Is Forex Trading Essentially Just Gambling?

By: James Woolley

Forex trading is considered by many to be nothing more than gambling. After all whenever you take a position in a particular currency pair, you are essentially betting on the price to either go up or down by taking a long or short position. So is forex trading really just another form of gambling?

Well to the uneducated person or the inexperienced forex trader, it would appear to be very easy to arrive at this conclusion, particularly if you start watching the chart of any currency pair and observe how it moves in a seemingly random fashion.

However many large financial institutions around the world, and indeed individual traders, make consistent profits from trading forex markets, so you can be pretty sure that they're not gambling away huge amounts of money every day at random.

There are of course many different ways you can give yourself an edge trading forex. The main way is of course through technical analysis. This is basically the study of charts and technical indicators to identify trading patterns and help you find potentially high probability trading positions.

They work so well because traders all over the world watch the same charts and the same technical indicators and see the same patterns repeating themselves over and over again. This allows them to take positions knowing that the price will most probably behave the same in this instance as before.

For example if the GBP/USD has found support at say 1.9600 three times before, and does so once more on this occasion, then many traders will have also noticed this and will be encouraged to take a long position, and in many ways it becomes a self-fulfilling prophecy.

Furthermore with the advancement of technology these days so many people can quickly and easily track any technical indicators they want thanks to the internet so technical analysis has become an even more valid way of trading forex.

So while it is true that on a very short-term basis, there is an element of randomness in the markets, if you look at the longer-term charts and use technical analysis to analyse the markets and make trading decisions, you can place the odds of winning firmly in your favour.

Therefore to answer the original question I would say that forex trading is definitely not another form of gambling because with a bit of education you can become an accomplished technical analyst and determine high probability trading positions where you win far more than you lose.

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