I was trying to explain to a freind of mine the other day how FX works. He couldn’t think of it as anything other than gambling and generally looked down on this whole operation. Eventually I got to the root of why he didn’t like it. We are participating in an industry which benefits only ourselves. We produce no product or service that benefits our fellow man. In a way it’s like gambling in that there is only win or lose, never any real trade (ironic). I’m not sure I’m comfortable being a vulture like this and I was considering titheing to a charity just to put something back into society. I was just curious if anyone else out there has ever thought of this dilemma and come up with a different solution?
You do realize, right, that the forex market is the basis for global trade? When you participate in it you contribute to the liquidity of the market for the exchange of currencies which is fundamental to the flow of goods and services around the world. The forex market also forces a level of honesty from governments in that if they don’t manage things well their weakening currencies will be strong indications to that fact.
This is going to sound a bit rude and capitolist.
The reality is that if you want to, “help the community,” or, “put back into society,” you should just go work for a charity or soup kitchen and be happy with helping those less fortunate and being relatively poor the rest of your life.
If you are going to trade profitably or even start ANY business to be run for profit, you have to be very capitolist and work your bottom line very hard.
There is absolutely NOTHING wrong with make a living for yourself out of something that doesn’t make you look like a saint, or even getting rich.
The type of attitude you mentioned is either: A: forcibly brainwashed on people from birth that they must, go to school, get a job work for someone else, get married and then die, or B: spouted by people who are too dumb/lazy/jaded to grasp for the golden ring anymore.
Honestly, how many jobs/businesses are done out of care for the community or fellow man?
Any place I’ve even worked for, factory or corporation, no matter what they produced, the main focus was, “how can we make this more profitable.”
You shouldn’t have to worry about, “helping your fellow man.” In modernized contries (at least in the US) people who are laid off have all sorts of welfare options and goverment to babysit them.
I’ve known many homeless types and rejects from being a councelor when I was younger. Let me tell you something. The great majority of them are in that postion because they choose it. Most do not want to lead a normal life and have all the responsibility that goes with it. They do not want to be part of average society. By giving charity to them, your time and money, is literally wasted…what’s the saying, you can lead a horse to water you can’t make it drink.
Trading isn’t being a vulture. A vulture feeds off of carcasses that have already died of a natural death or been killed by another animal and left behind. You are not killling anyone or victimizing anyone when you trade. You are not keeping poor people poor or making them poor.
The only reason you should ever feel guilty about monetary gain is if you did it illegally…scammed someone, robbed a bank, held someone at gun point, ect.
I’m not rich, but I’m not poor either.
IME, friends and aquantances who are very poor or just getting by from paycheck to paycheck will give you the attitude that you should some how feel guilty about making a good living or even being what they might consider well off.
My advice is not to pay attention to them. If they had the strenght of character to make themeselves financially stronger, their attitude would do a complete 180
Because they cannot do what you can.
Because they do not see what you see.
And they refuse to accept.
Therefore they ignore.
Interested to know what your friend does for a living that he/she
can take the “holier than thou” approach.
I would hazard a guess that it’s just envy or jealousy that he/she
cannot trade him/herself.
Would they also say that banking, finance, insurance etc. are the same?
Jealousy is right. I do have the funds to be able to do this and he doesn’t, but I was just explaining how I got to the point. I wasn’t meaning that we should all donate to a charity either. It was just what first came to mind.
If we relate FX to a buisness we can follow my example more clearly. If I make a wigit that a consumer wants they pay me for it. We have traded dollars for wigits. Both sides have come away with something beneficial. In FX I can’t quite see where the give is to the take. We take money from world economies, but don’t give much back unless you count the comment about us being a gauge of a country’s sucess. As I’ve said before I’m new at this and it’s possible I’m just being short-sited, which is why I posted the question.
Please don’t take this as preaching–It wasn’t meant to be.
I wrote something once on the subject of “gambling” in the forex market. I saved a copy, and I’ll paste it here, because it addresses your question. It may not [I]answer[/I] your question — at least, not in a clear black-and-white moral sense — but, it [I]addresses[/I] the question.
