To many outsiders, the forex market appears to be like a gambling market. Certainly, the forex market and the casino industry have a lot of things in common, such as the money involved, and the amount of risk involved. Certainly, one small mistake in both cases can lead to great financial losses to the person involved. But it would be harsh if one would label Forex trading as a form of gambling, due to many different reasons. There are many brokers who offer forex trading to South African citizens. It is necessary to know more about the best forex brokers in South Africa and their role in forex trading.
Forex is not Gambling
The opinion that forex trading is a form of gambling mainly comes from outsiders as well as a section of unsuccessful traders. They point to the high rate of failure in the forex market as a major proof of their claim. While no one can deny the rate of failure in the forex market, the reasons behind it can be many folds.
Common mistake novice traders make when they enter the forex market is to have a gambling mindset. The sheer size of the forex market may appear intimidating to many, causing them to take many hasty and wrong decisions.
Differences between Gambling and Forex Trading
A trader requires a definite degree of skill, knowledge and experience to execute profitable trades that could lead to consistent profit generation. Gambling, on the other hand, involves a large degree of luck. While there certainly are some similarities, Forex trading differs from gambling in the following ways.
- In Forex trading, a trader can never lose more than what they have in their trading account, no matter what decisions they make. This concept is largely absent in the case of gambling.
- The price movement in the Forex market is based on economic laws such as supply and demand, and are not random. Thus, for a trader to become successful, he/she has to analyse the market, predict the price behaviour and then take trading decisions accordingly. In the case of gambling, on the other hand, the casinos always tend to have an edge over the gambler.
Thus, trading in Forex has very little to do with gambling or luck. Rather, the success of a trader is based on the trader’s knowledge, the proper management of funds and creating an appropriate risk profile that prevents losses from being extravagant.
Trading Forex as a business
Casino gambling is considered a form of gambling. However, certain individuals can turn this into a business. They participate only in certain casino games such as Blackjack. Similarly, a forex trader can also concentrate on a single or few currency pairs with a solid trading plan.
The trading plan in place should be implemented in a disciplined manner. Many traders who have perfected their trading plan can easily remove the risky elements in trading, such as emotionally driven decisions or trading with a gambling mindset. Thus, a trader with a sound trading strategy and plan has increased chances of turning a profit than his/her peers.
The forex market has the potential to make a trader rich in a very small period of time. Over the years, many people have likened it to a form of gambling. However, it is quite clear that success in forex trading involves a lot of other factors and not just luck. With the proper skills and technical know-how, any trader can turn a profit when trading forex.