Is Forex Trading Gambling? The Answer Might Surprise You

To answer the question, is Forex trading gambling, we have to break it down by the very definition of what it is to gamble. But before we do that, I want to share a brief outline of the way I used to think about trading and gambling.

I remember when I first started trading Forex back in late 2007, a little more than 6 years ago. Whenever the subject of trading would come up at a social gathering, I was usually pretty quick to chime in; I was so proud to be a “trader”. Without fail, one of the first comments people would make was,

“Oh, so you must like to gamble”. Or my personal favorite, “You must love going to Vegas!”. Being the naive trader I was at the time, I would get a little defensive and respond with something like,

“No, not really…trading is nothing like gambling if you know what you’re doing”. Of course at the time I had no clue what I was doing, but that’s beside the point.

Fast forward to today…boy was I WRONG about that statement.is trading gambling
Make no mistake about it folks, trading is gambling!

Here’s what Webster’s Dictionary has to say about the definition of the word “gamble”:

  1. To risk losing (an amount of money) in a game or bet
  2. To play a game in which you can win or lose money or possessions
  3. To risk losing (something valuable or important) in order to do or achieve something

Notice a common theme? “Risk” and “losing”. If there are two things a Forex trader knows, it’s that there’s always risk and you will lose money at some point. It’s simply the cost of doing business as a Forex trader.

So why then do so many Forex “pros” love to tell you that trading isn’t gambling? Or that their new and improved strategy is a sure thing with a 98% win rate? Because they want to sell you their product, of course. They want you to feel like you’re no longer gambling. Because gambling is a bad thing, right? The truth may surprise you.

What is the truth? The truth is that even the “big boys” at the large banks and hedge funds gamble every time they sit down at their trading computer. But (and it’s a BIG but) there’s an inherent difference between how they gamble and how 99.9% of retail Forex traders gamble. It’s a little thing called “probabilities”.


Learn to Think in Probabilities


It all comes down to putting on trades where the probable win is higher than the probable loss. In other words, stacking the odds in your favor. In a previous lesson, I wrote about price action and confluence. The more “Confluence Factors” you have in your favor on any one trade, the higher the probability is that the trade will make you money.

So is Forex trading gambling?

Forex trading is the ultimate form of gambling. We get to review past price action before putting on a trade. Can you imagine getting to see the dealer’s hand before making a decision at the casino? That’s exactly what we can do in Forex.

However, this advantage you’ve been given as a Forex trader will go to waste unless you know how to use it to your advantage. The key is finding the right Confluence Factors that stack the odds in your favor. Here’s what that looks like.

price action and confluence on gbpcad chart

Notice how we’re now in a trade where we have five different factors in our favor. All of these factors mean a higher probability that this trade will make us money, and it did.

  • Price action pin bar on the daily chart
  • Price is rejecting a key level
  • The trend is up
  • The moving averages are providing dynamic support
  • No immediate resistance to the upside

Let’s go back to the casino example for a second. We can learn something from casinos. The goal for any Forex trader should be to trade their account like a casino owner runs his/her business. Casino owners know they’re going to lose money on some customers, it’s the cost of doing business. But they also know that by the end of the year, they’ll turn a profit because the odds are stacked in their favor.

So start trading your account like the casino owner runs his/her business by using price action and confluence, and begin stacking the odds in your favor.

Oh, and the next time someone asks if you like to gamble, just answer with, “yes, but only if the odds are stacked in my favor”. Then wait for the strange look they give you. 😉

Your Turn

Do you think trading is gambling? Feel free to leave your thoughts or questions in the comments section below and I’ll be sure to respond.

Leave a Comment:

30 comments
Justin Kouakou says

you don’t know what you are talking about and that convinces me that you are not a good trader because if you were you would know that trading is not gambling as it requires very specialized skills to be successful. You can argue that people who do not have those skills, and there are many of them are gambling. But the few that have acquired the skills and know what they are doing are NOT gamblers. So you are not credible as a trader. I am sorry. You should not be trading.

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    Justin Bennett says

    Sorry you feel that way, Justin. But according to Wikipedia “Gambling is the wagering of money or something of value (referred to as “the stakes”) on an event with an uncertain outcome with the primary intent of winning money and/or material goods.”

    Choose the definition from whichever source you prefer; they’re all the same.

    Wagering of money on an event with an uncertain outcome with the primary intent of winning money – that sounds like trading to me.

    Every business gambles to some degree, not just the trader. But that doesn’t mean you can’t win consistently over an extended period.

    Of course, we can also just agree to disagree. I’m okay with that too.

    Cheers.

    Reply
      Guest says

      Hey Justin,
      If you think that way, you can say parents looking after their children and providing them with everything in theire capacity believing children would look after them in return when they will be needed and when the children ditch their parent to be in old age homes, the parent were gambling. An entrepreneur who confidently relies on his hunch and abilities to grow a business is gambling. The investors who invest in companies and shares are gambling. Nonetheless the very individual who is working hard to get a dream job is gambling because most of the time the aspirant does not end up with dream job or to make things worse even jobless. All of these people know nothing more than the history known to them and they are gambling with their time, money, resources. When I started Forex trading, i started with demo accounts and I traded without doing any analysis. I ended up blowing my full account. I was gambling. It s been 2 years now and I am still in the process of learning, because I dont want to gamble. How do I do that. Not trading based on emotions, trade purely based on facts, get news updates constantly, follow mentors, research, back test. And I am able to make profit now. Those who think forex is gambling you are set to loose 100%. Those who think it is a serious business or investment venture and do everything necessary for its success, your success is guaranteed.
      Good luck folks.

