Is Forex Trading Gambling?
You might wonder why we have chosen to compare forex trading and gambling, but it’s quite simple – the forex market generates daily trading volumes of more than $4 trillion making it one of the most active marketplaces in the world. Furthermore, regardless of the day-trading platform you use, you will always have access to markets where you can trade currencies which makes it easily accessible for all people with an Internet connection. However, some people do underestimate forex trading and turn it into a gambling activity, losing more than they can afford to. This is something that can be prevented with two very important tools we’ll present in the following paragraph.
When Trading Without Gambling Is Beneficial
If you are into online trading and haven’t heard about these two very important types of analysis, you might consider yourself as more of a gambler rather than a person who is willing to invest and speculate on the financial markets. These two ways of making decisions in the world of trading are always a part of the methodical approach of professional traders, which is actually the main difference between online gambling and online trading. While the fundamental analysis is based on macroeconomic values related to the state of the national and worldwide economy, the technical analysis is more focused on the graphics and the trading signals that come with them. As you can see, these techniques do prove that trading without gambling does exist, but there is one trading tool that can change your perception – leverage.
Financial Leverage – Trading Is Gambling on Another Level
When we’re talking about speculating and trading on the financial markets, there are certain corporations that you can’t match in terms of volumes, putting most individual traders at a very high competitive disadvantage. Due to the way the market is set, a way of having at least an equal chance has to be provided to day traders. Therefore, certain financial platforms offer leverage – a way of trading higher volumes of financial instruments for a lower price. While this might be a great opportunity for most people to make great amounts of money by risking less than needed, the same rule applies when losses occur.
Furthermore, using leverage is maybe the most dangerous part of trading as it can turn into a very dangerous gambling addiction. The chances of neglecting the volumes you’ve committed to either buy or sell will make you lose more money than expected if you make the wrong decision. That’s why professionals advise beginners and even expert traders to use leverage responsibly to the best of their abilities. Of course, this is easier said than done as we’ll see that it’s psychology which plays a huge role in the similarities and differences between gamblers and traders.
Trading vs Gambling – Opposite Psychologies
In order to better understand where does trading stop and gambling overtakes, it would be for the best to observe matters from a psychological point of view. Although not all people can be good traders and excel in professional development, there’s a gambler in each one of us. It’s in human nature to sometimes take risks which can be either rewarding or crushing. On the opposite side is professional trading, where risk management and making logical decisions are of vital importance. Apart from that, the main goal, in the end, is the same – win as much money as you can.
However, what do gamblers and traders learn along the way? For bettors, there isn’t a pattern that can be followed and used successfully the next time they bet, regardless of whether they win or lose. The unpredictable character of games and the house edge they come with don’t offer that many learning possibilities. Fortunately for traders, they have access to more detailed information which requires analytical thinking. Simply put, people at the financial markets use learning from their mistakes to the best of their advantage in order to minimalise future losses. The psychology of gambling, however, is quite different as it has proven numerous times that it can turn out to be truly destructive.
Remember Why You Started Trading!
This headline may just be the best piece of advice we’ve added in this blog post. Always having in mind the greater purpose at hand will keep you alert, forcing you to rely on skills and facts rather than hopes and luck. Trading is indeed a craft that requires lots of dedication and studying, while gambling requires only committing money and time. However, time has proven that trading can be turned into a financial Russian roulette if you’re not careful and let gambling emotions take the best of you. Therefore, our final advice is to always be responsible, regardless of whether you’re into trading or gambling!