FOREX: Forex Trading is Not Gambling

Is there a difference between forex trading and gambling? I have been asked this question on more than one occasion and it is a good one as it can make the difference between failing and having a chance to succeed.

Compare a professional gambler who plays the odds with a casual gambler who hopes to make money if he gets lucky and measure the results. Similarly, there is a difference between a professional trader who relies on a systematic approach, discipline and prudent money management with a trader who relies on luck as much as skill to stay afloat. Of course, there is a gray area in between these two extremes where many retail traders reside

Whatever path you choose to take, you will see a difference if you treat trading as a business and not gambling. I have covered this in a section entitled Treat Trading as a Business and Not a Casino in Jay Meisler’s Trading Tips

If you were running a business you would deduct expenses from sales to see if you are making a profit. You would also calculate profit per sale and measure that against your overhead.

Treat trading as a business and keep a log of your trades. Calculate your average profit per winning trade, average loss per losing trade and percentage winners vs. losers. If this does not produce a profit or a profit not worth the risk you are taking, then reassess your approach and set goals.

With limited capital it is important that your business strategy has a formula that produces a profit or you will eventually run out of money.

I was quoted over ten years ago saying the following and it still holds true today:

"Those who treat forex trading as if they were in a casino will see the same long-term results as when they go to Las Vegas," he says, adding: "If you treat forex trading like a business, including proper money management, you have a better chance of success." …Newsweek International, March 15, 2004