How is forex trading different from gambling?

[QUOTE=“eddieb;691231”]It doesnt matter how you phrase it, if you dont know the outcome when you place your trade, and none of us do, then it is gambling. Gambling that your ‘edge’, plan, gut-feeling, knowledge, instinct, whatever else you may want to call it, will come up trumps. Stop kidding yourself otherwise.[/QUOTE]

An edge is not instinct it a gut feeling. It’s a mathematical absolute. Stop kidding yourself.

Who is asking for 10,000?

What I do know is that over a large enough sample, I have a significant edge of yielding a return. One individual trade is just a single sample. This is basic statistics; concepts children learn in primary school. Why are people arguing about this?

Here is the definition of gambling:
“Gambling is the wagering of money or something of material value (referred to as “the stakes”) on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods. Gambling thus requires three elements be present: consideration, chance and prize.[1] The outcome of the wager is often immediate, such as a single roll of dice or a spin of a roulette wheel, but longer time frames are also common, allowing wagers on the outcome of a future sports contest or even an entire sports season.”

One of the reason i got into training forex trading vs casinos (gambling related example) is because of my moral view on the gambling subject which it comes to this basic difference, if i know that the economy of USA is taking a hit next month because of something that happen then im gonna buy a couple of lots and make some money, i dont see any gambling decisions when the decision is base on the news or technical analysis this is just a basic example, and thats how i see it

If, with this definition, we must conclude that trading in financial securities is gambling, we must also conclude that every business conceivable is also gambling. Do you consider all businesses gambling?

-Adrian

Agreed. If trading is considered gambling than everything is considered gambling. Is buying insurance gambling? Paying money upfront and if a specific event occurs you get a big payout.

Another big difference for me when talking about traditional gambling and trading is the fixed payouts and the odds against you. Every game and outcome has a FIXED percentage chance of occurring and the payouts for those events are FIXED to pay less than the occurrence ratio. This is why the house always wins.

In Forex no outcome is fixed and no payout is fixed. You may have a risk reward ratio that you set with your stops and profit target but that is your personal choice and you get to choose those limits. A buy or sell does not payout a fixed amount. The market moves based on the actions of each market participant not on a fixed probability of a dice roll or deck of cards. There is no common opponent in trading, but in traditional casino gambling the opponent is clearly the house/dealer.

I’ll agree that many people treat it like gambling and that it can be a very risky venture, but I think it is a far cry from going to a casino and putting money on red.

According to [I]Barber, B. M., Lee, Y., Liu, Y., & Odean, T. (2009). Just how much do individual investors lose by trading?[/I], trading in Taiwan dropped by about 25% when a lottery was introduced in April 2002.

This answers your question i think. Whereas Forex and trading itself is not gambling per definition, most people treat it exactly like gambling: For the kick, for high returns, for dreams of getting rich quick. Hope, adrenaline and superstition are their guides when making decision and then of course Forex, as any other game where money is involved, is gambling.

Buying a cola is gambling. The contents of the bottle cannot be known until after you place your bet and open the top. You silly cola drinkers are just no good gamblers and one day you are all going to get a face full of fizz.

-Adrian

By definition then if you have a defined edge in the market than you are not gambling as the outcome is certain than.

Gambling is a zero-sum game, Forex is not. I do not think banks would be interested in gambling.

[QUOTE=“middaytrader;691932”] Gambling is a zero-sum game, Forex is not. I do not think banks would be interested in gambling.[/QUOTE]

Gambling is a negative sum game as there is always a party that has an edge or a varied odd.

I am greatful to live in the information era, where almost all information is readily available thanks to things like google. If anyone reads this maybe they can do a google search and type in “gambling defintion”. I’m positive some of the posters here have done so. So what’s the difference between trading FX and gambling? To me honestly, there really is no right or wrong answer. That sounds like trading doesn’t it? If I’m comparing it to gambling than wouldn’t it be gambling? Really though everything in life is gamble, as an earlier post has stated, getting out of bed, driving, eating, anything can be looked at as a ‘gamble’. A lot of these things that we do everyday though, we take extra percautions so that it is with less risk to the negative consequences. Driving, for instance, you put on your seatbelt and drive the speed limit to make sure you are ‘safe’ or you could drive double the limit and get to your destination faster or slower than the limit to be even more safe. Whatever it is you decide to do you measure the risk involved even if you don’t think you are measuring and act accordingly to your defined risk. Having said that I want to say that I don’t think trading is in any way similar to gambling, although I can see why people would say so. You can measure and always know your risk and add any type of analysis to give you a statistacal edge, where as in gambling your relying on pure chance, even if you were to count cards correctly at a black jack table you only take away the house’s edge and even it out. The real risk however, isn’t completly about what you can lose in money amount, sure it plays its part, but the real threat comes from not knowing what it is your playing with. If your flying a plane without any prior knowledge your most likely to crash and burn (literally). So for the ones that do call this gambling they’ve most likely did a small research, had a go with it and failed, maybe a few times, only to believe that there is no possible way that the trader him/herself can obtain an edge. From what I’ve noticed there is a small gambler in almost all traders, they just know when to take the chance when the opportunity is in front of them. For the true gamblers though or if you think it’s a gamble I don’t know why you would stick around on a trading forum unless your system/strategy/charts or whatever you may use are as flashy as a slot machine. If you’re not willing to put in the work and effort that you have too in order to succeed in this field than by all means keep pulling that slot lever.

