Is Forex Trading Gambling? To address the issue 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.
Do you think Forex trading is a gambling? This article have answer to your question, so many people have found it difficult to differentiate between Forex trading and gambling, not to worry the answers are here.
Gambling and Forex Trading
Because the Forex market is so volatile, it’s fair to argue that opening a forex position is a type of gambling.
This is a highly volatile market, and no one can anticipate how a currency pair will move with precision, even after years of rigorous research and analysis.
Only analytical tools and prior forecasts may be relied upon, but neither can be guaranteed. You will always be exposed to the Forex risk when you start a Forex position.
This is a sort of risk in which you are exposed to the market’s volatile character and have no idea how it will perform in the days or even hours ahead.
Regardless matter how much technical or fundamental research you do, the Forex risk will always be there, and every trading position you take will include some level of Forex gambling.
Is forex a game of luck?
No matter how experienced you are, there is always an element of chance in forex, which most rational traders feel cannot be accounted for.
You will never be able to completely remove the danger that Forex trading entails, no matter how long you have been trading or studying.
Some retired traders even suggest that Forex is worse than gambling because when you gamble, you understand the erratic nature of the game, but a Forex trader is encouraged to feel that if you lose, it’s your fault.
Many Forex gurus believe that risk may be neutralized. However, they will still attempt to persuade you to hire them to represent you and provide you trading advice in return for a fee.
That begs the question: why aren’t people utilizing their own money if they are so certain in how Forex works and how to reduce risk?
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Is trading forex a sin?
Is trading forex a sin? Is it unethical to trade? Is it a sin to do so? Is it wrong to take risks on purpose? These are some of the concerns that some traders have while considering becoming a trader or in the early stages of their trading careers, especially those who connect with Jesus Christ.
Is trading considered a sin? That has never occurred to me. I have, however, assisted scores of Christians and church pastors in dealing with this issue.
I’ll start with a straight quotation from the Bible. “But whomever has doubts is condemned if he eats,” writes Romans 14, verse 23, “since the eating is not from faith.” “Anything that does not flow from faith is sin.”
If you do not feel that trading is a good thing to do, you should not engage in it.
If trade is a sin, however, Jesus is twice guilty of encouraging his followers to sin. The parable of the talents (story of the pounds) in the Book of Matthew, Chapter 25, verses 14-30, and a similar parable in the Book of Luke, Chapter 19, verses 12-28, are two examples.
Each of the three slaves was provided with a sum of money in the form of talents to look after while their master was abroad. The servant who traded and profited the most for his master was rewarded the highest.
The servant who did nothing with the monies entrusted to him was harshly scolded and punished, and the funds entrusted to him were taken away and handed to the servant who had made the greatest money for his employer.
A talent was a sum of money equal to 20 years’ earnings. One servant got five talents, another earned two talents, while still another received just one talent.
Imagine working for someone who handed you a hundred years’ worth of income to manage and invest.
Furthermore, as a very rich guy, your employer fully expected you to expand that money.
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Is Forex Trading Gambling?
When making a “play,” one of the most noticeable contrasts between a gambler and a Forex trader emerges.
A gambler is constantly unsure about his or her chances of winning, and unless they are cheating, they think the odds are stacked against them.
Their odds of winning are always lower than, or equivalent to, those of the house. A forex trader, on the other hand, seeks to come up with various trading methods that will help them shift the odds in their favor.
They may utilize various analytical techniques to forecast market trends and establish a position that will almost certainly reward them.
They are certain that after some clever trading patterns, they will end up with a successful overall position. This demonstrates the key distinction between a Forex trader and a gambler.
These two marketplaces’ participants are also highly diverse and have different characteristics. Here are some of the primary characteristics that distinguish them.
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1. Counting
The primary motivation for individuals to pursue these two careers is to generate money. Everyone wants to make a solid investment, whether it’s a bet or a market position that will provide them with a positive cash flow. These industries have vastly varying quantities of money flowing.
Traders from all across the globe exchange about 5 trillion dollars on the currency market every day.
The sums involved in the gambling business are nothing near that. This is a significant distinction between the two industries.
2. The industry participants
Every line of business has its own set of participants. These might be significant or small players, but they all have to work together to make it all work.
The Forex market is mostly populated by retail traders. Individual investors from all over the globe build their own trading techniques in order to beat the market.
Another significant financial institution participant, such as mutual funds and banks. They assist in establishing the authenticity of forex trading, and with such a large number of participants, you can be certain that it is legitimate.
Gambling, on the other hand, presents several legal stumbling blocks since it is illegal in various areas of the globe.
Its members are restricted to unlawful underground activities, making everything suspect. Another distinction between them is this.