[B]Speculating and Gambling[/B]
The difference between speculating and gambling is essentially this:
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speculators [I]assume[/I] business risks which others wish to shed, in an attempt to earn a profit
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gamblers [I]create[/I] risk where none existed, in order to engage in risk-taking for fun and profit.
Is forex trading just a form of gambling? To answer this question, we have to look at it from two different perspectives. First, from the macro perspective of the world economy and of society, in general; and second, from the micro perspective of the individual trader — you and me.
[B]The Macro Perspective[/B]
The two most important groups of participants in the forex market are (a) commercial interests (e.g., Toyota converting euros from sales in Germany into yen deposits in Japan), and (b) speculators, who take positions purely for the purpose of making a profit by buying low and selling high, or vice versa. These two groups have a symbiotic relationship.
Commercial interests are the reason the forex market exists; and, because it exists, it offers speculators the profit opportunities they seek.
Speculators, for their part, provide a vital service to the commercial interests by providing ample, round-the-clock liquidity to the forex market, and by assuming currency-risk which the commercial interests choose to shed. The risk assumed by speculators is not artificially created for their entertainment: it exists by virtue of world trade, and it must be borne either by the commercial interests themselves, or by speculators who are willing to assume it. World trade would be negatively impacted if currency-risk could not be transferred from those wanting to avoid that risk, to those willing to assume it.
So, from the macro perspective, as long as there are national currencies and international trade, currency speculators will provide a vital service to the world economy and to society at large, by providing the mechanism by which commercial interests can shed risk which they choose not to bear. And this is not gambling.
[B]The Micro Perspective[/B]
From my perspective as a forex trader, the distinction between speculating and gambling is less clear. I have no commercial interest in the foreign exchange market, and no direct exposure to currency-risk of any sort. My entire life, business and personal, is denominated in U.S. dollars. It makes little difference to me whether the yen is 100 to the dollar, or 200 to the dollar. So, what reason could I have for participating in the forex market as a speculator, and for deliberately exposing myself to risk?
Clearly, I’m not motivated by a desire to provide liquidity for Toyota, or to help them out by assuming currency-risk which they want to shed. No, my reason for speculating in the forex market is pure greed: I can make money — a lot of money, in fact — doing this.
I’m well aware that a significant percentage of all forex transactions are between speculators, involving no commercial interests whatsoever; that we speculators are essentially trying to take money away from one another in a zero-sum game; and that, in order to keep making money year after year, I need a steady supply of losers coming into the market, taking the other side of my trades, in order to feed my account. Not much different from being a pool-hustler, or a card-shark, is it?
[B]Trying to Unify the Two Perspectives[/B]
So, where does this leave us? The forex market is not a casino, because the risks inherent in it are business risks, created in the course of world trade, which must be borne by someone. But, my attraction to it — and yours, as well, if you’re honest about it — is precisely because it is like a great big, lucrative casino which almost never closes.
So, how is this different from, say, playing poker online? I do this instead of poker, because this suits my temperament, and poker doesn’t. Aside from that, it’s hard to tell the difference between the two. And I’m perfectly okay with that. It may well be that everyone like us, who is attracted to risks we don’t have to take, is a gambler at heart. If so, then whether we choose to gamble in the forex market, or in the futures market, or at the racetrack, is simply a matter of our own personal preferences.
If you are troubled by how similar speculating and gambling seem to be, when viewed from the micro perspective, then you need to do some serious research (and some serious soul-searching) on the nature of risk and risk-taking.
If you’re conflicted about this, your internal conflict will likely sabotage your trading.
Clint
• Risk is the Price we pay for Opportunity •
.
Quite frankly, this gig ain’t for you. Not sure where you hail from, but my recommendation would be to become a teacher and/or doctor, and head off to some part of the world where you can best serve your charitable desires.
There is a place in the world for a soul as yourself. It’s just not in the forex markets.
My question…
What was your initial interests in the forex market?
