Is Forex Gambling?

Beginner Questions
494

Everyone who I speak to says that forex (and trading in general) is gambling and as worse as playing poker or the lottery. I can see why people think like that and I understand that forex is a zero sum game (exclusding brokers’ spread costs) so in terms of monertary value 50% will be winners and 50% will be losers (like in poker games or many casino games). Therefore forex could be considered gambling like poker is considered gambling.

Although, if we assume that forex is complelety random and it just is gambling (which I dont think it is), we have a 50% of making money by either going long or short. Assuming each trade is independent of each other we have a 1/2^n (n being the number of trades) of being right. Therefore, for example, if we traded 5 times using a 50% chance of winning, we have a 1 in 32 chance of winning all 5 trades. Compare that to winning the lottery, you have like a 1 in 10 million of chance of winning the jackpot and only a 1 in 10 chance of winning the smallest amount of like a few pounds, which could easily be matched in forex by trading 1 lot and making only a few pips with a 50% chance of winning. Therefore mathematically trading forex you have a easier chance of winning compared to traditional forms of gambling.

Then you hear reports saying 90% of traders lose which gives a bad sterotype to trading and so people then call it gambling but I believe that a lot of new traders fail becuase of bad risk management, over trading and in my own case getting too big headed too quickly. All these aren’t due to forex being gambling, they are down to people making mistakes and not the market screwing them over. Alhtough people who have lost money will say it is gambling and not their fault, but in reality it is becuase of not practicing enough.

So if it is gambling I much prefer trading forex odds compared to traditional gambling.
In my opinion people (i.e stupid people) who say it is gambling just don’t understand it yet and I hope they lose all their money on traditional forms of gambling.

Anybody who says trading is gambling and complete luck, then remember 50% must be winners and 50% losers so somebodies got to win and you have to study hard and practice to make sure that you are on that 50% who are winners.

495

I can assure you that poker is nothing like other casino games or tge lottery. In fact it is so similar to trading a lot of people dont realise. In poker you have to have a plan before entering a hand. Same in trading before entering a trade. You need to be able to adjust your plan depending what happens. Although any old idiot can win in the short term the best allways come out on top. Same as in trading.
The physcological aspects are dead identical as well. You need to have patience, an eye for detail, not be afraid of risk etc etc. When i used to play poker as a full time job (didnt get rich but paid my bills!) members on poker forums would always slate forex trading. Now on this site people slate poker! It just proves you should never judge anything on stereotypes until you have researched it yourself.

496

LOL!

Humorous? Yes.

Accurate, and informed? Not in the least.

Let me enlighten you.

Retail forex is gaming. Our trades almost NEVER reach the actual market they are warehoused by our market making broker. We have no intentions of actually purchasing the currency we’ve bet on, and our trades never leave our account’s base denomination in the first place. So, we are simply betting the euro, pound, or whatever will go up, or down.

And calling them “wins and losses” should be a clue as to what one is actually doing. It’s a wager pure and simple. Win some, lose some.

497

Not true in the least.

It’s a numbers game. Here’s why.

If I put in a trade against 99 other traders, and my single lot size is $100,000, and the other 99 trader’s aggregate total is $100,000, and I win, and the other 99 lose, 1% of the traders won the trade.

498

“I can see why people think like that and I understand that forex is a zero sum game (exclusding brokers’ spread costs) so in terms of monertary value 50% will be winners and 50% will be losers (like in poker games or many casino games).”

You can’t read.
If you read the third line of my post I do say it is Zero sum in terms of [U]monetary value[/U]. I didn’t say in terms of number or participants.

499

I can read just fine.

You still don’t understand it. It’s actually much more complex than a 50/50 minus spread game.

There are constantly imbalances in the market that never level out. Which is why the euro can be lower today than it was a year ago today. If it was truly 50/50, the market would be stagnate.

Retail forex is a TINY part of it, so do not confuse the market making side of this, with the actual market. We’re the bettors. The guys moving the market, are often not in it for pure speculation. They actually have need for the currency, and a lot of one way purchases occur. There can’t be 50/50 when that is the case.

500

I also consider that forex trading is not gambling but in forex and gambling you earn fast and lose also very fast. There are lots of similarity between forex and gambling therefore forex trading is compare with gambling. For me, Forex trading is a good part time job to make money.

501

Of course it is, if you dont have reason for your trade decisions

502

Call yourself a master, I only did A-level economics and I know way more than you.

You need to research supply and demand or just research basic microeconomics. The forex spot and futures market is a zero sum just like the market for gold, silver, copper, oil etc. The only exception is the stock market. Source for proof:
Zero-Sum Game Definition | Investopedia

Here is a proof for why the price moves. The reason the price moves and is still a zero sum game is simple. lets consider the example of a laptop. A made up business called company A makes 500 laptops and the real demand for the latops is 500 people. The market clearing price (equilibrium price) is £300, for example, which is derived by the firm, in theory, finding where there marginal cost and revenues equal. Then if 100 more people suddenly want to buy a laptop from company A, there is increased demand but supply is still the same, therefore the firm has to raise price to cut off excessive supply and to find a clearing price, for example £350. It was a zero sum game before becuase the firm recieved £300 in cash and the customers recieved a £300 laptop, after demand increased it is still a zero sum game becuase 500 laptops are still sold and the firm recieves £350 for each one and the customers receive a £350 laptop. The reason the price goes up is because on the supply and curve there are different willingness to pay, to clear the market the firm has to raise the price to cut off the extra demand and so some people on the deamnd curve won’t be willing to pay £350.

