Are You a Forex Trader or Gambler

Posted on 20th February 2018
Are You a Forex Trader or Gambler

The Forex market itself leads the Forex traders to gambling due to the high leverage and rewards. Most people who call themselves traders are operating with a gambler's psychology as they want to become rich overnight. Trading is often compared to gambling due to the high degree of risk and speculation involved. However, FX trading is not a scam though it's not a get-rich-quick-scheme either. Currency trading is much more than installing a platform, funding an account and clicking a buy/sell button. There are few important differences between trading and gambling.

  1. Gamblers do not plan, traders do: Gamblers do not have any well-thought-out plan or strategy and rely on blind luck. Novices or rookie forex traders might trade without a proper trading plan. These traders are the gamblers of the forex market that essentially just make bets in the market direction. Often, they will end up blowing their trading account. However, professionals or tenured traders always stick to logic & carefully proven back-tested trading strategies and try out their techniques in a demo account before venturing into live trading. Unlike gamblers they always trade their plan.

  2. Gambling is not business; FX trading can be: Professional traders approach trading as a business with a high degree of discipline. They will add up their wins and losses to obtain a net profit or loss. In order to do this, they will develop a sound trading system and keep the gambling mindset or emotions at bay. However, despite these there will always be a certain degree of inherent risk attached to forex trading as the market, at times moves in rather unpredictable ways. Yet a trader with a well-researched trading plan and a business-like approach will perform better.

  3. The risk-reward ratio: A very useful method which can boost your trading performance and reduce the gambling aspect involves computing the risk reward ratio. Determining the risk reward ratio means comparing the risk that you are undertaking to the projected reward on any given trade. Most tenured traders will not initiate a trade unless the risk which they foresee for the trade is at least half of what the expected reward might be.

  4. Traders are professionals, gamblers are not: Gamblers rely on hope and blind chance whereas traders are professionals who mean serious business and do not treat forex as a game. Instead, they apply careful risk management, think rationally and do not risk more than they can afford to. What differentiates trading from gambling is being able to turn the odds in your favour. This removes any bad or impulsive decisions. Traders learn through experience and acquire their skills with time. Forex trading is a learning curve and losses are a part of trading. Just because you have a series of losses does not mean that you cannot be a successful trader. Professional traders are patient & disciplined and are able to adapt to varying market conditions. Successful traders take many losses, accept & learn from their mistakes and keep the damage to their capital at a minimum.

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