The exchange of flat currency is nothing new, dating back a long way into history. The trend of this kind of monetary trading is still running strongly today and thanks to the internet, it has become a far more accessible practice for regular people.
With the convenience of mobile devices boosting accessibility, the best betting apps in South Africa are easily matched by the number of Forex Trading ones. Any mention of Forex trading is usually followed by the question of whether it is a form of gambling or not.
Communities are greatly divided on this question, but it’s also worth positing that by now, does it even matter?
The Basics of Forex Trading
The Foreign Exchange (Forex or simply FX) is a global marketplace where currencies can be exchanged. It is a place where the world becomes a little bit smaller, because anyone, regardless of where they are located, can trade in any currency.
With the markets open 24 hours a day during the week, the FX offers a continuous market and it’s moved well past the days when major financial parties like banks were the only ones looking to make a profit.
Now all traders and investors who want to can find a place in the globally interconnected Forex market.
Is Forex Trading Gambling?
There is always a natural comparison between Forex trading and gambling. But are they two peas in the same pod? There are certainly areas where things cross, such as a degree of ‘chance’ being involved. But at the same time, a lot of people see them as polar opposites.
The Forex trading vs gambling area is an interesting one to explore. People will ultimately come down on their conclusion, but here we take at some of the similarities and differences between the two.
Chance is a big part of gambling. Think of any traditional casino table game like roulette or blackjack. There’s no way to influence what number the ball will settle on from a spin of the roulette wheel. Players at the blackjack table need some luck to get the right card to send them towards 21.
With Forex trading, there is still an element of chance coming into play. It is debatable whether that is as large of a factor as it is in gambling, but traders still need the markets to run in their favour.
In any form of gambling, players should know the probability of an outcome happening. There is a 1 in 37 chance of picking the right number in roulette. But the probability that is in play can be affected by taking alternative wagers. A 1 in 2 chance of picking correctly on Black or Red for example, drastically changes the probability landscape.
Probability is also a crucial element in Forex trading. By seeking indicators and understanding risk management, traders can use probability to know when to make an exit strategy on a trade at the right time.
There shouldn’t be a scenario where a Forex trader does not have a risk management plan in place. In gambling, some people like a bet on a big underdog option, just like taking a Forex trade that has a big downside. People take lower-probability options because of the greater upsides.
But probability comes with a risk and risk is managed by a plan. Just randomly throwing trades out there hoping one will stick and pay off, is not the right approach. Everyone needs a trading system.
The Starting Line
An interesting way to think about one of the key differences between the two disciplines is right at the start. If you are looking at the roulette wheel, or even trying to pick a horse out of a field of 12 runners, you are immediately behind the 8-ball.
In the 1 in 37 chance available in roulette, that flips over to the player expecting to lose 36 out of 37 spins, or for the horse racing, eleven other outcomes stacked up against your one.
But for Forex trading, the starting line is more eventful. Any trader investing can reasonably expect to either make a profit or loss, to equal probability. But of course, with both things, the probability of success is greatly influenced by the handicapper and how well they can read statistics and understand odds, while Forex traders will try and position themselves in an advantageous position.
Risk and Loss
Risk and loss are the two main words that can be applied to both gambling and Forex trading. So is there a clear, definite line between the two practices? Maybe not.
You will find traders that believe it is gambling, because of the uncertainty of outcomes. Others will argue that a lot of the uncertainty can be mitigated by working towards the trading edge, knowing when to make smart market moves on currencies.
Perhaps the argument is simply moot. People will enjoy what they enjoy and apply a degree of bias as to why it’s better than the other option. At the end of the day, it’s more about learning skills for success instead.