As far as the give-take relationship goes, I know I’ve given money to buy something that I thought had value, but is now sitting on a shelf somewhere collecting dust…where’s the equality of the trade in that?..lol
As far as I’m concerned, the retail brokers are making the money…taking from other traders who are their supposed customers…and I’m just taking it from them. In the real exchange, it’s mostly the retail brokers, banks and institutions that are taking/giving the money from each other…and those same banks/institutions took it from me at some prior point (bank charges, mortgage interest/bogus gidgets)…so I’m just taking it back…lol
Oh don’t get me wrong, my interests are completely based on personal greed, I’m just wise enough to know that capitalism is flawed (gasp!). It just happens to be the best system out of a whole swath of lousy ones and I can’t think of anything better so I don’t complain. Capitalism in it’s purist form creates inequalities which become insurmountable. I cite the practices of union busting and monopolies. It is a system which would run amok if it weren’t being kept in check by government powers. I’m not saying the government is the cure-all balm to all our problems, but it keeps us from spinning out of control. And I think it’s somewhat unfair that you would say forex isn’t for me based upon a single post. All I’m saying is that if we look at the world with only our self intrest in mind than it can go to h-ll pretty quickly so I try not to approach any part of my life that way.
Of course I can. You provided information with a question. My answer can only have been gathered by what info was given to me. Your dilemma is self-induced by your own psychology. And if you’re approaching it under the guise of fear that it will trample your good conscience, then it’s not for you. Furthermore, if you’re pursuit is driven by greed, then you’ll quickly learn that’s another mindset that will only surrender your money to the market.
Hi,
Good authority suggests that only 5% of players make a success of trading in Forex.I am not too sure if these are private or institutional players but I would have thought the latter.
Therefore if you are considering giving some of your money away to charities then I suspect that you are in the top 5% .But as a successful trader you will be taking money from the other 95% who fail,but in reality they know the score(or at least should do) .
Now here’ a thought…most Forex traders end up with nothing…perhaps that constitutes a chritable need…now there is a worthy charity for you…ex failed forex traders.
Also the more I examine Forex the more I see it as a gamble and not really a profession that can be mastered.I feel the sytems approach is very much a hogwash thing ,a bit like a toy,looks pretty but does nothing.
In a profession rules and skills are mastered and then work in the real world.In Forex you can be a Fibo freak or a Bollinger bore,but at the end of the day none of these systems are in any way foolproof,and however “technical” they are in nature,the reality is that interpretation is more subjective than objective and scientific.
I noticed that Bollinger(the bloke who invented the bands) offers a service…it always makes me smile as to why people who claim to have the answer to trading always offer a service…if their system is so good then why not just trade it and make a fortune.
I think to be successful you have to be a fundamentalist.News does move markets but again this isn’t a hard and fast rule,and the gamble will never be removed.
Rodders
AGiantNun, don’t sweat it. Banks are mostly on the winning side of trades, so if you do ever make it into the winners halls, you’ll be reducing their profits. Taking money from banks has never been so morally sound an occupation, given that the money was probably yours in the first place (if you live in a country that’s had to bail out it’s own banks anyway).
The bigger risk is that an unhealthy obsession with money turns you into the kind of selfish, egotistical idiot who doesn’t give a toss about anyone around them, but the fact you asked the question means you’re more than likely to be immune.
In terms of being suitable for trading, you’re at an advantage. Fear and greed are found at the extremes of every market, and trading them is a solid route to success. That means, if you can study the participants of the market objectively without getting yourself wrapped up in the same emotions you’ll do just fine.
And as the others have pointed out, statistically, you’re most likely to be donating to your broker, so save the tything (sp?!) till you’ve proven yourself
Fantastic post Clint. Sounds like you’ve read Trading & Exchanges? Either way, top notch…
nice one.
short and sweet.
Your assumption about technical analysis is false or an inexperienced view. I can tell your that from a quite a few hundred trades that technical analysis does work. But, it is not an exact science. This is where your misunderstanding of it comes in. You, like a lot of those who think it don’t work, think that technicians claim they can predict EXACT MOVES and act on them.
