The question, is Forex trading gambling, doesn’t represent a real disjunctive since both answers can be true. The fact that both answers can be acceptable makes it a frequent topic of debate among Forex traders, financial advisers, investors, and the general public.
Furthermore, if any economist or any interested person opens a poll with this only question, the answer will change depending on the respondents’ financial education and trading background. Although Forex trading is gambling for the newcomer or the untrained investor, it is pure economic science for the expert’s trader. Consequently, the answer to this question depends on the person who answers it and the person who is trading Forex.
On one hand, the untrained eye can miss the virtually unlimited potential for Forex trading revenue generation. He may not see a connection between a political turmoil and the exchange rate variation.
Moreover, people with little financial knowledge fails to recognize price trends, charts’ patterns and comprehend the various technical and fundamental analyses needed to anticipate a future exchange rate variation.
Consequently, since they neither understand the Forex market nor the economic policies, they can only guess which currency pair will increase or decrease its rate.
Under those circumstances, the interviewed people of respondents must give a clear affirmative answer to the question, is Forex trading gambling? They have to answer yes, Forex trading is gambling since they don’t know what they are doing or why a price can change.
On the other hand, the professional Forex traders or people with knowledge of the financial markets must answer negatively to this question.
The question, is Forex trading gambling?, is laughable to them, to say the least, in the light of the recorded market knowledge and their personal experience. Furthermore, they know that the exchange rate varies depending on several identifiable factors. They understand the price charts information and can recognize patterns which allow them to anticipate with great certitude the exchange rate at a future date.
In addition, they can track the market and prevent losses by closing their position before a current trend ends. For this reason, this group will answer negatively to the question and they confirm and can prove that Forex trading is not gambling, on the contrary, it is a science and an art that can be learned and mastered.
When Forex trading is gambling?
Forex trading IS gambling every time the trader doesn’t study and prepare them self to identify the market behavior and recognize the current trends and possible confounding factors or market noises.
You are Gamble ....
- When a trader invests more money than they can afford to lose.
- When a trader opens a position without understanding the current market sentiment.
- When a trader doesn’t devote enough time to learn to identify price charts’ patterns and signs of alert.
- When a trader doesn’t follow the economic indicators, politics and international news that can affect his trading market.
- When the trader relies on luck and maintains an open position failing to close it at profit.
- When a trader doesn’t have or follow a good investment strategy.
- When a trader doesn’t have a risk management plan.
- When the trader doesn’t include the possible transaction and brokerage cost to their profit estimations.
How to prevent gambling in Forex trading
Preparation is the key to success and practice is the price to pay to become a profitable and successful Forex trader.
Any investor who wants to learn to trade must understand from the beginning that they needs to commit at least 20 hours a week to study and improve their market knowledge and the price charts patterns recognition.
The only way to prevent gambling is by knowing what the trader is doing and how the market is behaving.
- New traders should not trade with their real money until their winning rate is higher than 70% and they know the trading basics.
- Take advantages of the internet material. There is a huge amount of educational materials with the principles and trading basics. Newcomer must read and learn the terminology, the patterns identifications, the money management plan, how to decrease losses and how to create a good and functional investment strategy. Additionally, You must understand the different price’s charts and familiarizes himself with candlesticks or your preferred market graphical representations including the trading lines.
- Learn how to perform the fundamental analyses for the currency group he is interested in trading.
- Price pattern recognition is a wonderful tool in the experts hand; it can save time and money. The newcomer must learn the most accurate price’s patterns and how they are confirmed. Moreover, price’s pattern recognition is just the beginning level, afterward, you must learn to remember and identify what the next market movement is after the price’s pattern is established, its expected duration, and the main reasons for a price reversal.
- Technical analyses, it is the backbone of any successful investment strategy in any market. The newbie must learn how to use the oscillators and indicators required by their investment strategy.
- Take advantages of the social trading and the signals providers, newbie must pay close attention to the way how the professional and successful traders interpret the market and invest their money. A Trader must figure out why a professional opens a long or a short position and why they enter or exit the market.
- The Forex market activity is recorded; the newcomers must take advantages of this information and practice understanding of the price volatility.
How to reduce guessing in Forex trading
- The only way to reduce guessing is by increasing anticipation and this is done by practicing and studying.
- The Forex traders who become millionaires or survive for a long time are those who based their investment in solid knowledge and efficient strategies.
- Trading is a 24/7 job that demands that the trader knows, financial, international and political news and possible developments that can affect or impact the market in which investing.
- Price’s chart recognition is a time-consuming task and it requires an efficient way of confirmation and corroboration.
- Traders must open a position when they are confident in the next price movement direction and keep an eye on the market in the event of a price reversal or a wrong market or signal reading.
How can a Forex trader stop gambling and learn to trade without going broke?
The first step is to close any open position and stop trading until you understands the Forex market.
Afterward, you should open a practice account with an online broker and practice Forex trading with virtual money. The market and the quotes are real and up to date. Therefore, it is the best way to test your trading level and the winning rate of your investment strategy.
In a nutshell.
There is no clear answer to the question, “Is Forex trading gambling” because it depends entirely on the background of the person who answers this question and his market knowledge.