The Difference Between Trading and Gambling
I am sure that this is the topic that the majority of people would be interested in reading, as there are a number of individuals who still class financial trading as ‘gambling’. I can understand why people refer to trading as gambling due to the small similarities they both have such as a stake size, however they are both completely different.
The health of each nations economy has an affect on it’s currency. This, amongst many other impacts are what drives the world of financial trading and creates volatility, which ultimately creates trade opportunities. When you have reached to an advanced level in your trading career, you will acknowledge that there is something called a financial cycle. This literally means, when something is happening on a specific instrument, other specific instruments are doing the complete opposite or could be doing the exact same thing depending which instrument it is and how strong the positive/inverse percentages are at the time. Trading the financial markets is applying methods that have been back tested for decades, with risking a minimum amount of your account for double, triple or perhaps even a greater gain depending on market conditions. We have a high level of anticipating successful trades based on previous technical or fundamental events that has occurred, and continue to occur to date.
Trading is also based on what direction the majority of investment banks, institutions, hedge funds and top firms are trading in and also how they analyse the markets. Once you have developed an understanding as to how the markets work, what to look out for, what to do and when to do it and ensuring you have institutional support along the way, you should always end up on top. When you are experienced enough you will understand the perfect times to trade the financial markets (due to technical trade entries), and most crucially the times to stay away due to market conditions and a few other things.
To become a profitable trader, you need the right education and mentality. This is long term education so do not expect to make 7 figures from nothing over-night. Once you have perfected the skill and gained the key knowledge and information, the numbers are limitless. To become a profitable gambler you need luck, which I’m guessing most of you will choose education as relying solely on ‘luck’ does not hold any financial longevity and guarantee.
Trading allows you to have stop loss mitigations strategies which helps protect your capital; this by far is the key difference between trading and gambling.
To read more on managing risk, check out our ‘Risk Management’ article.
The rules are different in both industries.
Successful traders wait for high probability opportunities to present themselves, and they will calmly and patiently wait because of experience. The FX markets combined holds trillions in market capital, which makes the opportunities plentiful. Gamblers enter the casino with intentions to make money with no patience, no key information that will increase the chances of success for each game and no risk management structure which leads to emotional attachments to money when losses occur.
Understand the difference.
Financial trading and gambling are two different worlds.