That is not how technical analysis is used. Used properly, it puts THE HIGHER PROBABILITY move in your favor. Technical analysis, at least if touted honestly, does not try to predict an exact and certain move.
For instance a trader who used good technical analysis will be able to say with high probability that x move will happen after X, Y, & Z circumstances.
Now, that is not the end of the probability equation, after you have your technical analysis proficient, you can’t just enter and exit at any odd spot. The entry has to be placed in such a way that you can capitolize on the high probability move your predicted, otherwise you hamstring the probability of a profitable trade.
I can say for certain from first hand experience, that trading and being consistantly profitable is not luck, but based on skill. Yes, you can just go in haphazard and get lucky, but you can trade using hones skills and experience.
P.S. if you trade ONLY fundamentals and try to day trade you will quickly lose your account. The market is driven by the traders and what they do. When fundamental news hits, the market could move wildly, not at all, or barely blip…BUT, all those moves are because traders are reacting to or NOT reacting to news and driving the markets. The markets are driven by the minds and emotions of the traders.
Fundamental trading went out like the dinosaur when electronic trading and technical analysis came in. The last traders that did it well traded off ticker tapes.
If you look at a pricechart and put up fibs or other commonly used indicators, you can see the market moving and bouncing and trending, where PEOPLE drive it. GOOD, traders try to just go with the flow of this instead of trying to pick tops and bottoms and quick reversals.
Haven’t read [B]Trading and Exchanges[/B]. I was simply writing from experience.
I googled the book title and found a link to a 113-page, March 2002, “draft copy” of the book (written by USC professor Larry Harris). So, I’m going to start with that, and if it grabs me, I’ll buy a copy of the actual book (which I believe was published by Oxford University Press).
For anyone else who wants to read the “draft” in .pdf format, here’s a link: http://www-rcf.usc.edu/~lharris/Trading/Book/Book-extract.pdf
Thanks for mentioning this book, triphop. (And thanks for the compliment.)
Clint
No, trading is not gambling. But you’re right, just like you can’t become a doctor by reading a book and buying a stethoscope, nor can you become a trader by finding a “system” to follow.
Real trading skill takes much hard work and for those that can’t put that in, it might seem that trading is just another form of gambling.
Also, I’d like you to quote where Bollinger ever said he had the answer to trading?
Your view suggests that you have a hard time making money out of the markets, maybe trading isn’t for you?
I have always asked this question also.
The Bible makes it clear that gambling is no more than ill gotten gain.
Nothing produced, no service made.
One wins what another loses.
However, I feel a lot better after reading the posts by Rhodytrader (brief) and Clint (elaborated in detail).
According the macro position stated by [B]Clint[/B], we are offering the service of “risk”, like an insurance agent…
The risk assumed by speculators is not artificially created for their entertainment: it exists by virtue of world trade, and it must be borne either by the commercial interests themselves, or by speculators who are willing to assume it.
…by providing the mechanism by which commercial interests can shed risk which they choose not to bear. And this is not gambling.
As speculators assuming the risk that comercial interests do not want to bear,
we are then providing…
[B]1) risk which comercial interests choose not to bear.
2) ample, round-the-clock liquidity to the forex market.[/B]
[B]We are getting paid for our service with our profits.[/B]
[B]The fact that speculation and gambling appear very similar, and that we are in this for the money does not worry me too much. (micro perspective).[/B]
The [U]opportunity [/U]is there to do this “risk” service and, as [B]Clint [/B]put it…
World trade would be negatively impacted if currency-risk could not be transferred from those wanting to avoid that risk, to those willing to assume it.
Our role, then, appears to be a necessary role.
A high risk role, yes, but nevertheless, a necessary role.
And because it is a high risk role, we get paid accordingly.
Yes, there are those who do not make it.
But then every business venture is a risk, and plenty of business ventures do not succeed.
[B]To further provide a service to the community, I always state that one should give 10% of their gains to tithing or some charitable cause.[/B]
If you want to feel better your being paid to monitor the market.