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Forex Trading And Gambling - Is There A Difference?


February 24, 2020 ( Newswire) Lots of people are have limited experience in forex trading as well as those who've struggled to enjoy any success in the currency markets are keen to dismiss this form of investment as gambling. Frustration and limited knowledge are the primary contributors to this misconception. In fact, forex trading and gambling have very few similarities, however, a lot of people don't seem to grasp this. Cynics often point out the high rate of failure among successful foreign currency traders and say that their struggles are due to a gambling mindset.

The Gambling Mindset

In fact, a major mistake made by new traders in the forex market is that they approach trading with a gambling mindset. Today's forex market has a daily turnover of around $6 daily, and that can be pretty intimidating. It's no wonder that so many people misjudge how to trade foreign currencies. After all, the leverage that can be offered to traders can be enormous – even up to 1:3000 in some cases, so it doesn't come as too much of a surprise that the forex market appears quite overwhelming.

There is no other type of market that offers this combination. For a moment, imagine this situation: You've got $1,000 available to invest and your broker gives you a bonus of 30%. This means you've got a total of $1,300 to trade with. Now, imagine you select leverage that stands at 1:500. Your forex portfolio is suddenly an impressive $650,000. That's a lot of money to play with, so it's no wonder that forex trading and gambling are so often linked.

Why Are You Trading?

The difference between gambling and forex trading lies in the reasons behind your investment. Are you trading because you'd like to make a huge amount of money? While it's a valid reason, be aware that this can lead to greed and greed can lead to failure in your trading ventures.

Gamblers and traders can be very similar. When real money is on the line, some people are always going to take chances. However, if you'd like to be profitable consistently (and who doesn't?) never think like a gambler. Never take impulsive chances and, above all, never rely solely on luck.

What Separates Traders From Gamblers?

Traders realize that absolutely anything could happen in the financial markets, but they also recognize that they can bend the odds to their favor. This is what sets traders apart from gamblers.

Gamblers solely focus on a single game (or trade) at any one time. Traders, meanwhile, play their advantage over the long-term. They learn the patterns, tendencies, and behaviors of the market so they can turn them into new trading opportunities. They review price actions, record their observations and they devise statistics that help them stay on top of the different setups and patterns. They keep trade journals where they can focus on the various setups that showed a higher probability of winning. Traders also have strong risk management. They limit themselves to only taking or setting up trades with an appealing risk-management ratio.

Mistaking Trading For Gambling Causes Failure

A surprising number of forex traders experience failure at the first hurdle, and one of the reasons for this is that they believe that forex trading has similarities to gambling and that luck has a role to play. This couldn't be further from the truth. Luckily, it can be avoided. Take trading one day at a time, building up your knowledge, your skills and your understanding of the markets. With the right grounding, you can make knowledgeable trades that come from your own experience instead of depending purely on luck.

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