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Is forex gambling?
Every time I find myself in casual company, introducing myself and telling people what I do for a living, I’m usually met with the same response:
“Oh, you’re a gambler, right?”
I can’t count how many times I’ve heard this from new friends or acquaintances, and it got me thinking recently that maybe there is some truth to the notion of trading as gambling.
When I go through and analyze the profession, I do see gambling elements, but mostly, it’s risk management work. For the majority of the time that I’ve been in forex, I’ve been relying on my skills and profit expectancy and how to guard my financial investments. I haven’t been going at it randomly, as if I was gambling.
Therefore I’ve concluded that the answer to the question “is forex gambling” is actually pinned in the question itself. When someone doesn’t know something about a profession but is thinking of how to make a living from it, it can be considered gambling. When you have no knowledge and you jump into a new set of rules for any kind of business, well, that is considered gambling.
Let’s say you’re called to court but want to go without a lawyer defending you. You want to defend yourself in front of the judge because you’re willing to take a gamble despite lacking the necessary legal knowledge. This is an extreme example, but when noneducated people refer to trading as gambling, they just don’t know what the profession actually involves.
There are more people at fault here, though, because the sad fact is that many traders who claim to be forex traders are actually trading as gamblers. So there is a bit of truth in the statement that strangers present to me.
So why are so many financial traders considered gamblers? Most people don’t have a solid definition of what traders are doing. Most laypeople outside of the industry just don’t understand all of the aspects and intricacies of the profession.
On the peripheries of trading, gambling is when you trade without proper knowledge of your trading. For example, lacking education and lacking practice and then putting your money down is gambling.
Here are a few other types of gambling in trading:
This one is exactly how it sounds – thinking that you can predict and accurately forecast the market direction. This is gambling because the prediction of the market is simply not a realistic way to trade. If the prediction ware possible and even probability-wise possible, the market would be a completely different business.
Even if you have a way to predict the market, and it seems to work for you most of the time, you’re still acting with a little hint of gambling in your forex trading. You’re only relying on statistics which at any time can go against you. For example, you say you know how to play roulette because you have studied and understand all of the statistics. But even in doing so, sticking to your prediction will cause failure an unpredictable amount of times.
The next type of gambling we’ll outline is clinging to your belief that the market will go a certain way according to your preconceived bias.
In this scenario, if you don’t leave yourself enough margin for error and you go all the way to lose or win in a binary way of thinking, it is a type of gambling.
Possibly the most severe form of gambling in trading are the traders that avoid taking losses or placing proper stop losses on their trades, which can have devastating effects on their portfolio. Once you enter the market, if you don’t have a plan for how much you’re willing to risk, you’ll find yourself in trouble.
As a proprietary forex trading fund manager, I’ve seen so many people who don’t respect their own resolution to take a proper stop loss. Instead, time and time again, they go all the way to the definite loss of their portfolio capital and make impossible recovery points after their losses.
Gambling in this way is so destructive because it kills your confidence when you see your trades quickly eating away at your funds. The lack of success and the anger and despair at failing will lead you to feel broken and without much self-esteem. In this scenario, you put so much on the table and open yourself up to serious troubles.
A lighter version of avoiding stop loss is avoiding having a trading plan or risk management plan. These two strategies should define your trading routine and the loss of both or just one leaves you in the market as a gambler, untethered by pre-drafted strategy and considerations. You are floating unprepared and are lost as a gambler.
Here is the link where you can Download The5ers digital Trading Plan
This article underlines a very negative picture of how most traders are because it’s important to be tough on yourself and to shine a light on the elements that might make you a gambler in order to reduce the tendencies then.
Ultimately you want this job to be something you can rely on and live on. So take this as shock therapy to get you to cut out and reduce as many gambling tendencies as possible.
Eventually, if you do not treat Forex professionally, then you are treating your trading like gambling.
Without a trading plan, risk-taking and stop-loss, you are simply a gambler.
Of course, there are more ways to improve your chances of succeeding and becoming a profitable trader over time, but if you start with the three points mentioned above, you are already on the right way.
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