Why do you trade forex?
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Let me guess…
- /r/Forex is your forex trading community here on Reddit!! We cover trading setups, trading strategies, fundamental and technical analysis, and automated trading. /r/Forex is also the official subreddit of FXGears.com, a trading forum run by professional traders.
- Forex trading is glorified gambling. Forex traders are basically the same as a gambling addict down at the bookies, they sit and watch a screen all day to guess if the movement is up or down with a little bit of 'analysis' here and there, similar to picking out the best horse in a race.
Because you want to make a crapload of money and be able to buy anything you wish?
While this is a perfectly valid reason, it will most likely lead to excessive greed and ultimately lead to your trading account’s destruction.
While the activity Forex and financial trading has some overlaps with the definition of gambling, there are also important differences. However, it would be fair to say that for both those using excessive amounts of leverage and those who are newbies lacking experience, it might be the case that Forex is simply just another form of gambling. The truth is simple. Forex trade is not gambling, but most folks actually treat and exercise it as gambling. If we approach forex trading with no implementation of money management and risk management it is pure gambling, and if we approach forex. So like many other forex traders was disappointed to hear people saying forex is gambling and that #forex is a scam. This was also the conclusion of one of my favourite YouTubers - #Biaheza forex.
You might as well take your money to Vegas instead, and gamble it away. Once your money is all gone, at least it was entertaining.
You have to remember that what differentiates trading from gambling is being able to bend the odds in your favor.
That is why, as a trader, your mindset should be akin to that of the CASINO and NOT the gambler, who merely focuses on one event (or trade) at a time.
Casinos are profitable year, after year, after year, despite having a business where the outcome of each card laid down, dice roll, or slot pull is unknown each and every time.
They understand the concept of probabilities and create games that put the odds in their favor–in other words, “the house advantage.”
While it is true that there will be some lucky ones that will win and walk away with millions of dollars, casinos know that if they get a large enough sample size, there will be more losing patrons than winners in the end.
Let’s take baccarat, a popular card game for high rollers, for example. The game is fairly simple. Cards are dealt to a “banker” and a “player,” and all you have to do is place a bet on either one.
Since you have equal access to both the banker and the player (you can even bet on a TIE if you want), it would seem like you essentially have a 50% chance of winning. But in reality, that’s not the case.
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By tweaking the rules, like charging a very small commission or reducing the payout if the banker wins with a certain number, the odds are turned slightly in favor of the house.
It might be a very tiny advantage, anywhere from 1% to 5%, but it’s enough for the house to eventually come out on top when enough games are played.
To become consistently profitable, you have to trade like the HOUSE and play the advantage over a series of outcomes.
You can do this in a couple of ways:
First, you need to learn the market behaviors, patterns, and tendencies that could be recognized in the future and turned into trading opportunities.
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This comes from reviewing price action against a framework (support and resistance, mechanical indicators, economic events, etc.), recording your observations, and then devising statistics to keep track of the different kinds of patterns or setups.
This is where keeping a trade journal becomes a necessity. Using the data from your journal, you can focus on the setups that have had higher probabilities of winning, rather than those setups that tend to lose.
Secondly, you need solid risk management. You can tilt the odds of long-term success in your favor even more if you limit yourself to setting up or taking trades that have an attractive risk-management ratio (ie. average bigger wins than losses).
The better the reward-to-risk ratio, the less often you need to win a trade.
And lastly, you can look to other traders in addition to your own analysis. The web is loaded with free economic and technical analysis content. By getting a second opinion, you make sure that you don’t fall into the “confirmation bias” trap.
Of course, these aren’t the only ways to tilt the odds in your favor. But you should always remember that you don’t have to predict exactly where the market will go; you just have to figure out where price will likely go and make the best of it if the trade goes your way.
Why do you trade forex?
Let me guess…
Because you want to make a ton of money and be able to buy anything you wish?
While this is a perfectly valid reason, it will most likely lead to excessive greed and ultimately lead to your trading account’s destruction. You might as well take your money to Vegas and gamble it away instead. Once your money is all gone, at least it was entertaining.
Greed is the worst motivation for trading. The market will always punish greed and will always reward moderation.
There is a fine line between traders and gamblers. When there is real money on the line, there are always those who take blind chances.
If you want to be consistently profitable, do NOT think like a gambler, do NOT take blind chances and do NOT solely rely on luck. Remember that luck comes and goes just like the gambler.
As a trader, you must realize that anything can happen in the markets. Without accepting this very essential fact, you will NEVER become consistently profitable.
I know, I know, the idea just sounds silly! How can you, as a trader, become consistently profitable from a market that has uncertain outcomes? It’s just not possible!
WRONG! In trading and in life, we have what are called PROBABILITIES.
Casinos are profitable year, after year, after year, despite having a business where the outcome of each card laid down, dice roll, or slot pull is unknown each and every time.
They understand the concept of probabilities and create games that put the odds in their favor–in other words, “the house advantage.”
While it is true that there will be some lucky ones that will win and walk away with millions of dollars, casinos know that if they get a large enough sample size, there will be more losing patrons than winners in the end.
Let’s take baccarat, a popular card game for high rollers, for example. The game is fairly simple. Cards are dealt to a “banker” and a “player,” and all you have to do is place a bet on either one.
Since you have equal access to both the banker and the player (you can even bet on a TIE if you want), it would seem like you essentially have a 50% chance of winning. But in reality, that’s not the case.
By tweaking the rules, like charging a very small commission or reducing the payout if the banker wins with a certain number, the odds are turned slightly in favor of the house. It might be a very tiny advantage, anywhere from 1% to 5%, but it’s enough for the house to eventually come out on top when enough games are played.
You have to remember that what differentiates trading from gambling is being able to bend the odds in your favor. That is why, as a trader, your mindset should be akin to that of the casino and not the gambler, who merely focuses on one event (or trade) at a time.
To become consistently profitable, you have to trade like the HOUSE and play the advantage over a series of outcomes. How can you do this, you ask? Here are a few tips:
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First, you need to learn the market behaviors, patterns, and tendencies that could be recognized in the future and turned into a trading opportunities.
Is Forex Trading Gambling Reddit Stocks
This comes from reviewing price action against a framework (support and resistance, mechanical indicators, economic events, etc.), recording your observations, and then devising statistics to keep track of the different kinds of patterns or setups.
This is also where keeping a trade journal becomes a necessity. Using the data from your journal, you can focus on the setups that have had higher probabilities of winning, rather than those setups that tend to lose.
You’ll also need solid risk management. You can tilt the odds of long term success in your favor even more if you limit yourself to setting up or taking trades that have an attractive risk-management ratio (ie. average bigger wins than losses). The better the reward-to-risk ratio, the less often you need to win a trade.
For instance, if you notice that you are good in spotting double top formations and trading them, then you can devise a trading system that focuses on finding setups based on double top chart patterns.
If you are able take a large enough number of these trades, and your winners are larger than your losers, then you’ll eventually end up profitable over the long run!
Last but not the least, you can look to other traders in addition to your own analysis. The web is loaded with free economic and technical analysis content. By getting a second opinion, you make sure that you don’t fall into the “confirmation bias” trap.
Of course, these aren’t the only ways to tilt the odds in your favor. But you should always remember that you don’t have to predict exactly where the market will go; you just have to figure out where price will likely go and make the best of it if the trade goes your way.