Is Forex Trading a form of Gambling?

Today's article talks about the difference between a real forex trading and merely gambling in the forex markets. I just want to be straight here as well, especially to those who have negative notion that Forex Trading is gambling. I remember when I was still starting trading Forex, I hear lots of negative feedbacks regarding forex tagging it as gambling. It may seem to true to me when I was still starting, that I was playing purely based on “odds” with always no certainties in my trades. It was a mental and emotional torture especially when I start to lose money... consistently! ; as if the chart has a demon inside that keeps taking money from my account. I was a desperate trader that time admitting that I was more on gambling than trading the markets. That was my experience that made me who I am now; and with that I realize the big difference between trading the markets and gambling the markets.

First, let me provide some definition of gambling. According to Wikipedia, "Gambling is the wagering of money or something of value on an event with an uncertain outcome with the primary intent of winning money or material goods". Gambling simply means playing purely on “odds” or “luck", just like rolling a dice, or playing cards. The problem with gambling is that, you do not have any edge at all to increase your probability of winning. And with that, you cannot ensure long-term success. Most people (especially those who have no idea about Forex trading), will think that Forex is gambling as there is an uncertainty to which direction the market goes. I totally disagree! Let me put it this way, if you put up a business, there is also a degree of uncertainty if the business will prosper since you cannot really assure what your target market prefer, maybe the location is not preferable for your business, or an economic recession will affect your business as a whole. There are lots of factors that a business will not prosper, and that is the risk of it. Uncertainty is almost in all areas of life. However, having some uncertainties will not classify it as gambling since business is not based on mere “odds” but on some skills (of the owner or manager), an edge that was pre-calculated, and experience which makes the business most likely to succeed. The uncertainties that the business wont prosper is the risk to be calculated by the business-owner ; and having a risk does not mean gambling.

What Makes Forex Trading (or any business) differ from Gambling I will enumerate some of the reasons why real Forex Trading is not gambling:

• You Trade based on an Edge – Like a normal business, Forex Trading has an edge that a trader can consider and trading plan in which all the trades can be based. Trading edge are the winning advantage of a trader in which speculation on market movements are based on proven price dynamics that has been used for centuries. So it means that a trader base his success on every trade not on “odds” or “luck” but on a high probability. That is why a trader must calculate very well the risk on each trade as much as a business-owner calculated his risk before putting up a capital

• Trades based on experience – For gambling, no matter how long have you been a gambler, the “odds” will always be the same - you're lucky you win, you're unlucky you're out. Only luck determines your win, not any edge or skills. But in Forex Trading, experienced traders win more than traders with no experience because somehow they get to know the market behavior already in the long run. But then again, there are times that markets won't go to the speculated direction, but that will be seldom and is already calculated by the trader.

• In Gambling, you do not need a thorough training – As long as you know how to play the game like poker, whether you are experienced or not, trained or not, you can win (or lose) with no basis. But Forex Trading is based on skills, on your knowledge about price dynamics and on current events. Without that knowledge, risk is higher than normal as much as it is risky to put-up a restaurant with no knowledge in recipes and in business management.

The chart below is the price for Australian Dollar vs US Dollar (AUDUSD) in a daily chart. We can clearly see our edge of market entry using Price Action signal, Key Level and Trend. Pin bars on Key Levels are high-probability trading signals, which means, trading on those signals may give a trader more winners than loses. Just like in a business, would you put up a gasoline station in areas with no cars? Of course not, that's gambling. In Forex, you don't just simply trade without your edge signals. If you want to have the details about my strategy and high-probability entry signals, you can enroll to my Alpha Forex Trading Course that will be launched soon.

​Risk vs. Risky and Gambling There is risk in every business including Forex, but risk (which represents the uncertainty) does not mean that business is a “gamble”. On the other hand, one can also gamble in business if the owner does not know anything on what he is doing- which qualifies it to be called “risky”. Gambling has risk and is also risky since only “odds” or luck determines your outcome. Same as in Forex market, there are forex gamblers, but it does not mean that forex is gambling business. As I mentioned, I used to be a forex gambler. I trade with no confidence that I will win since I do not have a proven edge and money management system. It was just like placing my bet (trade) and praying that market will go in my favor. I took the risk and I was risky as well, that qualified me to be a gambler that time. It is therefore, the trader that makes Forex a gambling business, not the business itself. If you have no strategy, no trading plan, and no money-management plan, you are a Forex Gambler, not a trader. Conclusion Forex Trading, like any other business, is a very lucrative business provided that a trader will apply the proper system in the trade. Having a system makes it a legitimate business and not just playing on odds. Apart from the system, the trader must possess characteristics of a real entrepreneur like proper risk and money management and studying/planning ahead the trades, inventory of potential trades and journal which serves as monitoring data.

In my next articles, I will be writing about the exact system that I use in trading the markets, all the edge a trader needs to follow to succeed in the long-term. By reading this article alone, you are already building your edge since your are solidifying your foundation and mindset about this industry. To be a successful trader is no different from a successful businessman, it needs hardwork in developing oneself to be fully equipped and ready to fight in the forex arena. Have an awesome trading journey!