3. The tools that were employed
Although Forex trading has its own set of risks, you are generally fully educated about why you took a certain position.
There is a variety of tools available to assist you in properly analyzing the market as well as several rules on how to initiate and close trading positions.
These will differ based on your trading strategy and analytical process. When employing technical or fundamental research, you may keep an eye on market patterns for days or even weeks before deciding on a position.
This demonstrates that there is no such thing as a fortunate deal, since they are always based on thorough market research. These tools assist a Forex trader in improving their skills and making profitable deals.
There are no such instruments in gaming, though. There are no trends to research in order to make an educated selection. This seems to be a bad concept since it leaves everything to chance.
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4. Feelings
The majority of gamblers get addicted over a period of time. This, according to research, is due to the emotions involved in gambling. When a gambler enters a casino, his or her main goal is to earn money.
This skews their judgment and helps them forget there’s a chance they’ll lose money. Because they have no method of making educated bets and rely only on chance, it may not be their fortunate day, and they will lose all of their money.
Rather of deterring someone from gambling, it tends to encourage them to do so since they will return again and time again until they get hooked.
It is, however, quite different in forex trading. During the training process, participants must learn to separate their emotions from their choices.
To make better selections and initiate winning transactions, a trader must learn to distinguish between greed and fear.
This eliminates any emotion from the equation, and a trader may exit at any moment.
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5. The strategies used
Engaging in the forex market, like any other line of business, is very risky. Some argue traders might go on a losing run for months, but you discover they traded without a plan or adequate assessment in mind.
These are generally traders who believe that forex trading is a kind of gambling. A trading strategy is essential for accomplishing long-term objectives.
Make a thorough review of each transaction before investing any money in it to see whether it will assist you achieve your ultimate and desired position.
This will help you make better judgments about whether to participate or not. You may utilize the different components of the tools, such as Stop Losses, to ensure that transactions are closed at the appropriate times.
Gambling, on the other hand, does not need any strategy since the outcome of your bets is determined by chance. This is a significant and noticeable distinction.
I recall when I initially 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 often, one of the first things people would say is,
“Oh, you like to gamble, then.” “You must like travelling to Vegas!” alternatively, my personal favorite, “You must enjoy going to Vegas!” Being the ignorant trader that I was at the time, I would get 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 comment was WRONG, to say the least.
Is trading a kind of gambling?
Trading is, without a doubt, a kind of gambling!
The following is a definition of the term “gamble” from Webster’s Dictionary:
To take a chance on losing (a certain amount of money) in a game or wager
To engage in a game in which you may win or lose money or property
To take a chance on losing (something precious or significant) in order to accomplish anything.
Is there a recurring theme here? “Risk” and “loss” are two words that come to mind. If a Forex trader understands two things.
It’s that there’s always danger and that you’ll lose money at some time. 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 better approach, with a 98 percent victory record, is a sure thing? Of course, they want to sell you their goods.
They want you to believe you aren’t gambling anymore. Isn’t it true that gambling is a harmful thing? You may be surprised by the truth.
What really is the truth? The fact is that every time they sit down at their trading computer, even the “big guys” at giant 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.”
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Can the forex market crash?
The quick answer to this question is Yes and No. While Forex markets as a whole cannot fail, individual currencies may crash at any moment.
Forex market collapses vary from stock market crashes in that they generally impact a single currency.
When the Swiss Central Bank decoupled the Swiss franc from the euro, for example, the franc rose and dragged other currencies down in a so-called flash crash.
In early 2019, a similar scenario happened when the Japanese yen fell overnight in another flash collapse, bringing several other currencies down with it.
What is the difference between a stock market collapse and a Forex market crash?
Stock market crashes vary from Forex market crashes in that a stock market collapse often impacts all equities since they all trade in the same currency.
As a result, if the S&P 500 collapses, the value of the majority of the firms that make up the index would be lost, as will the value of other stock markets and indexes.
Unexpected developments startle investors, forcing them to sell the currency. Forex market crashes generally impact a particular currency, such as the British pound or the US dollar.
Given that most Forex transactions include two currencies, such as the GBP/USD pair, which puts the British pound against the US dollar, the US dollar will rise as the pound declines.
As a result, those who held the pound will see a huge decline in the value of their assets, referred to as a crash.
As the US dollar rises against the Sterling pound, those on the other side of the transaction will see a tremendous increase in the value of their trades.
The same is true for every other currency that is touched by a collapse, since its rivals will report significant gains even as the afflicted currency sinks, causing a tremendous loss of value in global currency markets.
Because the Forex markets are made up of several currencies representing various nations and regions, it is almost difficult for the whole Forex market to fall, as each currency is generally linked with another currency that benefits when its peer loses value.
What causes currency devaluation?
