Forex Trading and Gambling… One and the Same

I often find it curious that people tend to react very negatively when forex trading is compared to gambling. Every time I talk to a proffesional trader about this matter we end up discussing how only “new traders” gamble and proffesionals do not gamble but “trade”. What is so different between forex trading and gambling ? Through the following few paragraphs I will tell you my views on the subject and why I believe that forex trading is a form of gambling. I will also tell you how they are different and what the difference between investing in forex and going to Vegas really is. At the end of this article I hope you will understand my points of view and why forex cannot be considered anything but a type of gambling.

So what is gambling anyway ? Gambling is simply the act of betting on the outcome of a given event without any true certainty about its result. Sounds familiar ? Forex trading is merely the betting of a certain amount of money on the outcome of price movement without any absolute knowledge of where price will head. Therefore, in accordance to the definition of gambling, forex trading and any other form of speculative investing is merely gambling. But if it is gambling by definition then why do proffesional traders find this comparison offensive ?

The problem arises because people often relate gambling with casinos and in casinos you are gambling on a game which has an outcome which will be statistically unfavorable to you in the long term. Casinos make money because they are NOT gambling, they know that the outcome of a large sample of events will always be in favor of the house. In practice, a player in a casino floor may feel like he or she is “gambling” (which is true for small samples which can effectively be totally random) but statistics do favor the casinos within a large number of events. What this means is that if someone plays in a casino for an infinite period of time, the casino will end up with all the money. The casino always wins since it has a statistical edge on all the games played.

Many traders are offended by the comparison because they believe that people are telling them that they trade like they would play in a casino, to inevitably lose money in the long run, which is why new traders are so often compared with casino floor players.

In reality, forex trading is gambling, but it is a “game” in which the odds are not set against you in a mandatory way. Forex trading resembles sports betting a lot more. In sports, a bet is made for a time with a lot of information which can be used to determine the winner with statistical significance. For example, if a horse has won the past 10 races, then it is bound to also win the next rase. Betting for this horse will give you a statistically higher chance of winning than betting against other horses. However, the outcome is never known so it might happen that your horse loses. However, within a large given number of events, you can be an overall winner if you know enough about the facts that affect the outcome of the events.

Forex trading is very similar, if you know enough about the facts which determine the outcome of price movements then you can statistically profit from the market even though you may lose in several events due to the true outcome of any event being unknown. The more educated gamblers make money while the less educated gamblers which have no capacity to determine the probabilities of certain price movements against others end up losing their money. Since every dollar is sold for every dollar bought, the best gamblers get in and out with money when the others get in and out to give their money.

So in the end the matter is pretty simple. If you trade like you would gamble in Vegas, without any edge, you will lose, however if you gamble with intelligence and with analysis over the outcome of events you will, in the end, become a profitable trader.

If you would like to learn more about the systems I use to trade in the forex market for a living and how you too can design and trade your own automated long term profitable systems please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

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3 Responses to “Forex Trading and Gambling… One and the Same”

  1. townjet says:

    When I first started trading Forex I remember putting in money and starting out with a resistance and support strategy, FXCM was posting these levels. My first week I had doubled my money, but to my surprise I was shocked when the support and resistance levels were broken the following week :) . I kept throwing in more money… I remember the feeling I had, and "IT WAS" a feeling like gambling. I felt like I was throwing money in and seeing if it would pay off, like a slot machine. It was a tough lesson to learn, and to learn that a real strategy needs to be in place with real discipline. Three years latter I feel like it still kind of a gamble, but one where I have now taken the time to try and put the odds in my favor through a realistic strategy and gain and with a large amount of discipline (of which I am still learning). Still lots to learn.

  2. Sang says:

    I will immediately take hold of your rss feed as
    I can’t find your e-mail subscription link or e-newsletter service. Do you have any? Kindly permit me realize in order that I could subscribe. Thanks.

    • admin says:

      Hi Sang,

      Sorry, I have no free e-mail subscription or e-newsletter service. However you has subscribe to the rss feed to get the latest updates from my blog :o) Thank you for posting!

      Best Regards,

      Daniel

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