Is Forex trading the same as Gambling?

15th January 2022

One thing that both gambling and trading have in common is risk. When you make a trade or a bet you take a chance on losing money in the hopes of making more. You can both 'win' and 'lose' money in this game.

But that's where the differences end ☝️.

The main distinction between the two is the concept of 'probability.' When you gamble, you are completely reliant on 'luck.' When you roll the dice in a casino, for example, you have no idea what number you'll get. When you trade, on the other hand, you may analyze the market and forecast where it will likely go. You can devise a trading strategy and set objectives for yourself. Trading has a logic to it, as well as the possibility to improve your odds of success.

In forex trading, a gambler mentality will not lead to success 🤷🤷🤷. However, if you consider forex trading like gambling, it can quickly turn into a losing proposition. You can't set goals, analyze the market, or even grasp what you're doing if you don't know what you're doing.

When you don't know what you're doing,forex trading can turn into gambling, and it can take various forms. When forex traders do not follow a trading plan, they almost always end up gambling.

One of the most typical ways people gamble on the forex market is to chase losses. It's when a trader loses money and quickly tries to make up for it by placing more orders.This behavior is similar to that of a casino gambler who has lost a bet and then places another to make up for it. The result is a constant cycle in which the trader tries to recover their losses by making larger and larger trades, not just to recoup their losses, but also to perhaps generate a profit on top of their first trade. If a trader decides to use leverage in this terrible downhill spiral, things can get even riskier.

As an example of pursuing losses, consider the following:

At 1.1164, a trader opens a position on EUR/USD.

The trader loses money when the position is closed at 1.1164.

Instead of taking the loss, the trader panics and begins a new position with a larger lot, without even looking at the opening rate, in the hopes of recouping the prior loss and possibly making a profit, the exchange ends up costing them much more money. The trader panics once more and tries to reclaim everything.

This procedure continues until the trader has nothing left. Of sure, they may recoup some of their losses at times, but if they continue along this route, they will finally lose everything. Most forex gamblers, on the other hand, are unlikely to have developed an addiction as a result of pursuing their losses. It's more likely that they began gambling after 'getting lucky' on one of their first trades and profited. This is referred to as "beginner's luck." Beginner's luck, on the other hand, can be more of a curse in many ways.

This first victory may excite them, and they may mistakenly feel that they are on a "lucky streak" and that the money will keep coming in. They make more frequent trades, foolishly believing that they’ll strike lucky twice. To make things worse, they make bigger trades.

To gamblers, it’s obvious, if this small trade worked then the next one, if larger, should also work and reap a larger reward.

The thing to bear in mind about forex gambling is that the ‘trader’ isn’t necessarily chasing profits, but chasing the high of winning. And they’ll throw away all of their money just to replicate that feeling of their first win all over again. They trade more frequently, naively expecting that if they're lucky once, they'll be lucky twice.

To make matters worse, they engage in larger exchanges. To gamblers, it's self-evident that if this little trade paid off, the following one, if greater, should likewise pay off.

It's important to remember that when it comes to forex gambling, the 'trader' isn't necessarily looking for earnings, but rather for the rush of winning. And they'll gamble all of their money away only to relive the thrill of their first victory.

Images sourced from Google.