Is Forex like Gambling?

Forex, the foreign currency exchange market, is available for online trading 24 hours a day, 5 and a half days a week. Using a broker service, you can perform your own trade almost any time of day and even from mobile platforms. The pace is fast and there appears to be little governing the boundaries of behavior, so does this make Forex more similar to casinos than like other investment opportunities? Yes and no. Trading is what you make it. It can be a risk filled hobby as dangerous and luck driven as a casino game, or it can be a complex and highly orchestrated investment business with a minimum risk element and a high potential for profit.

The Business of Trading

To the uninitiated, all trading appears as speculative as to be little more than legalized gambling. There are no guarantees and making a profit on the exchange seems a totally random matter. The reality is that successful Forex trading is a highly skilled business that is not like betting at all. Traders have to function with a high level of planning and organization to mitigate risk and make a profit. While someone addicted to chance would argue that they always have a plan, a trader is working for a set of historical data and economic records that originate outside of what they want to happen. Playing games of chance uses plans that only exist based on the personal desire for gain.

The Business of Gambling

Gambling is about desire and wanting a return on an investment that is far in excess of the amount of effort put into the act. While many gamblers may argue that they study mathematical systems, the point of this studying to find a way to take advantage of a weakness rather than capitalize on strength. In Forex, good traders look for advantage windows that are based on their strength. The profits they make are not from luck, but from skilled assessment of the fluctuation of values. There is little left to chance in trading, a loss is usually a result of trader error. The extent of personal accountability in trading is enormous; the extent of personal accountability in the gamble is almost none existent. In betting games, a loss is always someone else’s fault or ascribed to some ephemeral influence of the unseen. When a gambler then funds the bet with cash that they cannot afford to lose, under the delusion that a great undefined magic has shifted in their favor, loss is inevitable.

How to avoid playing for chance on Forex

Every trade on Forex comes from a funded account they work from, should they show more of a loss than profit, the funds available dip. One way to avoid falling into a casino mindset is to avoid an emotional reaction to loss. A gambler will race to deposit more money into a depleted account on the emotional belief that their next run will double their money and recover their loss. Traders won’t replenish funds until they have understood why their reading of the opportunity was so off as to cause a loss.

Journals and Tracking

Forex traders can avoid acting like gamblers by making sure they are always analyzing the behavior of the spread against their profit plans to see where their planning may be week. You do this by keeping a detailed tracking record of profit and loss. By staying up to date with industry journals and third party performance analysis, a trader avoids reacting to either profit or loss and acts based on the best rational plan. Gambling follows no plan, never self evaluates and never questions personal accountability for loss. Win or lose, you are never competing against anyone but yourself.

Testing for Addiction

Gambling, as an addiction, is very real and extremely harmful to the gambler and everyone around them. One of the important tests that a demo program will allow you is to see how you emotionally respond to profit and loss. Too many people only focus on how they respond to loss to determine if they are at risk for developing a betting addiction. It is how you respond to profit that is more important. If you find yourself getting excited and feeling like you have gained “something for nothing,” then you are not ready to become a trader. Someone who pursues the markets to make up for an upsetting loss will give up sooner rather than later. Someone who finds profit a thrill and ascribes to it little effort can quickly become obsessed with pursuing risky bids. Working the markets is a business, whether you do it full time, for someone else or as a personal hobby. To be successful, you need to bring all of your discipline and mastery of self to the field or you risk losing more than your funds when you trade.