This example could be put in to a spot silver market situation. lets say that the price for silver is $40 per ounce and this is at market equilibrium. When more people click on the buy button then sell (when more go long than short in terms of monetary value), i.e demand increases, the price rises beucase the people who are supplying the silver (or going short) have to raise the price to ration out the supply of silver and reach the market eqililbrium price. The theorectical output of silver will also increase. Obvisouly the equilibrium price is changing all the time. Source on basic markets: Economics Basics: Demand and Supply | Investopedia

On a big logical picture the forex market [U]has [/U]to be a zero sum game, if it was negative sum where would the money physically go, it can’t get lost in limbo somewhere on the internet. If it was a positive sum game where would the money come from to create more money rich winners than losers, theres no printing press in the forex market. If it was postive sum then goverments could trade it to expand the GDP of their economy, which obvisouly isn’t true, they can only use it for trade export and import advantages.

I see your point that not everyone in the forex are there to speculate, but it is still zero sum because if a U.K business sells goods in America it has to sell Pounds to buy dollars and so there has to be people on the oppsoite side buying pounds and selling dollars to complete the trade. So the business although not directly speculating or meaning to operate in a zero sum game is still operating in a zero sum game.

When or [U]if[/U] the forex market ever finishes and all positions are closed it will a perfect zero sum. just face it.
some sources:
Forex Is A Zero Sum Game
zero-sum game
Currency trading for dummies book

503

Its skilled gambling,

Your betting against another that your right and he’s wrong. If your right, you win, if your wrong, you lose.

Its the plan you detail yourself, and conclude on due diligence, that you have a better chance of winning, so you bet on YOURSELF that your analysis is superior to his.

50/50 chance? If you know nothing, and go in blind, sure it is, but If your as good as me, i call it an excuse to losing, because, well, you think the odds are with you, or against you…

Hogwash!

504

I agree. Thats my point compared to traditional forms of gambling it is just chance or luck but with forex you actually need strategy, money management skills and a good trading mindset, so I believe it is much more than gambling. The message I was trying to get across in this thread was that if it was gambling (like many people say it is) you still have better odds with forex than with any other form of gambling.

505

How is this gambling.

In gambling if i lose, i lose all my money and i take a complete guess when i place my bet.

In Forex i take time with my decisions, i make a fully informed trade. If i lose, i lose only a portion of what i put down. Afterwards i’ll analyse my trade and hopefully learn going forward. With time and effort my understanding grows.

If you think Forex is gambling you are doing it wrong.

506

Good for you, and your A-level economics.

Now, back to the real world.

Forex is actually a negative sum game. Winners pay, and losers pay. Ideally, it is what you claim. A zero sum game. But in reality, that’s an impossibility.

If ANY given retail broker closed all currently open positions, they would not close net zero. Why? Because [I]the open orders are never perfectly symmetrical[/I]. The broker is always going to be in a floating state of net plus, or minus. And even if it were to unwind slowly, there would be some orders somewhere that likely cost the broker money.

And BTW, I know the economic base of supply, and demand. But you still don’t see all the cogs in the wheel that makes currency markets roll.

The biggest mover day to day is probably the swaps. They are one way moves, and usually LARGE ones. There IS no equal and opposite zero sum reaction. There are also futures, and options. We retailers aren’t generally part of those games, and don’t figure in, since we are closed up in the market maker’s world.

We’re just betting on a rise or fall of price…

507

You only lose all your money, if you bet all your money.

Money management is practiced by pro gamblers more rigidly than it is by retail traders.

A good gambler is not stupid about the risk. Neither is a good trader.

508

and so it goes, never risk more then your willing to lose, so, that would be your entire bankroll, or you shouldnt be trading/gambling to begin with…

If your willing to lose it, then there is no risk, :wink:

509

It’s like asking if you believe in God, most people will argue if God exist and others will find reasons to believe he doesn’t. Move on!

510

ahh what else can you say…


511

Gambling? More like professional pick-pocketing

Keep checkin’ your wallet… it’s going to be right where you left it, right up until it’s not!

512

Lol talon

I will add my opinion here. I will not say forex is gambling. It is a lot like Texas holden poker. In poker you play a probabilities game ( just like forex ). The only real difference is in poker you can bluff and take the pot. In forex you can throw all the money you want and it won’t matter. In poker you play the hand your delt with the cards on the table. You either have a winning hand or you don’t. In forex you play you strategy with the carts and you either have a trade or you don’t. Like stated before in poker you can bluff unless there is a bigger player on the travel willing to call you and in forex you can take a risky trade. Both you are probabily going to lose but you can get lucky. That’s my take but I don’t consider poker gambling. I consider gambling the slot machines and ruotlete wheels gambling. Yes the real difference between poker and forex is in poker you hAve to beat the house. Where forex you can’t beat them so you must follow them.

513

Forex is gambling?

Sort of.