Forex VS Gambling

I got an email from a Gambling site the other day (won’t mention their name), asking me whether I’d like to promote their site on my forum. I told him he’s approaching the wrong person/site, because Forex and Gambling are two totally different playing fields. But then he replied to me trying to convince me how they’re actually very similar. That got me thinking on how to refute his ludicrous assumption based on ignorance.

So anyway, here’s a question I’d like you to think about and try to answer it if you can. Is there actually any difference between Gambling and Forex (and trading in general)? If so, what are the differences?

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Here’s some of the answers you’ll get from fx traders:

a) Forex requires skill.

b) Even though Forex takes years to master, it is possible to make a consistent income/living out of it.

c) Forex is not really “addictive”, most traders who can’t make it, usually give it up.

d) Forex is not a “game”, nor is it done “for fun”.

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And here are some of the “refutations” from gamblers:

a) Some forms of gambling require skill, such as Poker.

b) It’s also possible to make a living out of gambling.

c) Forex actually is gambling, no-one knows where price is going to head in the future.

d) Gambling is only a game if that’s how you approach it, there are many Professional Gamblers who treat it very seriously.

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Of course, these are just words from the gamblers. If you make claims, show us your proof. I’ve yet to come across a single profitable gambler!

Bottom line – the richest man in the world is a trader, not a gambler.

Tom said:

Forex is best compared to any other zero-sum game, including poker, futures, etc. but not vanilla “gambling” in general (casinos).

Forex traders have a failure/blow-up rate north of 90%. That pretty much mimics the results of poker players & futures traders.

October 15th, 2009 at 5:20 pm

Greg said:

If Forex is like roulette then why am I bothering with Support/Resistance!

October 15th, 2009 at 5:51 pm

Jon said:

Well seeing as markets potentially offer positions that can deliver unlimited gains to limited losses. They are not the same for that reason.

You can enter a position at a very strong psychological resistance area offering you little to no loss with the potential for unlimited ROI . No form of gambling I know offers that.

As for the arguement about not knowing where a market will go. There are many times you KNOW where a market will go short term based on specifically strong news reports. Entering a position KNOWING you will make a gain is something gambling doesn’t offer.

I can only think of one thing related to “gambling” in regards of KNOWING when you will win. This is in poker when you have the best possible hand. The only difference is in poker you can put money in betting on your hand, but no body has to be there to match you. In forex you will be matched on your bet 99% of the time due to high liquidity. Obviously volatility comes in to play, but you get the point.

October 15th, 2009 at 7:26 pm

Luis said:

First thing you always do is check the definition of the word gambling.
The websters dictionary states: 1. to play at any game of chance for money or other stakes.
2. to stake or risk money, or anything of value, on the outcome of something involving chance: to gamble on a toss of the dice.
In my opinion forex is not gambling because it is not a game of chance. I only place trades that I have studied and analyzed and predict the outcome to be in my favor. I have an 82 % win ratio on my trades so therefore I do not consider it gambling.

October 15th, 2009 at 9:03 pm

Leon said:

It is very interesting question. In my opinion, FX could be same as gambling if you are speculator.

But the thing is that there are not just speculators in the market(even though most of them are). One of the biggest difference between gambling and trading is that trading can be used a method to hedge, and arbitrage.

That explanation regards the purpose of players. But the real difference between trading and gambiling is the result of this act. In case of trading, it actually helps distribute resources efficeintly. But gambling has nothing to do with this.

October 15th, 2009 at 10:50 pm

Marle said:

when you trade, you have a control to cut your loss and take your winning.. in gambling simply u will win all or lose all.

October 15th, 2009 at 11:46 pm

Tim said:

I’ll agree that there are differences between trading and gambling, but there are similarities as well. You final statement about the richest man in the world being a trader is not entirely accurate. Warren Buffet is not a trader. He is a value investor. WB never buys anything with the intention of ever selling it. He buys companies because he wants an ownership stake in them. This is not trading. I know several professional gamblers. They are just like professional traders. They bet probabilities rather than possibilities. Professional traders trade based on probabilities rather than possibilities. Professional gamblers bet only when they have an “edge.” Professional traders only trade systems that have the same “edge.” If you think that professional traders are not like gamblers, you’ve never stepped foot in the Merch (New York Merchantile Exchange). Stand on that floor for thirty minutes then tell us what you think. I think you’d be surprised. I was.

Trading or gambling can both be viewed as a business. There is no question that there are similarities – and – differences.

October 17th, 2009 at 9:15 pm

Jim Hunt said:

Here in the UK if you trade forex using a spread betting account it is legally classified as “gambling”. That means that in the unlikely event that you make a profit from your trading you pay no tax whatsoever.

“Gambling” is thus more profitable than “trading”!

Jim

October 19th, 2009 at 6:35 am

Leslie Dweck said:

I have developed a trading system that takes all trading decisions without human interference. It trades a diversified basket of markets in Europe Asia and the USA, mainly on derivative markets. (Forex, Stock Indices, Government bonds, energy, metals and agricultural commodities).
The work started in 1985 and has an actual track record for 3.5 years. The simulated trading indicated that one could expect, on average, to more than double one’s money every three years. Indeed the actual track record proved the expectation we made in excess of 125% in the actual trading (these results when compared on a daily base are almost identical to the simulated trading when compared daily and cumulatively). Forex plays a very substantial part in my trading system. All these markets are risk markets. The program is robust and has to perform across all risk markets, it is not tailor made for one. Every adaption change improvement has to be tested not only with past historic data on all these markets going back to 1984 but also into the unknown future (at least 3 years preferably 5 years) and consistently perform before it can be considered for incorporation etc etc Very few people go to such extremes to establish a robust working edge that transforms a trading gamble into a business with a very substantial edge over 3yrs / 4yrs ). Its is not that I have eliminated taking losses on trades or having bad times its that I have established a consistent edge in a business requiring a known amount of money to safely see through the extremes, should they happen, and that will consistently in time always exceed any previous peak in profitability and return on average 100 % every 3 years. (based on very extensive actual and simulated trading (that is proven to be a good reflection of actual trading) going back to 1985 monitored on a daily basis. A system that is only allowed to start trading on a system defined good entry point.) I am quite certain most in the FX business delude themselves that they are not gambling without an edge. Those who think they have an edge all too often find that edge fails. Having an edge and transforming it into a business is a very hard, very time consuming and consequently very expensive venture that most individuals and institutions simply cannot or are not prepared to undertake.

October 23rd, 2009 at 11:57 am