Is Forex gambling?
When trading Forex, there are a lot of traders who approach this full-fledged business as if it were a gamble, and of course, this does not bode well. It may seem that Forex trading and gambling have a lot in common. In both cases, it is mainly about games with probability. But the opposite is true because it is precisely in this aspect that they are diametrically different. In the end, we could spend long hours arguing whether this is or is not the case, but let us rather look at the whole matter from the practical point of view. Let us present some examples that will make you believe that Forex is not a gamble.
Trading vs French roulette
Probably everyone who has ever spent some time coquetting with gambling has probably encountered the famous French roulette (unlike the American one, it has only one zero on the playing field). Therefore, if we take into account the theory of probability, then we find that the playing area consists of 37 numbers (including zero) and the player gets a payout in the ratio of 1:36 (36 times the bet amount) if the number is guessed. It is already clear that a player will always be at a disadvantage in the long run, as he will lose an average bet for every 37 rounds played.
In contrast, trading usually does not put traders at such a disadvantage. If the trader proceeds completely randomly
and does not analyze the markets, then it can be expected that any position he opens can make a profit with the same probability as making a loss
. Thus, unlike roulette, trading does not put the trader at a disadvantage from the beginning, but the resulting probability of success is ultimately influenced by the traders themselves with their own abilities and skills, in which gambling and trading again differ greatly.
Why some still consider trading a gamble?
Trading with unsuitable brokers (MM, DD)
MarketMaker (MM) or DealingDesk (DD) are brokerage firms that, as the name suggests, are active market makers, which means that these brokerage firms normally become counterparties to trading positions that are executed by their own clients. So if a trader earns money, then these brokers lose. This often leads DD and MM brokers to the practices used by gambling companies, and traders unfortunately eventually assume that trading is ultimately just a kind of disguised gambling.
The position of trading on the level of chance
Blind trading (trading without any analysis, strategy, and comprehensive plan) is usually a path to the great unknown and also a path to fast and uncontrolled trading losses. Gamblers often behave very similarly. Although they usually have a system that they try to stick to, if they would do a proper market analysis they would quickly find that it is very difficult, if not nearly impossible, to succeed in that gambling “market”. For gambling, Forex, and other markets, developing analysis and a strategic plan is one of the first steps needed. This is the only way we can find out whether the market is suitable for us and our approach or not.
So there you have it. Not only probability but also the right choice and personal approach have a significant impact on traders and whether they consider trading to be gambling or not. Let us conclude today’s article by saying:
"The main architect of luck in gambling is always the casino, in trading, on the contrary, luck is in the hands of the trader himself"