Is Trading Forex The Same As Gambling
In this weekly video:
00:21 – Forex trading and gambling
00:53 – The blame game – it’s very easy to do
01:59 – Trading is definitely not gambling
02:45 – You must understand risk and probability in order to trade well
05:04 – I’ve been trading for 14 years but it takes time
05:50 – Trading FX is one of the best things you can do
Is trading Forex gambling? Let's talk about that and more right now.
Hi Forex traders, Andrew Mitchem here, The Forex Trading Coach, video and podcast number 239.
Forex trading and gambling
I want to talk about Forex trading and gambling. Are they the same thing? Well, I certainly don't think they are, but I've had a comment today. It's been on YouTube. A guy said, “Andrew, what you're doing is you're gambling. Trading's not real. It's a terrible thing to do. You're just a gambler.”
Well, a number of answers to that really. Thousands of people, hundreds of thousands of people around the world make their living from trading Forex, but there's more to it than just that.
The blame game – it’s very easy to do
You see, the problem is today, it's very easy to blame other people. Social media means that people can moan and groan and vent their anger and frustration very, very easily. You generally find that the people that are doing well and busy in life, and entrepreneurs, et cetera, they don't bother with this whinging and moaning and typing stuff everywhere, because they're too busy enjoying life and doing things and making money, and spending time with their family to worry about doing all this criticism stuff.
As a trader, it's very, very easy if things go wrong to blame everybody else, to blame the broker, to blame the platform, to blame the robot that you've bought, to blame all these different things, to blame the indicator, to blame your strategy, to blame your coach, whatever it might be. It's very, very easy to blame other people. Or in fact, for most people, the real reason that they don't do well is through lack of learning, lack of discipline, lack of focus, controlled risk, all those type of things.
Trading is definitely not gambling
For me personally, it is definitely not gambling. I am the most ungambling person, if that's a word, that I know. I have never betted on horses or dogs or anything like that. I've never bought a lotto ticket, ever. I've been to a casino probably three times in my entire life, and that's briefly. I'm not a casino person, I'm not a gambling person, and Forex trading is not gambling. You have to understand that if you want to become a trader, you have to have discipline, you have to understand the market, and you have to have focus. You have to have controlled risk. You have to understand probability, all these type of things.
You must understand risk and probability in order to trade well
So for me, as a trader, I understand risk. I never, ever risk more than half of 1% of my account per trade. Never. Most of the time it's a quarter of a percent, a quarter to a half percent. Very, very low, controlled risk. I understand probability, I understand price action, I understand patterns, I understand strength and weakness, I understand where price might bounce, round numbers, support and resistance levels, previous highs, previous lows, pivot points. I understand what happens when we have divergence, when you have the price going one way and an indicator heading the other way.
I understand I've bought oversold situations, I read the news, I'm not a news trader, but I have a look at what's happening in the news, the fundamentals. Any big news events. I trade longer timeframe charts where they have more probability, they have more information contained within a candle than a five minute chart, as an example. So, you put all that together with probability, you trade with the trend. If you take a reversal trade, you know it's a higher risk trade, so therefore you have more, you're watching the trades maybe slightly more.
But if you're trading with the trend, you're trading after pullbacks, you're trading so that you have maybe a round number to protect your stop loss. You trade so that you don't have to break a new high or a new low to get to your profit target. All these type of things adds probability to your trade and to your strategy. Now, if you do that, you put all that together, you have yourself a low risk, high probability trading approach. Therefore, when you start adding probability and you add reasons for a trade, and you have lots of reasons to protect the trade and your stop loss, and you have controlled risk, you're actually trading.
You're reading the market, you're trading. Not every trade will go well. Not every day, not every week, not even every month will go well, but as a trader, you accept that if you have discipline, you follow this methodology, you stick to the approach, you don't let your emotions get in the way, you don't start doing silly things, then you have a very good trading approach that will, over time, will work across all market conditions.
I’ve been trading for 14 years but it takes time
I know that, because I've been trading the same way for more than 10 years, probably about 11 years now of trading the same way.
I started trading 14 years ago, but it took me a number of years to get to where I could understand the market and have a strategy. Now, most people give up in that time or they start gambling, they take too big a position size. They start arguing with the market or the broker, or not placing stop losses, doing silly things, and then it's very easy to say, “It's gambling and it's the market's fault, it's everybody else's fault.” It's not, it's your fault. If you want to become a good trader, you have to understand that, you have to understand the realities of it, and if you can't understand that, you can't accept that, don't trade. Simple as that.
Trading FX is one of the best things you can do
If you do want to trade and you want to put some hard work and some effort and some dedication and some discipline into it, it is one of the best things you can do. I likened it on my reply on YouTube to flying a helicopter. Extremely hard thing to do. A lot of people will say, “I'll never go in a helicopter. It's far too dangerous” and all these things. It's not, it's rubbish.
If you seek good instructions, a good instructor, you're disciplined, you plan, you understand the weather, you understand where you're going, you understand the radio calls, maps, you understand the machine. You've done your homework, and you're disciplined in your approach to flying, it's such an enjoyable thing to do, and trading's exactly the same. Really, it comes down to you.
This is Andrew Mitchem, The Forex Trading Coach. Have a great weekend. I'll see you this time next week.