February 15, 2008
Is Forex Trading Just Another Form Of Gambling?
I was chatting to this guy last weekend and when I told him I make a lot of my income from forex trading, he looked visibly shocked and then said “Really? Isn't forex trading just another form of gambling?”
It was a fair question, and it certainly made me pause for a few seconds. After all how can you argue that it's not?
When you enter a position there are only two possible outcomes - the price can go up or the price can go down. Therefore even pure gamblers stand a good chance of making some money without any knowledge or experience of how the forex markets work.
However, the answer I came up with went something like this:
“Yes in a way I suppose you could argue that forex trading is a form of gambling, but the great thing about forex trading is that a lot of it is based on human behaviour and psychology, which is where technical analysis and charting comes into play. If you watch the markets you will see the same patterns repeating themselves over and over again, and similarly the price will often react in a similar manner to certain technical indicators because so many human traders all over the world follow the same indicators, which is where you can give yourself an edge and make a regular income. Whenever I take a position, it's always backed up by a combination of technical indicators being in my favour, so there's always a high probability that my trade will be a winning one”.
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