To answer the question of whether Forex trading is gambling, we must first define what it means to gamble. But first, let me give you a quick rundown of how I used to think about trading and gambling.
I recall when I first began trading Forex in late 2007, a little over 6 years ago. I was always the first to speak up whenever the topic of trading came up at a social gathering; I was so proud to call myself a “trader.” Almost always, one of the first things people would say is,
“Oh, you like to gamble, right?” “You must enjoy going to Vegas!” or, my personal favourite, “You must enjoy going to Vegas!” Being the naive trader that I was at the time, I would become defensive and say things like,
“No, not at all…
If you know what you’re doing, trading is nothing like gambling.” Of course, I had no idea what I was doing at the time, but that’s beside the point.
Now fast forward to the present…
That statement was WRONG, to say the least.
Is trading a form of gambling?
Trading is, without a doubt, a form of gambling!
The following is a definition of the word “gamble” from Webster’s Dictionary:
- to take a chance on losing (a certain amount of money) in a game or bet
- To engage in a game in which you can win or lose money or property
- To take a chance on losing (something valuable or important) in order to accomplish something.
Is there a common theme here? “Risk” and “losing” are two words that come to mind. If a Forex trader knows two things, it’s that there’s always risk and that you’ll lose money at some point. Simply put, it’s the price of doing business as a Forex trader.
So why do so many Forex “experts” insist that trading isn’t gambling? Or that their new and improved strategy, with a 98 percent win rate, is a sure thing? Of course, they want to sell you their product. They want you to believe you aren’t gambling anymore. Isn’t it true that gambling is a bad thing? You might be surprised by the truth.
What exactly is the truth? The truth is that every time they sit down at their trading computer, even the “big boys” at large banks and hedge funds gamble. But (and this is a big but), there’s a fundamental difference between how they gamble and 99.9% of retail Forex traders. It’s a concept known as “probabilities.”
Learn to Think in Probabilities
It all comes down to placing trades where the probability of winning is greater than the probability of losing. To put it another way, you’re stacking the deck in your favour. I discussed price action and confluence in a previous lesson. The more “Confluence Factors” you have in your favour on any given trade, the more likely it is that you will profit from it.
So is Forex trading gambling?
The ultimate form of gambling is forex trading. Before we enter a trade, we get to look back at previous price action. Imagine being able to see the dealer’s hand before making a casino decision. That is precisely what we can do in the Forex market.
However, unless you know how to use the advantage you’ve been given as a Forex trader, it will go to waste. Finding the right Confluence Factors to stack the odds in your favor is the key. This is what it appears to be.
Take note of how we’re now in a trade with five different factors working in our favor. All of these factors point to a higher likelihood that this trade will profit us, which it did.
- On the daily chart, there is a price action pin bar.
key level is being rejected by price.
- The upward trend is continuing.
- The moving averages are acting as a dynamic support system.
- There is no immediate upside resistance.
Let’s return to the casino scenario for a moment. Casinos can teach us a thing or two. Any Forex trader should strive to manage his or her account in the same way that a casino owner manages his or hers. It’s inevitable that some customers will lose money at a casino; it’s the cost of doing business. However, they are confident that by the end of the year, they will have made a profit because the odds are in their favour.
So start trading your account like a casino owner does, with price action and confluence, and start stacking the odds in your favor
Oh, and if anyone ever asks if you like to gamble, just say, “yes, but only if the odds are stacked in my favour.” Then expect them to give you a strange look.
Now it’s your turn.
Do you consider trading to be a form of gambling? Please leave your thoughts or questions in the comments section below, and I will respond as soon as possible.