Is Trading Forex More Dangerous than Gambling?

Before jumping into trading with your both feet, you may want to ask if it is true that trading Forex can be more dangerous than casino type gambling.  

Just by reading this question and considering the possibility that trading is actually worse than casino gambling should point out the presence of high risk in playing with foreign currencies.

The most basic problem arises with misleading easiness of making money in forex.  Although it may sound very exotic, but you can open an account and start trading forex faster than it is to drive to the nearest casino, even if you live in Las Vegas.  Also deceptive is the fact that you do not need to have any skills to have a winning trade.  Luck works that way.  Yes, you can win, but the point is not to win once, or a few times, but to be consistently making money.  And by consistency I do not mean making money every day if you are a daytrader, or making money every month if you are position trader.  This consistency means that your equity is on an up curve – it should not dive close to 0 or the point where you started from.  

And to reach that consistency you need to develop skill.  Without it, you will think you know what you are doing.  You may even think that it is easy to trade.  And that thinking will make you deposit funds you can not afford to lose, and most likely you will end up losing it.  The deceptive appearance of easiness to make money does not exist in gambling.  When you walk into casino, you know you are in a house whose whole glamour was created for the purpose of taking your money.  Everything they do is set to take your money away from you.  So you will, most likely, take only what you can afford to lose and play with it.  So in that sense, trading is much more dangerous than casino gambling.  You tend to risk more than you would do in gambling thinking you somehow can outmaneuver the market itself. 

There is another real reason why trading can be much more dangerous than you think.  It involves something called binary options.  They are becoming very popular with new crowds, and basically they represent different ways to bet that market will go one way or another by putting few dollars on each bet.   Problem is that you can lose much more than you bet.  If you bet $20 on a single pip move, and market goes 10 pips against you, you will be down $200 on your $20 initial ‘investment’ (better called bet – just to make it clear what it really is).  Your losses can be even more than your whole account!  With binary options, you do not have a safeguard of margins and brokers who will automatically close your positions once it goes deep into red. That is why experienced traders avoid them.  But many new people are sucked in by the promise of incredible riches and astronomical returns.  I mean, if you are hard pressed for making money like most people are, how easy it would be to stay away from the possibility of making $2 – $3,000 by investing only a few bucks.

But trading does not need to have more risk than gambling.  Actually, you can manage the risk so that you can control it.  You can make your own rules which make sense and turn probabilities on your side.  Yes, it is possible.  How easy it is to do that is a complete other question, and  whether you are going to be able to do so might require a few years to fully find out.

For more info about trading, visit our post "how to get started in trading".