Let’s look at several famous currency crashes and their reasons now that we’ve shown that the broad Forex markets can’t fail, but that particular currencies may.
To begin, we must recognize that there are two sorts of accidents: long-term crashes and flash crashes.
Long-term crashes may last months or even years, but flash crashes can happen in a matter of seconds and last less than an hour.
Whether a collapse is a flash crash or a long-term catastrophe, investors who hold the impacted currencies frequently lose a lot of money and may even lose their whole account.
Long-term currency depreciation
Long-term currency collapses are frequently linked to the country’s current socioeconomic circumstances and linger for a long period.
Currency crashes frequently happen when a nation is dealing with a big crisis, such as a government coup, hyperinflation, or serious economic problems.
Venezuela, for example, is experiencing a severe currency crisis as the bolivar plummets in value as a result of US sanctions that have effectively devastated the country’s oil sector, which was a key source of foreign cash.
The country is also governed by an authoritarian regime that has been ostracized by the international community, which has had a significant negative impact on the country’s economy. This is just one example of a long-term monetary crisis that might last for years.
Long-term currency crises, on the other hand, are more common in developing nations with weak institutions and dictators that pursue unpopular policies that drive away investors, badly impacting the economy.
Flash crashes should be avoided
The sudden fall of the Japanese yen on January 2, 2019, stunned forex traders, with the yen rallying 3-5 percent versus other currencies including the US dollar in only eight minutes.
Traders that were holding currency pairings that contained the Japanese yen suffered big losses or profits as a result of the rapid change.
Because of their exposure to yen crosses, most traders had their stop-loss orders hit and some even had their accounts wiped out as a result of the move.
Given that there were no remarkable underlying causes behind the drop, which came over a week-long Japanese bank vacation, most currency analysts ascribed the abrupt shift to algorithmic trading.
The disaster occurred between 17:00 and 18:00 New York time, popularly known as the witching hour because of the low liquidity levels associated with the hour since the New York markets are generally closed and the Japanese markets are not yet open, according to some analysts.
Other analysts pointed out that Apple Inc. disclosed disappointing earnings after the New York close owing to a downturn in China, which might have panicked investors and triggered the flash drop.
The Swiss currency is in freefall
The Swiss franc had a mini-crash a month later, on February 10, 2019, during the Asian trading session, when it fell sharply versus its main rivals, notably the US dollar.
Because the Japanese markets were closed for National Foundation Day festivities, most analysts blamed the mini-crash on low liquidity levels.
Another notable Swiss franc collapse, or rather, flash rally, happened in January 2015, when the Swiss National Bank declared that the franc would no longer be pegged at 1.20 versus the euro, causing it to jump by up to 20% against the euro and other major currencies.
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Acquire the ability to think in probabilities
It ultimately boils 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 advantage.
I discussed price action and confluence in a previous lecture. The more “Confluence Factors” you have in your favor on any given deal, the more likely it is that you will profit from it.
Is Forex trading a kind of gambling?
The ultimate kind of gambling is forex trading. Before we enter a trade, we get to look back at previous price activity.
Imagine being able to view the dealer’s hand before making a gambling choice. That is precisely what we can accomplish in the Forex market.
Take note of how we’re now in a trade with five separate variables working in our favor. All of these elements point to a greater likelihood that this deal would profit us, which it did.
- On the daily chart, there is a price action pin bar.
- A 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 upward 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 consumers may lose money at a casino; it’s the cost of doing business.
However, they are certain that by the end of the year, they will have made a profit since the chances are in their favor.
So start trading your account as a casino owner would, using price action and confluence, and start stacking the chances in your favor.
Oh, and if someone ever asks whether you like to gamble, simply say, “Sure, but only if the chances are stacked in my favor.” Then expect them to give you an odd look.
Now it’s your turn
Do you consider trading to be a kind of gambling? Please leave any opinions or questions in the comments box below, and I will do my best to answer.
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Conclusion
In a nutshell, what we found was this: yes, Forex trading is gambling (and no, it is not a good idea to bet your life savings). Professionals in the Forex market are quick to point out that there are different risk and reward profiles for playing casino games and trading.
But in the real world, many people engage in both of these activities, and many ordinary investors have been gambling by investing in FOREX.
Unlike gambling which is strictly a game of chance, Forex trading is essentially a game of skill. It’s that distinction that typically separates games of skill from gambling.
It is this reason why Forex trading is not considered gambling by most regulatory bodies throughout the world. For me personally, the decision is clear; I don’t think Forex trading should be considered gambling. That said.
It would be dishonest to not acknowledge that there are some similarities between Forex trading and gambling and there are certainly Forex brokers out there who operate like casinos. It’s up to each individual trader to choose which path they want to take.
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