While doing Forex, some people feel like they haven’t done anything more than gambling. During their trades, the only real variable is luck, which sometimes acts in favor of them and sometimes leads them to a loss. Numerous attempts have been made to simplify trading in the forex market, and while a degree of success has been achieved in this area, trading forex is more than installing a trading platform, funding an account and clicking a buy or sell button on your computer.

In fact, trading has often been compared to gambling since a high degree of risk and speculative activity is involved. Before we dive right into how trading can become gambling, we should just clarify that there is a clear difference between the two and they are not interchangeable terms. One has to understand the underlying mechanisms of both activities and then determine whether they are exactly the same or not.

What is the main difference between trading and gambling?

The primary difference between the two is ‘probability’. With gambling, you are relying solely on ‘luck’. For example, when you roll a dice in a casino, you have no idea what number you’re going to get. In comparison, when you trade, you can analyse the market and predict where it is likely to go. You can implement a trading strategy and set yourself goals. There is a logic to trading and an ability to increase your chances of success. The gambler mentality will not lead to success in forex trading.

That said, forex trading can become forex gambling when you treat it that way. When you don’t set goals, analyse the market or even understand what you are doing. In gambling, the house always wins. In forex trading, you stand a chance of winning. You just need to act logically and with restraint.

We implore you, don’t be a forex gambler, be a forex trader. The easiest way to avoid forex gambling is with your practice and learning about Forex trading.

The signs of Gambling

Gambling addiction is just like any other form of addiction and there are a number of signs. To determine whether you are gambling in the Forex market, ask yourself the following questions:

• Do you have a trading strategy which you have reason to believe gives you an edge over the market?
• Do you ever risk more than 2% of your account on a single trade?
• Are you trading with money you can’t afford to lose?
• Are you just holding out for that next big trade?

If you answered yes to these questions it is a high probability you are gambling with your money in the Forex market, as compared to the professionals who approach their trading more cautiously, as they would running a business.

Gamblers do not see what they do as a business. Instead, they approach Forex with a dangerous zealousness. But here is exactly where Forex trading can differ from gambling. Traders can use a proven method such as Price Action trading to give themselves and edge over the market.

Most gamblers act on hope. Hope of the next win and hope that they can claw back the losses they have sustained. When Forex traders act on hope they get into very dangerous waters.

How to avoid Gambling in Forex

• Understanding of how much you will risk per trade
• Entry and exit rules
• Trade management rules
• Times you will scan the market

Being realistic about what can be achieved in your trading plan is essential. Forex trading can make you money consistently but if you are opening an account with $1,000 you are very unlikely to make $1million and quit your job in the near future.

Moreover, every business must keep a record of money made and lost. Your trading should also have such a book or trade journal. Your trade journal should track all things such as trades placed and the outcomes including profit/loss and how you managed the trade.

Conclusion

Both in gambling and Forex involve concern risk and strategy. So for an untrained eye, it could seem the same. But there are key distinguishing factors between the two. Individuals can increase their chances of success in both. However, in gambling unlike Forex, the house will always retain the upper hand over the player. And all the different techniques can only reduce that upper hand, not remove it completely. In trading, however, people can flick the odds in a way that they hold the advantage.

There are lots of different advantages available in Forex . The most popular way is to do technical analysis, in these traders can analyze prior price movements and have some idea as to where the price will move next and other is fundamental analysis. Observing the current situation of a company, market, or a country gives the idea of Fundamental move. Another method of maintaining the advantage is risk management, which itself has many different elements. One of them is portfolio diversification: traders use different assets at the same time in order to reduce the risk of large losses and keep the account more stable. Moreover, gambling is just trying your luck while trading is backed by analysis. So, now you are sure that forex trading is not gambling.