Everything in life is just perceptions, there is nothing right or wrong. However, whatever you perceive it to be is what it will be.

Interesting how many only seem to equate gambling with casinos when there are so many other forms of gambling that do not involve one side with an advantage over the other.

:18:

Hillarious! Broker statements, insults all around whether FX is gambling…

It is the negative connotation associated with gambling I guess is the problem. Let’s have a thought experiment. If I entered a casino as a professional card counter determined to clean the house. Am I gambling or I merely attempting to rip the house off? Many people get thrown out of casinos for card counting.

If I enter the casino without any objective other than blind faith I will some money, then I am gambling my money hoping to get lucky. Gambling can be employed as a strategy in any scenario. Trading assets be it a house or FX or stocks can be a gamble or calculated attempt to make a gain from buying and selling an asset. So it is a non-argument.

Secondly, it is the presence of leverage in the FX market and the microseconds the market is being made in that sweeps FX in to the territory of Gambling. To most it is inconceivable how one could buy an asset an look to profit from 1/10000th of price change (absolutely fair) arguably it is very hard to make a reliable logical prediction on the best possible price. That level of volatility doesn’t really exist outside of the financial markets.

Let’s rewire the discussion. Presumably, I am friends with Mario Draghi and he had told me 6 months before that a QE bond buying program was going to be approved for the Eurozone. I then took 1,000,000 EUR cash and sold them for the equivalent in Dollars knowing the fundamental effects of QE will depress the Euro am I gambling? Not really, I Know the outcome, granted Draghi may change his mind but that is the risk on my decision. The absence of leverage essentially means any loss is manageable.

How is this different from buying house in an area that is known to hold value against buying in a slum and gambling your savings? How is it different from buying the stock of a company based on a solid performance and buying the stock of a company that your buddy told you was good and gambling your life savings?

To conclude it was a non-starter argument. The key difference between gambling in markets and participating in buying and selling is the availability of information or the unavailability depending on the participants sphere of influence, operational knowledge and market knowledge. In the absence of this you are no doubt gambling. There is nothing wrong with gambling as long as you are comfortable with it. Likewise there is nothing wrong with trading if you have the knowledge for it. Are they the same? CERTAINLY NOT! END OF…

Please stop posting statements, etc. It is embarrassing. As a someone who is in a brokerage, some of the most successful traders started with on average 10-20k our least successful clients have usually in excess of 100k and have been successful in other areas of life and don’t trade usually for profit. Show me a balance of 10k - 100k or even 50k, you have my respect. Beyond that save your breadth. (Sorry for the harsh words) and myfxbook is a load of rubbish not only does it hold fake accounts but also if you move money around or change brokers or hold multiple accounts, gains can’t be accurately calculated and the ability to customize periods also has limitations to a show of real consistent performance. Even the largest hedgefunds can’t show consistency over time as investors join and exit the fund, they can only paint a picture of performance so not worth publishing your private information on public forum unless you have an agenda.

Hmmm! Not so long ago, here on Earth, the Swiss central bank decided to remove the EURCHF ceiling. So many people, broker, company etc. lost money…

Presently, as far as I know, insider trading is a crime, isn’t it?

Nothing is wrong with that, isn’t it? I have seen so many businesses start and then fail… Those people risked all their money and more (loans). And here and there on Forex forums people/teachers say: don’t risk more than 2% of your money on any individual trade…

There are lot of other forms of gambling , but you cannot compare forex trading with gambling, if you want to get involved you need a different approach for doing gambling and trading.

Well…yes, it is gambling when one treats the Forex market like a huge Jackpot machine or Roulette table where the hope of winning is dependent on nothing else but pure luck.

The problem with casino gambling is that the odds are stacked heavily against the gamblers. Whereas in Forex trading, the trader needs only to overcome the odds of a few PIPs spreads payable to the broker before he/she can attempt to make a profit.

Trading “blindly” in the Forex market with no plan or strategy will cause the Forex gambler to lose money just like any game of chance.
The consequence is worsen when the Forex gambler does not apply stop losses in his trading.

But forex can also [B]“work in your favour”[/B] if you do a proper analysis of market and then uses the right strategy. Unlike a game of chance, the Forex trader can rely on price patterns and analysis to decide on the opening and closing a position with a probability of winning in his favor.