Do traders and gamblers meet in Forex?

Trading - Gambling
Trading - Gambling

There are a lot of people out there that consider retail Forex trading as a casino packaged up as financial trading and those people more often than not are gamblers. For the typical gambler it is perfect, they can control their risk and project the image of being a trader, which has much less of a stigma attached than being an outright casino going, poker playing gambler. These people usually place trades that far exceed their means using massive leverage and lose all their money in most cases but sometimes win big and they feel and embrace the thrill of the market.

Now, trading is definitely not gambling even though it can be used for gambling by gamblers. There are professional traders out there that consistently profit from trading, manage the money of others, make respectable money and I think we really need to look at what separates trading from gambling and how the two converge.

Trading should be based on a thorough analysis of charts by the minute, hour, day, week and monthly. It should take into account the use of technical indicators and the trader should be keeping in touch with economic news as it happens as well as understand the history of events in the markets. There also needs to be an understanding of the macro-economic business climate of difference markets. All of this gives the trader sufficient knowledge and indicates to them with some certainty how to trade. In contrast, a gambler does not really understand the markets and places trades based on a shallow understanding of the markets and running high with emotions, hoping to see a huge gain.

Now that we have separated gambling from trading we now need to recognize that a lot of things in life and especially in business, are a gamble. Most business people are gamblers; they take a punt on certain opportunities in order to make more back than their initial investment in time and money. If we understand this then we must also realize that every trade is a gamble, no matter how well researched it is. So despite a view to separate gamblers and traders we must accept that trading is a form of calculated gambling in the same way that investing in a business opportunity is a calculated gamble. What really sets the two schools apart though is the fact that pure gamblers make decisions on emotion and traders make decisions based on fact and experience. The gambler will always have the odds against them, while the trader makes a solid attempt to put to odds in their favor before pulling the trigger.

If we look at the traits of the traditional groups of gamblers we all know and love there is some interesting consistency with traders. First, let’s take a look at the casino player; these people know the house edge is against them and yet they still play for a chance to get lucky, love the thrill and emotion of the game. This mentality has no place in business or investments and for that reason I would say that casino players have very little in common with professional traders, other than being accustomed to risk exposure.

However, in stark contrast a professional poker player puts the odds in their favor using skill and experience and the more calculated and emotionless they are in the game the better they perform. Based on this it is clear that traders share a similar skillset to professional poker players. The best traders need to be cold, emotionless and must put fear and greed in a box just like poker pros. So after all, maybe Forex trading is a form of professional gambling?

Published by Alex Eliades
Alex is a digital strategist with a history of writing academic papers on business and technology, he is also a blogger that loves writing about growth hacking, Forex and adventures in life. He works for financial brokerage firm XGLOBAL Markets and specializes in Forex, Metals and CFD trading.

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