Currency trading takes place on the forex market. There are trillions of dollars traded on the forex market every day, making it the largest financial market in the world.
In 2019, the daily turnover for forex markets reached $6.6 trillion dollars, up from $5.1 trillion in 2016. By 2019, the total value of the forex industry was $2.409 trillion, up from $1.934 trillion in 2016.
Forex trading and gambling are often compared because both involve risking funds on a certain price movement that may or may not occur. It is believed that the only difference between the two is luck.
Key differences between currency trading and gambling
Does forex in reality resemble gambling? Between these two activities, there are several significant differences, and the most fundamental one has to do with probability.
- During gambling, the house understands the odds of winning and losing positions and turns them in a way to make losing more frequent than winning.
- Forex traders don’t compete against a unitary house; they compete against other traders, as well as against themselves. Because of this, they hold the power to make the odds work in their favour when using various strategies and techniques when trading.
- A gambling game, for example, involves two participants: the player and the house. A gambler is never able to beat the house no matter how good they are. Therefore, the house sets higher odds for losing bets than for winning bets. While some gamblers can win big jackpots, others will lose, making the balance wheel tilt in the casino’s favour.
- Forex trading, on the other hand, is a market where there is no “house” against which a trader should act. Traders are competing with other traders, as well as themselves, and they must make their decisions in a way to increase their odds of receiving a payout. In other words, a trader can turn the odds in their favour in order to become a house.
- Individuals can improve their odds of success in both gambling and Forex. In gambling, however, the house always has the upper hand over the player, unlike in forex trading. All those techniques can only reduce it, not completely eliminate it.
- With trading, you can utilize the tools available via many brokers to improve your performance.
- The odds can be manipulated in trading, however, so that the trader has the advantage. There are many ways to manipulate the odds. Using technical analysis is the most common method. Analysts can use technical analysis to determine where the price will go next based on past price movements. These indicators will help them determine where the price will go next.
- A company’s, market’s, or a country’s fundamental analysis also looks at current conditions. Using it, traders can determine whether an asset will go up, down, or remain unchanged.
- Risk management is another method to maintain an advantage, which has multiple elements. Portfolio diversification is one way to reduce the risk of large losses and keep an account more stable: traders use different assets simultaneously.
Traits of gamblers in forex trading
Gamblers do not view their activities as businesses. Their approach to forex is zealous and dangerous. This is the main difference between forex trading and gambling. Price Action trading can be used by traders to give themselves an edge over the market.
Gamblers are often motivated by hope. We hope they can recover from the losses sustained in the past and get back on track for the next win. Hope is a very dangerous thing when it comes to Forex trading.
Bottom line
Over time, most retail Forex traders lose money. Nevertheless, a significant minority make money over time.
Unless you are a professional poker player, there are no long-term winners in gambling.
