Is it gambling? That depends on your definition of gambling.
I remember when I first started trading forex in late 2007. Whenever the subject of trading came up at a social gathering, I was usually 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 naïve trader I was then, 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, I had no clue what I was doing at the time, but that’s beside the point.
So, Is Forex Gambling?
Fast forward to today, and it turns out nobody was wrong back in 2007. Trading is (literally) gambling, but it’s also nothing like going to the casino if you know what you’re doing.
Here’s what Webster’s Dictionary has to say about the definition of the word “gamble”:
- To risk losing (an amount of money) in a game or bet
- To play a game in which you can win or lose money or possessions
- 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, 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 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 is that even the “big boys” at the large banks and hedge funds gamble every time they sit down at their trading computers. But (and it’s a BIG but) there’s an inherent difference between how they place bets and how 95% 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 likely 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 can find for a trade, the higher the probability that the trade will make you money.
So, is forex trading gambling?
Forex trading is the ultimate form of gambling (with a twist). We get to review past price action before putting on a trade.
Can you imagine seeing the dealer’s hand before betting at the casino? That’s exactly what we can do in forex.
However, this advantage as a forex trader will be wasted unless you know how to use it. The key is finding the right Confluence Factors that stack the odds in your favor. Here’s what that looks like.
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
We can learn something from casinos. The goal for any forex trader should be to trade their account like a casino owner runs their business.
Casino owners know they will lose money on some customers. It’s the cost of doing business. But they also know that given enough customers, they’ll profit because they’ve stacked the odds in their favor.
So start trading your account like the casino owner runs their business. Use price action and confluence to begin stacking the odds in your favor.
And the next time someone asks if you like to gamble, tell them, “Yes, but only if the odds are in my favor,” and wait for the confused look.
Your Turn
Do you think trading is gambling? Leave your comment below and let me know how you plan to stack the odds in your favor when trading forex.
