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Forex Basics

Do You Trade or Do You Gamble?

If you ask someone that doesn’t know much about sport or anything to do with Forex trading, they will tell you that it is exactly the same thing, and from an outside view, we can see why they would think that. There are however huge differences between those that gamble on the markets and those that trade.

The majority of people get into Forex trading for a simple reason, to make money, if we look at it at a base level, there is no reason to trade apart from gaining money. So we all have the same goal, so why do people go about it differently. Ultimately it comes down to mindset, some people have the patience to learn, the drive to improve, while others want the easy get rich quick version, which the vast majority of the world will see as gambling.

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So what would the differences be? Let’s take a look at EURUSD, it’s the worlds most traded currency pair, its currently moving horizontally, a trader will have a strategy with certain criteria that need to be met, the majority of strategies won’t take a trade while it is moving in a horizontal manner, however to a gambler, it doesn’t really matter, it is a 50/50 to them, in terms of gambling, those are pretty good odds, you only need one trade more in the right direction than the wrong to make money. Of course, the forex markets are not that simple, there are thousands of different things that can have an effect on the markets, things a trade will know but a gambler will not.

Trading and gambling are not exclusive from one another, a trader can very easily be sucked into the world of gambling, you just made a losing trade, you may want to win that money back , so you trade with a little bit extra, this is a form of gambling. You see someone make a lot on a trade, you want the same so you put in trade following them or that does not work with your own strategy in the hope to make a bit more money, again this is gambling.

The main difference between the two is the patience and learning that comes with trading, having your own strategy with strict entry and exit criteria will make you a trader, each trade that you make is calculated and is not fuelled by the thought of making some extra money.

Trading takes a loot at the probabilities that are within the markets, they are are always more likely to move one way or another, these probabilities are the driving force for the prices. News events add probabilities, technical and fundamental analytical information add probabilities, the market consensus adds probabilities, you get the point. A trader will take all of these into consideration before making a trade, so it is no longer a 50/50 trade it is not an 80/20 trade. That is where the main difference comes from, taking the probabilities and only taking trades that are in your favour rather than trading ad hoping.

You can create the mindset of a trader rather than a gambler by using tools such as trading journals, learning from past trades one of the best things a trader can do, recording entries, exits and reasons for the trade, while a gambler will simply trade without any records being kept.

So are you a gambler or a trader, do you plan your trades, do you record things? Or are you just here to try and make a bit of quick and easy money?

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