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Why a Forex Trader Is Not a Gambler

Essential differences between forex trading and gambling

For a lot of traders, the line between gambling and trading continues to be thin. This is because they fail to understand the essential difference between the two activities, which is the simple fact that when you trade, there are many things that you can do to moderate your risk and increase your chances of making a profit.

With gambling, on the other hand, what you’re essentially doing is risking your money to chance. There’s nothing you can do to affect where the ball will land in roulette or what the dice will read.

Successful forex traders do not gamble
Although some traders might approach forex trading as a gamble, those truly successful traders follow fundamental concepts that consistently deliver good returns.  (Image by Pixabay.com)

Why Forex Trading is not Gambling

Here are some of the ways a trader is different from a gambler:

» Forex trading is based on scientific methods

A trader has a system that actually works. The best traders are those who spend time analyzing the markets and creating a trading system that is effective based on their analysis. Once they develop their system, they also test it using paper trading to ensure that it works. By contrast, a gambler creates a system based on unscientific methods.

» Forex trader controls the risk

A trader controls the amount of risk he accepts when he enters a trade. Before a trader opens a position, he looks at the amount of risk associated with it and then considers the potential profit he could earn from it. It is only when these two factors are acceptable to him that he starts a trade. A gambler, on the other hand, knows that every bet is a risk and relies on luck and “hot streaks” to be profitable. In gambling, basically, there is no way to moderate risk other than tightly controlling the amount of money you are wagering per bet.

» Trader uses profitable trading opportunities

A trader only trades when market conditions are in his favor. The best traders don’t treat forex trading as if it were a day job that they have to devote regular hours to; instead, they only trade when they see a profitable trading opportunity. They realize that their money is made not from making a series of trades and hoping that they win more often than they lose, but from several trades that they have studied carefully and determined will be profitable. On the other hand, a gambler plays any time he has the opportunity to, and he accepts that the odds will always be against him.

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