate?
Now we come to how they are not the same thing. What are the differences, you ask?
- The hope for profit can be looked at as a false hope, but is it? Is the market set up against the trader? No. The main reason for this is that there is no central exchange that controls the direction. The traders decide how the market will move. So there is no big bad man getting everybody’s money.
- There are a lot of ways to manage money and keep a check on one’s account to ensure a certain level of safety.
- There is a stop loss. So you can control how much you will lose if things go wrong and the market moves against you.
- You can leverage to not have to put all your money on the line.
- Trading accounts are sustainable when used right. There will not be one trade that will make you rich enough to retire. In order to get good profits, you have to take it slow but steady.
- There are ways to know and predict market trends. It requires study and research but they exist. There are technical indicators that can help you too. In gambling, however, it’s usually a matter of chance who gets dealt a good hand and who doesn’t. You can’t prepare to help your chances. In trading you usually can.
- In trading there is an exchange. You buy and sell. In Forex especially a position closes when this transaction has completed. Gambling is not an exchange.
- Between a skilled, mature trader and a gambler there is even a difference in emotions. The mature trader does not let greed or excitement dictate their moves. They follow the strategy they are following and stick to it for the most part.
- Since there are big players such as banks involved in FX, it lends a great deal of legitimacy to the forex market- something the gambling world lacks.
Let’s get it right
There’s such a thing as a risk-adjusted return. This is when you take into account the risk involved in getting the return. Is it worth it? A good trader who has been in the business a long time and is till thriving, will tell you no. It is not. That’s because all it takes is one bad trade for things to hit the fan causing the trader to lose a whole lot of money- more than they could afford to lose. In gambling, this cannot be ensured.
Is trading sometimes like gambling though?
Yes, if you don’t trade right. If you trade like a gambler, it will turn into a gamble.
Trading requires a lot of patience. It requires consistency. For successful traders, it is work. It is not a game.
Ultimately, in Forex moderation, consistency, research, and a good strategy will result in success. If you’re someone looking for a get rich quick scheme then this conclusion might seem a little off-putting or perhaps discouraging.
We still think it’s good that you found out now and not later when you realize that it didn’t turn you into a millionaire in 2 months like you hoped it would. That intention and that motivation in Forex will most likely come to nothing. If you’re looking for that kind of a thrill, you will most likely find the real trading part of Forex rather boring.
In gambling there’s chance and luck, in Forex trading there is probability and trend.
Therefore, it is possible to remain consistently profitable because the hand you get dealt is not completely out of your control. You can choose to enter a trade or not. And you can also control the amount of money you’re risking so that even if you lose, it still isn’t going to bankrupt you.
To sum it all up:
- Trading is not gambling by nature. It depends on the trading style being employed.
- The mature trader who wants to make consistent profits will risk smaller amounts, use stop loss, enter a trade wisely, and maintain knowledge and understanding of the market.
- A trader who looks at Forex like a casino or an opportunity for a lucrative gamble, will let greed drive their trades, will rush into trades, will be inconsistent, and risk more in the hope of earning more.
It depends on the trader which style they want to adopt.