      Reply
        Dakao says

        It’s amusing how deeply our trader egos can be tied to the idea that what we do is somehow nobler than gambling. I think Justin made it quite clear what definition of gambling he’s using: risking something you own (capital) against the prospect of earning profits on that capital, with the caveat of doing your best to ensure the odds are in your favor.

        Those who think forex is gambling where you can’t help alter the odds and it’s best to just go for it — will lose, sure. Just like people who go to Vegas and don’t play the odds will also lose.

        So why do some people manage to maintain an edge in gambling, or an edge in trading? B/c something about their process allows them to only selectively gamble when the odds are in their favor.

        By most people’s reflexive estimation, that’s not gambling any more, b/c most people assume that “gambling” MUST entail high odds of failure for any participant.

        It’s all semantics; there are successful professional gamblers (who systematically exploit key and recurring probabilistic advantages in order to win more than they lose over time, using high-odds entries and sensible money management strategies to maximize wins / minimize losses) and there are traders (who do the same).

        Reply
          Justin Bennett says

          Well said, Dakao. I always knew this post would garner quite a bit of attention as it’s a controversial topic, to say the least.

          Reply
Alex Chestnutt says

Investing, trading, to me is not gambling, as you own shares in the company concerned. You put your money in a Bank or Building Society and get a fixed rate of interest. You invest in the stock market hoping to make more than in a Bank or Building Society knowing that you are taking on greater risk. Investing in a share one takes into account the fundamentals of the company, how well it is run etc.. Gambling is like E G throwing a dice or a game of roulette, where you have no control at all.
If we did not have Banks and private people investing in companies, our civilisation would not be so far advanced.

Reply
    Justin Bennett says

    Alex, this post is about trading, not investing. Those are two very different things, especially when referring to fiat currency.

    Reply
Yhaceed says

I wouldn’t gamble my money in the forex market but to even begin the firm I want to trade with says you have to make at least 20,000 a year which I don’t. Is there anyway around this?

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Elias says

Hey there,

I have one important question regarding Forex Trading. If it is like gambling, how come there are Forex Trading Funds that are succesful and given 10% per week, for 50 weeks+ already?

Are those Forex Traders just lucky, or how do they mantain to have that 10% edge?

Please take your time to answer, Iam really curious to your explanation

Reply
    Justin Bennett says

    Elias, the point of this post is that you need to trade like the casinos (by stacking the odds in your favor). By its very definition, trading is gambling (so are many things in life), but that doesn’t mean you can’t profit consistently. I’m living proof of that.

    Reply
Rajesh says

Trading is not gambling, it is possible to make money in the market, only those who know the market how it is moving.the market always not work in the same way some time you have to away from market.i know that, I done that, I made money

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    Justin Bennett says

    Rajesh, of course it’s possible to make money consistently. It seems you missed the point of the post, which is to trade like a casino by stacking the odds in your favor.

    Reply
Paweł says

The similarity to gambling is that the outcome of one individaul trade is unknown and ramdom. You can try to increase proabilities with more confluencies, but it is still ramdom. Serious traders make money via a series of trades with proper Risk Reward

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Lucas says

Absolutely true article. There is no way to guarantee your trade will be a profit. Every time you enter in a trade(doesn’t matters your strategy, indicator, news, etc) you must be prepared for a potential loss.

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Heinrich Bosch says

I’m a good forex and stock trader and at the end of the day its a gamble because no one knows if it’s going up, down or in fkn circles thats why we use stop loss.

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Mohamed says

Yes is gambling

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Andrew says

I agree, I’mm not sure why people are getting so serious about the technicalities of the word. I’d say its an investment more than gambling but at the end of the day you’re risking A for a greater B.

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yousef says

if some body open a restaurant.and he expect people to come to him. is he gambling,if he is.it is means every thing in our life is gambling.forex needs skills so its akind of a jop

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    Justin Bennett says

    If you define gamble as taking on risk in the hope of a desired result, then yes, opening a new restaurant is a gamble. Most life endeavors are gambles if you stop and think about it. But as I’ve stated before, that doesn’t mean you can’t have an edge and win in the long run.

    Reply
Palo says

Trading means a supply and demand cycle. You get the supply so if there is a demand you sell your supply. If you have business, e.g. selling fruits etc., if a businessman gets 5 cartoons of apple, how sure he is that all 5 cartoons of apple will be sold? of course he is not sure if all will be sold, perhaps some will be rotten and that is his loss. is that gambling? maybe gambling in a sense that you have to take the loss, but that’s how business is, a probability.

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    Justin Bennett says

    Very true. I think some folks get the literal definition of gamble confused with the idea of gambling. Each trade is a gamble to some degree, but that doesn’t mean you can’t have an edge and win in the long run.

    Reply
Lesego Motsweta says

yes I still think forex trading is gambling, I tried it before though I did not understand much of what I was taught and loosing a lot of money made me realize I was just like a punter in a different platform of betting

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Lesego Motsweta says

can I make a career out of Forex trading?
I do not want to work a white collar job all my life

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abir says

Forex reminds me of establishing privately controlled central bank by making public fool or hypocrite. Its Gentle form of Gambling. It pushed many religious and moral people in gamble by confusing them, Those wouldn’t try forex if they knew it clearly. I know many muslims including me gambled in forex without knowing that its gamble. Its more unethical than gamble because its based on hypocrisy. I think only hypocrite or illiterate will call it trading rather than gamble.

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Larrio says

So Justin, you are not in anyway discouraging anyone from looking at this (forex trading) as a stable income generating venture to embark upon….Right? As for your definition, life choices in themselves, are gambles. They are accompanied with the possibility of positive or negative consequences.That said, I am just beginning out on trading,.,…. are the prospect good?

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