Let's look at a more specific example of blackjack odds to better understand where the comparisons between forex trading and gambling hit a roadblock.
One of the key features of blackjack, and any other casino game, is that no matter how professional a player is, the house will always win in the long run. Granted, some people will win big, but the total losses will eventually wipe out all the winnings and tip the balance in the casino's favor. In a typical casino, the more you play, the more likely you are to lose.
In gambling, the house is the ultimate winner because the gambling house has an advantage over its customers, making opening a casino a viable venture in the first place. In blackjack, a player should always act only after the first round is over. And if they hit a card (requires another card from the dealer) and break, that is. card values exceed 21, they lose, even if the house is also destroyed. Interestingly enough, the chance of this happening is about 28%.
Another detail to mention is that each hand value has a specific chance of beating a player. For example, if a player has a hand value of 11 or lower after a starting hand, there is a 0% chance that he will fold. Immediately above the value of 11, this chance increases enormously: 12 hand value – 31% chance of busting, 13 hand value – 39% chance of busting... With the value 20 the chance of busting is 92% and at 21 the player is almost going guaranteed to be destroyed if it hits an extra card.
Now players can use different techniques such as doubling down to increase the payouts, splitting the pair, etc. to reduce the odds in favor of the house. However, the house has the upper hand regardless of the actions the player takes.
Trading Forex is not gambling – and here's why
Unlike gambling, there is no 'house' in Forex trading. Your competitor in the market is another trader with their own interests. Moreover, not all market participants are interested in making big profits. The list of Forex market participants includes: commercial banks, central banks, private and institutional traders, governments, multinational corporations, etc. Multinational corporations do not focus on losing money when they exchange currencies. They trade currencies out of necessity, because they operate in different countries and need different currencies.
Psychological factors can wreak havoc on your performance in the forex market. If you don't have a plan that you stick to, chances are you'll lose money. It is important to have clear expectations and objectives when trading forex to avoid survival and excessive risk taking. Knowing your risk tolerance is also incredibly helpful.
What sets Forex apart from gambling is that traders are not passive participants in the process of being deliberately disadvantaged by the market. By using different strategies and tools, traders have the opportunity to turn the odds in their favor, gain an edge in the market and increase their trading balance.
Another important distinction between forex trading and gambling is institutional activity. For example, a pension fund is unlikely to hire professional poker players to make money, but they do hire forex traders to get ahead in the market. Moreover, proprietary trading firms also fund forex traders, while professional players do not have such privileges.
How can a trader turn the odds in his favor?
There are several approaches and techniques in trading that help people make more informed and well-thought-out decisions. Let's take a look at some of the most popular:
- One of the most commonly used approaches is integrating technical analysis into trading. This method allows traders to further minimize the similarity to gambling by minimizing the randomness of a transaction. Technical analysis allows people to observe past price movements, analyze them and speculate in which direction the market will move. And there are plenty of technical indicators that make this possible;
- A trader can also perform fundamental analysis using various financial indicators. Using this method, they can observe the current state of a company, market or economy, assess its strengths and determine whether the price of an asset will rise, fall or remain the same;
- There are also different onesRisk managementstrategies that add stability to their portfolios. For example, a trader can diversify his portfolio by using different trading instruments.
- Traders can search for and develop trading strategies, test and backtest them using trading platforms to see which strategy can give them an edge over other market participants.
Clearly, these are not the only strategies that help traders increase their chances of success, as there is no way to consistently predict the exact future price points on a chart. However, they still give traders a better chance to succeed and get ahead in the market.
